Heng Kiong teaches Information Technology, including business analytics and management information systems, at a tertiary institute.

The Importance of the Digital Signature to Blockchain

In blockchains, data are stored in a distributed manner, which allows trust to be established without an intermediary.

This article explains what digital signature is and its importance as one of the fundamental technologies within Blockchain that ensures that transactions are carried out legitimately.

Is Blockchain New?

Yes and No. It is new because of the way transactions are being recorded among parties: i.e., OPEN and DISTRIBUTED.

Blockchain keeps a continuous growing list of records organised in blocks which are linked. Each computer in a network represents a node on a Blockchain and has a copy of the list of records, also known as the ledger file.

All the transactions ever made can be traced and verified. Hence, records are protected from tampering, deletion and amendments.

This makes the Blockchain efficient, verifiable and permanent.

Blockchain is New

Blockchain is also Not New

However, Blockchain is also NOT new.

The two main cryptographic concepts behind Blockchain, namely, Digital Signatures and Hashing, are well-established techniques. Digital Signatures are used for validating the authenticity and integrity of data, whereas Hashing is used to detect changes in data.

Hashing guarantees that no records can be tampered with. If any part of the transaction changes, it changes the hash of the block to which it belongs, and as a result affects the hash of any following blocks.

Digital Signatures establish trust on the blockchain by proving that a message originates from a specified source. This is how TRUST can be established even without an intermediary on a Blockchain.

These two cryptographic concepts are what hold the Blockchain together.

Digital Signatures are used to prove that a message originates from a specific person and no one else.

Hashing is the transformation of a string of characters into a usually shorter fixed-length value or key that represents the original string. It is used to detect any unauthorised changes to the records.

TRUST without an intermediary

The above two cryptographic concepts are the fundamental concepts holding the Blockchain together.

Digital Signature and Hashing ensure that the transaction records on a Blockchain are only carried out by authorised owners, and free from alterations.

Digital Signatures

What is a Digital Signature?

When somebody sends me an electronic document, I want to be sure that the information originated from the sender and no one else.

A digital signature does just that. Much like how a human signs on a paper document to prove his/her identity, a digital signature is a digital code generated with encryption to present the authenticity of an electronic document.

This digital signature is then attached to the electronic document to verify the sender's identity. This assures the recipient that the electronic document was created by a known sender and the document was not altered during sending.

Digital signatures prove that a message originates from a specified source. This is exactly how trust is established in a Blockchain with the use of cryptographic proof systems. Digital signatures rule out the possibility of hacking.

Importance of a Digital Signature in a transaction

Digital Signature ensures the following:

• Authentication - When Party A digitally signs a document, this document is originated from A and nobody else.
• Data integrity - When digitally signed, the content has not been tampered with.
• Non-repudiation - Party A cannot deny that he is not the sender.

Above all, Digital Signature assures the parties of a transaction that the document is authentic, and can be trusted.

What's Next?

Digital Signature is implemented using Public-key cryptography, also known as asymmetric cryptography.

In the next article, we will show examples of how Public-key cryptography works.

Concept of Cryptography

Article Navigation

Check out the full series:

Part 1 - What is Blockchain?

Part 2 - Centralised vs Decentralised Database

Part 3 - Digital Signatures

Part 4 - Private-key Cryptography

Part 5 - Public-key Cryptography

Part 6 - Cryptography and Digital Signatures

Part 7 - Hashing

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2018 Heng Kiong Yap