Chain Signatures: The Key to Making Multichain Go Global

As an abstract concept, it can be hard to get a handle on cryptography. You know, for example, that a public-private keypair secures your web3 wallet, but if pressed you’d struggle to explain the workings of Diffie-Hellman key exchange. It’s a similar story with chain signatures, a cryptographic technology that the majority of blockchain users are unfamiliar with, let alone the wider world.

But that’s starting to change as the technology begins proving its worth in making smart contracts smarter. Chain signatures enable smart contracts to sign messages when requested by another smart contract that resides on a different blockchain – or even when requested by an off-chain source. They provide a way of verifying events that occur on different blockchains, sectors, and systems, and their true utility is only just starting to be discovered. 

It’s a seemingly marginal innovation that on closer reading has the potential to be a genuine game-changer – just don’t expect to be hearing about it on the front pages of tech media any time soon. Like most seminal technologies, chain signatures can only truly be appreciated once the benefits they bestow are witnessed first-hand. Here’s what you should know about the technology and why it’s such a big deal.

Verify Anything, Anywhere

As HOT Labs Founder Petr Volnov explains, “Chain Signatures are a cryptographic tool that allows smart contracts to have an impact beyond their native blockchain. They enable smart contracts to produce verifiable signatures on messages, opening up interactions with assets on other blockchains and even with systems in the real world.”

This has major ramifications for the multichain landscape, particularly when dealing with things such as identical tokens that are issued on different networks. A user could be paid in ETH on Arbitrum for instance and a smart contract on Polkadot could release a corresponding amount of ETH from their wallet and convert it to DOT.

But things get more interesting once you start to incorporate off-chain mechanisms. Imagine a P2P crypto marketplace, for example, where funds are automatically released from multisig – i.e. escrow – upon the deposit clearing into the recipient’s bank account. Chain signatures are a use case that is anything but an edge case: it’a a technology with wide-scale applications.

What Else Can Be Done With Chain Sigs?

A bit like other versatile blockchain technologies such as ZK proofs, chain signatures can be used in an array of creative ways. Less exotic use cases include simplifying transaction verification and reducing onchain data usage for multisig transactions. They can also power more efficient threshold cryptography – a tech analogous to multisig – by efficiently validating the required threshold such as 3-of-5 without processing each signature individually.

But it’s once you zoom out and imagine the implications of this technology in a broader context that their power becomes clear. Today, we still separate the world into “onchain” and “offchain.” What happens in blockchain stays in blockchain and vice-versa. While oracles and decentralized data feeds have made some inroads in uniting these two worlds, chain signatures turn those roads into six-lane highways.

Once you give a smart contract the ability to confidently process a transaction with complete certainty in the validity of the event it’s reacting to, everything becomes smarter, faster, and more efficient: prediction markets, RWA protocols, perps exchanges, the whole shebang.

Slowly Then All at Once

Technology is exciting to no one save for its developers and a handful of fellow tech geeks. But the solutions it engenders can change worlds and wow everyone from digital nomads to tech skeptics. Take AI: it’s not the notion of an intelligent computing brain that’s gotten the world into such a frenzy – it’s the ability to have instant help with your homework; a haiku for a birthday card; a recipe based on the contents of your larder.

So it will prove to be with chain signatures. They might not be as transformative as AI, but make no mistake, their effects will be just as widespread, traversing industries and continents as they permeate every major digital sector, from hotel bookings to supply chain. But before they get that far, becoming a cornerstone of IoT, TradFi, CBDCs, and ecommerce, they’ll start with humbler aspirations: to make blockchain more efficient.

By reducing bloat, minimizing the number of transactions required to approve onchain events, and using less gas per tx, chain signatures are making dapps leaner and meaner. As the number of onchain applications soars and L1 and L2 chains become crowded, this will be vital in keeping crypto networks ticking over and costs to a minimum.

You might not hear about chain signatures for another three months. Then another few weeks will pass before you see the term used again. But there’ll come a day when you can’t recall a day where you didn’t see them cited somewhere during the course of your crypto browsing. That’s how it goes with transformative technologies: slowly then all at once.