A digital signature is a cryptographic mechanism used to verify the authenticity of data. It can be considered a digital version of a regular signature – far more complex and thus providing a significantly higher level of security. Essentially, it is a code that serves as proof of the authenticity of the data to which it is attached.

The concept of the digital signature dates back to the 1970s, but with the advent of cryptocurrencies, its usage has become much more widespread. In relation to cryptocurrencies, there are three key stages in working with a digital signature: hashing, the signing process itself, and verification.

Hashing – processing information using a special algorithm to generate a hash. After hashing, the message must be signed with a private key, whose authenticity will be verified by the recipient using another key – the public key. The private key is very important because its holder gains access to the account it secures and can move the cryptocurrency stored in that account at their discretion.

The use of a digital signature allows:

• To verify data integrity. The recipient can be sure that the message has not been altered; otherwise, the digital signature will no longer match it.
• To perform authentication using the public key.
• The holder of the private key cannot deny having created the digital signature – unless their private key has been compromised.

In addition to cryptocurrencies, digital signatures can be applied in various fields: to enhance internet communication security, in financial documents, contracts, and various agreements, and to prevent fraud in the medical sector.

Among the challenges of this technology are its demands on algorithm quality and integration, as well as the risk of private key leaks – for instance, for a cryptocurrency user, losing their private key to someone else could result in losing their funds.