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What Is a Digital Signature and How Does It Work?

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Today, business happens at the speed of the internet. Companies use every tool available to maximize efficiency. Yet, fast service only works if client privacy is safe. That’s why the use of digital signatures is so popular.

Digital signatures give businesses and consumers a way to sign important, time-sensitive documents. 

The entire process is online. This eliminates the expensive, time-consuming process of having physical documents signed and verified.
Documents using digital signatures remain protected and authenticated. Users have secure access to view and sign documents online.

Digital signing is legal and binding in many countries. When someone receives a digital signature it’s considered valid. This is true even when the message passes through a non-secure channel.

Let’s dig into how digital signatures work and why they are a secure alternative to pen and paper.

What is a Digital Signature?

A digital signature is often described as an electronic fingerprint. It’s a coded message that links the person who signed the document with the transaction.

It’s the digital version of a handwritten signature or seal on an official document. The code validates the authenticity and integrity of the document. It protects the document from tampering and impersonation problems.

Digital signatures use Public Key Infrastructure (PKI). The format provides the best level of security and acceptance. Its technology is specific to electronic signatures.

Public Key Infrastructure

Public Key Infrastructure (PKI) requirements permit you to create digital signatures.

The PKI gives each digital signature transaction two keys: a private key and a public key.

The signer secures the private key. It isn’t shared. The signer uses it to create an electronic signature.

The public key is available to anyone validating the signer’s electronic signature. It’s not secured.

PKI has more requirements, like using a Certificate Authority (CA). CA is digital certificate end-user enrollment software. It’s tools manage, renew, and revoke keys and certificates.

Certificate Authority

A Certificate Authority (CA) is a third-party Trust Service Provider. They protect public and private keys against forgery, theft, and malicious use.

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CAs ensure when you send or sign a document it’s protected. CAs make sure the document is secure and the keys are valid. 

The document sender and recipient both must agree to use the Certificate Authority.

Next, let’s examine how digital signatures operate.

How Do Digital Signatures Work?

Digital signatures are as unique as handwritten ones. There are three algorithms involved the digital signature process:

Key Generation

The PKI protocol uses a mathematical algorithm to generate two long numbers. The numbers are the keys. The algorithm creates a private key and a corresponding public key.

PKI protects the signature’s integrity by creating and saving the keys in a secure manner.

Signature

The second algorithm produces the signature. It’s created when it receives a private key saying the message is being signed.

When someone signs electronically, the signer’s private key creates the signature. The signer keeps the private key secure.

First, the algorithm produces data matching for the signed document. Then, it encrypts that data. The encrypted data is the digital signature. It’s also time-stamped.

Verification

The third algorithm checks authenticity. It authenticates the message by verifying it with the signature and the public key.

If changes occur to the document after signing the digital signature becomes invalid. The signature won’t be available.

The algorithms make it impossible to produce the signature without the private key. In many countries, digital signatures are legal and binding.

Benefits of Digital Signatures

Many companies have made electronic signatures part of doing businesses. That’s because there are benefits beyond speeding up processes and preventing forgery. Let’s take a look.

Security

Digital signatures are more secure than paper documents. Digital documents include the signature and traceable information on who signed it. It contains information on where and when the signature took place.

All the information makes the document more enforceable than a signature on paper.

It also satisfies any questions about alterations during transmission. Digital signatures reveal any unauthorized actions. An altered digital signature document is not valid anymore. Both the sender and receiver see the breach.

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These safeguards make digital signatures work for businesses and official agencies. They work for e-commerce, regulatory filings, banking, contracts, and more.

Ease of Use

One of the best things about digital signatures is they are easy to use. Companies can find online solutions to fit their specific needs.

In most cases, you upload a document, assign recipients and signers, then send a link to the recipients. It’s as easy as opening the link and choosing the signature button. The signature and process take a few minutes.

Convenience

We live in an instant access society. No one wants to wait long for an answer, signature, or offer.

Add in the fact that eCommerce and business happen around the world all the time. Small and large companies interact with customers and vendors located near and far.

Digital signatures provide remote authentication. Fast turnaround is possible whether you do business across the ocean, or across town.

Digital signatures are convenient for all parties. Everyone can sign in seconds. This is essential for time-sensitive situations.

Save Money

Any company that deals with official documents can discover more ways to save. For example, an insurance agency needs signed documents all day every day. Savings in time and effort from using digital signatures are significant.

Electronic signatures are cost-effective. Businesses reduce expenses for paper, postage, and mailing supplies right away. The time and effort saved translates into money, too.  

Try Digital Signatures for Your Business

If you’re still using pen and paper signatures, consider switching to a digital set up. Most people are familiar with digital signatures. They’re accepted as normal by consumers and companies.

If you want more ideas on high-tech ways to improve your business flow, read up on the latest digital trends. Feel free to contact us with questions.