Digital Signatures

Identities in blockchain transactions are stored outside blockchain and bind using digital signatures

Digital signatures are used extensively in blockchain, however there is common misunderstanding on how they work. This subject is associated with how keys and their ownership work as discussed earlier. Electronic signatures are not just widely used in commerce and contracting but also the legal structure is quite clear when it comes to what is an electronic signature and how identity is associated with these signatures.

The following diagram shows the process of how digital signatures are used.

The signature that gets generated by the signer is generated based on the identity of the signer. Once that signing happens, identity is tied to the signature. The information that ties the signature is typically stored in a registry or local storage of the signature service provider.

A signature is generated by the signer based on the signer's identity. This ties the identity to the signature. The information is typically stored in the signature service provider's registry or local storage.

It is not necessary for a signature to reference the individual's first and last name but does need some mark which identifies it as resulting from the act of the party. For a digital signature algorithm to link the key to an individual and hence the act, there needs to be some way to register and control the signature key, otherwise it would not be possible to prove that the individual engaged in the act, and some other extrinsic evidence would need to be provided that proves the control of the key at the time the signature was reportedly made.

Digital signatures cannot be anonymous as digital is simply a means of making an electronic exchange of a signature. A signature is an agreement to be bound from an individual. A part of the requirement of a signature is identity. There are many instances of pseudony in digital signature legislation. A pseudonymous transaction is private under the European provisions. The individuals engaging in the transaction must know of each other without having the personally identifiable information associated with the exchange made public. The need to identify individuals by definition precludes having a digital signature algorithm act as a digital signature without some means of identifying the individuals involved.