Key Technologies & Advantages of 
Digital Signatures

Signatures are a common activity we experience in daily life. For example, when making a card payment or signing a contract, we use signatures. The primary effects of a signature can be divided into two categories: authentication and non-repudiation. If you need to submit a graduation certificate issued by your school to your employer, this certificate typically includes an official seal or signature from the school. The company can verify that the certificate was genuinely issued by the school by checking the signature. From your perspective, it helps the company trust the validity of the certificate. This is an example of authentication.

Non-repudiation can be exemplified in cases like using a signature for transactions in internet banking. Here, the signature serves as proof to the bank that you approved the transaction. This prevents scenarios where you could later deny sending money. For the bank, non-repudiation ensures that customers cannot dispute authorized transactions, as such disputes would undermine the reliability of their records.

Similarly, digital signatures are a key technology in blockchain for ensuring trust and security. Digital signatures are used to approve specific transactions or authenticate data on the blockchain network, ensuring the transaction genuinely originates from the sender. This article delves into the concept, usage, role, benefits, and major algorithms of digital signatures in blockchain.

What is a Digital Signature?

A digital signature is an electronic method for verifying the integrity and authenticity of documents, messages, or data using cryptographic algorithms. It typically involves a pair of cryptographic keys: the private key and the public key. The sender signs data with their private key, and the recipient verifies the signature with the sender's public key to ensure the reliability of the data.

Digital signatures are especially useful in protecting data from being altered and ensuring that data remains unchanged during transmission or storage. In blockchain, these characteristics play a significant role in enhancing the reliability of transactions and the security of decentralized networks.

The Role of Digital Signatures in Blockchain

Blockchain is fundamentally a decentralized distributed network designed to complete transactions between users without the intervention of a centralized institution. Digital signatures provide a means for users to prove and validate their transactions. Through digital signatures, users can ensure that a transaction sent to the blockchain network originates from the rightful owner of the digital asset and was created by them. This enables blockchain to facilitate transactions between users in a trustless environment (without centralized authority).

• Bitcoin and Digital Signatures: In the Bitcoin network, digital signatures are a core element for ensuring the integrity and authentication of transactions. Bitcoin transactions involve moving coins from one user address to another, and digital signatures are essential in this process. Bitcoin uses the #ECDSA (Elliptic Curve Digital Signature Algorithm) to enable users to sign each transaction and allow others to verify it.

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  Smart Contracts and Digital Signatures: Smart contracts are automated codes that execute contract conditions, commonly used in blockchain platforms like Ethereum. Smart contracts automatically execute when specific conditions are met, and digital signatures play a role in ensuring the reliability of data inputted into the smart contract. For instance, when a user sends funds to a smart contract, their digital signature is required. This ensures that the smart contract can enforce the contract terms and prevent tampering or misunderstandings during execution.

How Digital Signatures Work

Digital signatures work by combining hash functions and asymmetric key encryption. Hash functions generate a fixed-length value that acts as a unique fingerprint of the data, allowing for verification of the data’s integrity.

• Hashing: Hashing is the process of converting data into a fixed-length hash value. For example, inputting the word 'Blockchain' into a hash algorithm generates a unique hash value of 256 bits (32 bytes), regardless of the input data’s length. Online SHA-256 encryption tools can easily convert input data into hash values.

   

  As shown in the examples below, the hash value's length remains consistent regardless of the input words or combinations. Additionally, even the slightest change in the original data produces an entirely different hash value, ensuring data integrity.

Input Information	Hash Value
Blockchain	5318D781B12CE55AA421737BC6C7906DB0717D0302E654670D54FE048C82B041
Blockchain Wallet D’CENT	93669F91D8CA4D83E97E3F1172BD1EE71753373FAEF2AC3F5B9A298745C53ABD

 

• Asymmetric Key Encryption: Asymmetric key encryption uses two keys: a private key and a public key. The private key is kept confidential by the user, while the public key is openly shared, similar to a bank account number. During the digital signature process, the sender signs the data with their private key, and the recipient verifies the signature with the public key. This ensures the data was genuinely created by the sender.

 

Major Digital Signature Algorithms

 

• #ECDSA (Elliptic Curve Digital Signature Algorithm): ECDSA is a digital signature algorithm based on elliptic curve cryptography, widely used in Bitcoin and other blockchain networks. It offers high security with shorter key lengths compared to traditional RSA algorithms, enabling faster signing and verification processes.

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  #RSA (Rivest-Shamir-Adleman): RSA is one of the oldest asymmetric key encryption algorithms, widely used for public key encryption and digital signatures. While secure, it is less commonly used in blockchain networks due to its longer key lengths compared to elliptic curve algorithms.

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  #Schnorr Signatures: Schnorr signatures, a newer signing method introduced in Bitcoin, operate similarly to ECDSA but are faster and more efficient. They handle multi-signatures more effectively, enhancing transaction speed and security in blockchain networks.

 

Advantages of Digital Signatures in Blockchain

 

• Integrity Assurance: Digital signatures guarantee that data has not been altered during transmission. For example, when user A sends Bitcoin to user B, the data signed with a hash function and private key ensures that the transaction remains unchanged while being transmitted through the network.

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  Authentication: Digital signatures confirm that the sender created the data. In blockchain networks, where there is no centralized authority to guarantee trust, proving the authenticity of each transaction is crucial. Digital signatures verify that the sender of the transaction is a legitimate user.

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  Fraud Prevention and Security: Digital signatures play a critical role in preventing fraud and unauthorized alterations of information. For instance, if a user attempts to perform illegal transactions on the blockchain network using another user’s data, the lack of a valid signature will result in the transaction being rejected. This enhances the security of the blockchain and prevents fraudulent activities.

 

The Future of Digital Signatures

 

As blockchain technology evolves, digital signatures are expected to play an increasingly significant role. With advancements in quantum computing raising concerns about the security of existing cryptographic methods, more robust and efficient digital signature algorithms are likely to be developed. Quantum-resistant digital signature methods will become essential security features in future blockchain networks.

 

Additionally, as various blockchain platforms optimize digital signature algorithms and introduce new approaches such as multi-signatures and aggregate signatures, the technology will continue to advance. These developments will help blockchain become a more secure and reliable system.