Debitoor's accounting dictionary
Digital signature

Digital signature - What is a digital signature?

A digital signature consists of two keys codes used to verify an individual or company and indicates commitment to the information in an online document

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A digital signature acts much like a handwritten signature. It provides a binding agreement between the individual or company signing and the information set forth in the document in an online setting. It is both verification and a commitment the data provided in the document and is recognised as a binding mark.

It also provides a high level of security, and is essentially able to ‘unscramble’ an encrypted message so that it can only be viewed by the intended recipient and ensures that it came from the sender listed. It can also be used on unencrypted messages.

It is the most secure type of electronic signature and is used for confidential documents, important contracts, legal documents, etc.

Structure of a digital signature

However, unlike a traditional signature, it is not a name but consists of two separate ‘keys’ or character sequences. One is public and one is private but they are mathematically linked. This is known as ‘public key cryptology’.

A digital signature can be much more secure than a traditional signature

How it works

The sender signs their private key to an electronic document and assigns it to the public key of the recipient. When the recipient gets the document, they must enter their private key in order to view the document, if encrypted, and again to sign.

This acts as a signature. When the recipient enters his private key, they ‘sign’ the document by entering the unique code that only they know.

Setting up a digital signature is a complex process as it involves two linking algorithms, so must be created and implemented by a certified authority.

Better than paper?

While all types of electronic signatures are considered legally binding, according to The Electronic Communications Act 2000, the digital signature offers the highest level of security.

It not only verifies the sender and the recipient, but also time-stamps when the digital signatures are entered.

In addition, a digital signature can be applied to a broader range of electronic file types, including films, sounds, music, etc. making it more versatile than a traditional paper signature.

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