(FORTUNE Small Business) – There's nothing like a fat purchasing agreement to bring on a nasty case of writer's cramp. But someday soon your John Hancock may well consist of bits and bytes on electronic documents. Just as a PIN identifies you as the holder of your ATM card, a digital signature will say, "Hey, it's really me" for any of your e-commerce transactions.

Here's how a digital signature works: Using special software running on your computer, you select a signature option and then open the document you need to sign. Then you enter a secret authorization code (your "private key," issued by a licensed third-party certification authority) on the signature line of the document, close the document, and send it along as a file attachment. On the other end, the recipient--in this case the purchaser or buyer--uses another code (the "public key") to "unlock" your authorization number, which has been scrambled to prevent tampering. Your code verifies that you are who you say you are and confirms the authenticity of the document. Bada bing, bada boom: Your contract's ready to process--and without ink, paper, copies, faxes, postage, or pain.

All 50 states have either proposed or already enacted legislation recognizing the authenticity of digital signatures, and federal recognition is in the works. In many places digital signatures are just as valid as their pen-and-ink brethren. In California and Utah, for example, investors opening brokerage accounts and businesses applying for permits and loans can affix their digital signatures to electronic documents.

With digital signatures, proponents argue, such documents can be processed quickly and safely. Bruce Brown, chief technology officer for iLumin Corp., a Utah company whose software creates legally binding (read digitally signable) Internet documents for court and government use, says, "Technologically speaking, there is absolutely no problem with using digital signatures."

Despite hopes for a brave new digitally signed world, however, the concept of encrypted virtual "keys" passed out by third parties and used over the Internet makes some folks nervous. Cem Kaner, a legal expert on the topic and co-author of Bad Software, argues that it's too easy for crooks to purloin a digital signature. "My problem is that reasonable, prudent people may have their key read and copied by a third party under circumstances that look like 'normal course of business' situations."

For some companies, the ability to use digital signatures is etched into the business plan. Online escrow-service company Escrow.com, a 90-employee spinoff of Fidelity National Financial in Santa Ana, Calif., has invested thousands of dollars in software and consulting services to handle digital signatures. If someone wants to buy an antique on eBay, for example, the parties could agree to handle the transaction through the escrow service, using digital signatures to verify the identity of both the buyer and seller to help prevent fraud on either side of the deal.

Of course, Escrow.com's reputation depends on the security of transactions, so any such investment is worth it. "A digital signature is the highest security you can get at this point," says the company's business analyst, Michael Agee. "It's an added value to our customers and part of doing business."

But in order for digital signatures to take hold, they are going to have to overcome the cultural hurdle. Getting people to warm up to signing documents this way is a formidable task, says iLumin's Brown. "A tangible piece of paper with a signature is 4,000-year-old technology," he observes. "People understand it."