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How Do Digital Signatures Work?

writing pen

Digital signatures are the wave of the future for document management. Collecting wet-ink signatures is a complex and time-consuming process. In our digital age, many important business transactions take place over long distances with very little face-to-face contact. The complex process of printing, signing, scanning, and e-mailing signed documents is now outdated.

Digital signatures make it possible to obtain secure, reliable, and legally binding signatures remotely for a variety of purposes. Here’s a look at how they work:

What Are Digital Signatures?

Digital signatures are electronically generated signatures that are verified using public key cryptography. This type of cryptography relies on a public key algorithm with two numerical keys. One key is public, while the other is private. These are connected with a mathematical algorithm that verifies the authenticity of the signature so that an electronic submission is as authentic as signing your name to a piece of paper in person.

How Are Digital Signatures Collected?

A digital signature is generated using the private key of the signer. For security, this key is exclusive to the signer and never belongs to anyone else. The digital signature software then implements a mathematical algorithm that creates a digital match to the signature, known as a hash. This is encrypted for added security before transmission. When the signed document reaches the recipient, it contains the signer’s public key, but not their private key.

The recipient can verify the signature using the public key. However, lacking the private key, a recipient cannot forge a digital signature. This keeps digital signatures safe, secure, and reliable.

Are Digital Signatures Legal?

Digital signatures are widely accepted as legal and binding. They are governed by two statutes. The Electronic Signatures in Global and National Commerce Act ( E-Sign Act) governs digital signatures at the federal level. This act provides guidance for the validity of electronic records and digital signatures for transactions involving interstate or foreign commerce. It includes many stipulations. Financial institutions must provide the option for a paper document, maintain accurate and accessible records of electronic documents, and allow signers to withdraw consent at any time.

The Uniform Law Commission’s Uniform Electronic Transactions Act (UETA) provides guidance for the use of digital signatures at the state level. This has been adopted by the District of Columbia and 47 states. The act stipulates that electronic signatures are acceptable for legal documents in all transactions where the parties have agreed to conduct transactions electronically.

What Are Digital Signatures Used For?

A digital signature verifies the authenticity of an online signer who is giving their legal consent to a document through electronic means rather than in person. These signatures can be used on nearly any document that one might sign in person. Places where you might find digital signatures include the following:

  • Bank documents
  • Life insurance policies
  • Rental leases
  • Architectural design contracts
  • Consent forms
  • Employment and onboarding documentation
  • Independent contractors’ work contracts

Digital signatures are acceptable in nearly any form where you would originally sign your name. This could include anything from a permission slip to a medical release. The uses for digital signatures are extensive for both B2C and B2B communications.

What Do I Need to Collect Digital Signatures?

In order to obtain a secure and legally binding digital signature, you need reliable software. Both parties must have an internet connection and the ability to transmit documents electronically. There are many options on the market, so it’s important to make sure you’re using the best electronic signature software for your needs. The best providers offer not only software services but also support.

Professional consultants who specialize in the digital signature products can help you streamline implementation for easier set-up and use of electronic signatures. When you’re comparing new products for digital signature collection, make sure yours comes with the support you need to use the products reliably.

Digital signatures are a powerful and versatile solution that will help you manage essential documents easily. They make it possible to conduct business remotely and get more done with less time in live meetings. Increase your efficiency easily by taking your document signing, management, and storage online.

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Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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