How do digital signatures work?
Digital signature is an authentication tool that contains relevant information for any transaction. These include proof of origin, time of origin and status of any digital document.
Based on asymmetric cryptography, a digital signature is created to verify information or commands. To create a digital signature, a pair of private and public keys need to be created. While the private key is used to create the signature, the public key is used to verify the signature.
Overall, digital signatures rely on public key infrastructure (PKI). Mathematically, public key algorithms such as Rivest-Shamir-Adelman can be used to generate the link private key and public key. Just as all human signatures are unique, this software also generates a unique digital signature, different from all others generated so far.
In March this year, WazirX blog Published in which it was told how important these digital signatures are in the blockchain sector. According to Indian exchanges, digital signatures improve the security and authentication of transactions. The exchange also said that digital signatures provide accurate timestamping, eliminating the need for a centralized authority and making the verification process more time efficient.
“If the signature is completely valid, it confirms that the user who initiated the transaction is the rightful owner of the data,” the blog says. “The widespread adoption of blockchain, along with the ongoing use of digital signatures, is creating a future where decentralization, security, and transparency reimagine the dynamics of online transactions.”
Disadvantages of implementing digital signature
Implementing digital signatures for smart contracts or transaction verification can be an expensive process, as both senders and receivers of the transaction must purchase digital certificates and verification software.
While digital signatures may be seen as a more secure option for implementing 2-FA for crypto transactions, they are clearly not a foolproof security method in the crypto arena.
In the case of WazirX, the hacker used WazirX’s multi-sig wallet held to monitor liminal custody. The hacker is reportedly from North Korea’s Lazarus Group. The hacker managed to gain access to the signatures required by both parties to allow the transaction to complete.
