Bitcoin is a pioneer in technological advancement and decentralization. As its creator states in the white paper, peer-to-peer digital cash will allow payments without the need for a third party to verify and approve them. Network timestamps, hashing, and mining keep Bitcoin safe and useful for the crypto community, but its value comes from its adaptation features for the real world.
Users leverage Bitcoin for crowdfunding, donations, and purchasing goods and services, so its integration in the real world is prominent. The Bitcoin price prediction has also shown a trend of stability higher than stocks, so it has become available in more markets since it’s everyone’s first crypto investment.
However, one Bitcoin element makes it the propelling force for Web3 adoption, where decentralization, immutability, and transparency will shape the financial sector. Let’s discuss digital signatures, the technology that ensures a digital document’s authenticity and integrity.
Digital signatures and Bitcoin’s security
Digital signatures are blockchain technology that proves a person’s link to a document. Based on cryptography, a digital signature shows that no one has tampered with the information and that an authorized user provided it.
The digital signature works through the following:
- A hashing code that sums up the information
- A digital keychain consisting of the public and private key
The process is simple. One user locks the hash code through their private key, creating the digital signature. The one who received it uses their public key to access the original hash and compare it with a new one to ensure it’s a perfect match, meaning the transaction is genuine.
Why are digital signatures this important?
Considering the decentralized crypto ecosystem works without third parties, developers must still work in a safe environment, while users should be able to transact in a secure system. That’s why digital signatures are necessary―they prevent users from messing up each other’s information.
Therefore, no one can pretend to be someone else, which is crucial for a decentralized environment in which people interact with strangers from across the globe.
Digital signatures also ensure:
- Trust between users as they can always be sure the information received is true;
- Reassurance in signing contracts as agreements cannot be denied or taken back;
How are digital signatures nurturing the Web3 adoption?
The Web3 world is already starting to take form, as we’re using Internet of Things devices and exploring machine learning, AI, and 3D graphics. However, the new era of the Internet is much more than that. Web3 will introduce the semantic web to the world by allowing users to create and share content through technology-based search and analysis.
At the same time, it makes data trustless since people can communicate in public or private online environments without third-parties spying on them. Finally, Web3 allows users to participate in ecosystems without permission from a central authority.
These can all be achieved through the introduction of blockchain technology, as its features of decentralization, immutability, and consensus contribute to advanced security and improved transaction efficiency.
Blockchains use different signature schemes
Digital signatures may use the same concept, but blockchains leverage them differently due to infrastructure technology. For example, Bitcoin works with the Elliptic Curve Digital Signature Algorithm (ECDSA), which generates signatures that users can easily verify but not forge. Despite its use case, the ECDSA is prone to numerous vulnerabilities, which the developers have tried to fix with the Segregated Witness update.
A new scheme, the Schnarr signature, was introduced for Bitcoin to solve the inefficiency of ECDSA. The technology is much more complex as it reduces block load through the taproot smart contract technique.
Ethereum also used the same signature scheme until it switched from PoW to PoS, when it started leveraging the Boneh-Lynn-Shacham (BLS) strategy. At the same time, Polkadot uses the GRANDPA validation system.
Why are we pushing forward for the Web3?
We’re currently living in the Web2 world, with a few Web3 introductions here and there. Experts consider that it’ll take some time for the latter to fully integrate into our systems, especially
considering the differences in internet coverage across the world.
The second stage of the internet leverages mostly user-generated content, as social media allows anyone to post content freely online. It has improved communication and increased accessibility, but it’s still struggling with the following:
- Spamming, hacking, and forging;
- Online stalking, cyberbullying, and identity theft;
- Misinformation due to the availability of everyone to post online;
Of course, Web2 was considerably pushing towards innovation, considering how it allowed fiat currency to become digital. However, we’re waiting for the future of the financial world online, where assets like Bitcoin make it easy for worldwide users to exchange and trade in online environments.
We must be wary of Web3 challenges
Web3 is a revolutionary step forward for future nations to nurture their knowledge and create something unique, but it has its issues, especially regarding vulnerabilities. First, since most of Web3 will be designed through smart contracts, it will be prone to timestamp dependence, front-running attacks, and logic errors.
On the other hand, given people in the future will leverage custodial wallets to keep their assets, they’ll be faced with problems due to a single point of failure, which is common in crypto exchanges. At the same time, in most cases, these companies cannot protect users from bankruptcy, which traditional banks provide.
Finally, the problem with high-frequency trading in DeFi ecosystems exposes users to front-running attacks and network congestion, as the high transaction volumes slow down systems and increase gas fees. Overall, security in Web3 will have its own issues.
What do you think about the Web3?
Web3 is the next generation of the Internet, where users will benefit from enhanced decentralization, immutability, and transparency. Although it has yet to be fully implemented in our environments, we’ve dipped into the Web3 world through the use of cryptocurrencies like Bitcoin, IoT devices, and artificial intelligence. Bitcoin might contribute to the emergence of this new era through its digital signature technology, which allows parties to ensure the information they’re exchanging is genuine and will be helpful in contracts and agreements.
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