Security Mechanisms

Capsule employs a multi-layered approach to security, incorporating various mechanisms to protect user assets and data. This document outlines the key security features implemented in Capsule’s architecture.

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Multi-Party Computation (MPC)

At the core of Capsule’s security is its use of Multi-Party Computation (MPC) for key management. MPC enhances security by:

• Preventing the entire private key from being in one location
• Eliminating single points of failure
• Enabling secure key generation and transaction signing without exposing the full private key

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Hardware Secure Enclaves

Capsule leverages hardware secure enclaves available in modern devices for additional security. These enclaves offer:

• A dedicated, isolated environment for sensitive operations
• Hardware-level protection for cryptographic keys
• Secure biometric authentication capabilities

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Passkeys and WebAuthn

Instead of traditional password-based authentication, Capsule implements the WebAuthn standard to create passkeys. This approach:

• Eliminates risks associated with password-based authentication
• Leverages device-specific security features
• Provides phishing-resistant authentication

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Distributed Key Generation (DKG)

Capsule uses Distributed Key Generation to create key shares without ever assembling the full private key. DKG:

• Ensures no single party has access to the complete private key
• Provides protection against key theft during the generation process
• Allows for secure key refresh and rotation

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Permissions Framework

Capsule implements a sophisticated permissions system to control transaction signing across multiple applications. This framework:

• Allows granular control over what actions applications can perform
• Mitigates risks associated with compromised applications
• Enables users to manage their wallet’s exposure across different apps

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Two-Factor Authentication (2FA)

Capsule supports 2FA for additional account security, particularly during the wallet recovery process. The 2FA implementation:

• Is an optional feature that can be enabled by users
• Utilizes time-based one-time passwords (TOTP)
• Adds an extra layer of security for critical operations

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Secure Backup and Recovery

Capsule provides robust mechanisms for wallet backup and recovery, including:

• Recovery secrets generated during wallet setup
• Support for multiple backup devices
• 48-hour delay for recovery attempts to prevent unauthorized access
• Capsule Backup Kit for censorship resistance

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Encryption and Secure Communication

All communication between the user’s device, Capsule’s servers, and connected applications is encrypted. This includes:

• Use of TLS for all network communications
• End-to-end encryption for sensitive data
• Secure storage of user data with encryption at rest

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Regular Security Audits

Capsule is committed to maintaining the highest security standards through regular third-party audits. The audit process includes:

• Periodic audits by reputable security firms
• Comprehensive review of cryptographic implementations
• Continuous monitoring and improvement of security measures

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Censorship Resistance

Capsule’s design ensures that users maintain control over their assets even in the event of service disruptions. Measures include:

• Option for users to export their Cloud Key
• Ability to sign transactions independently if Capsule services are unavailable
• Decentralized nature of key management prevents single points of failure

By implementing these comprehensive security mechanisms, Capsule provides a robust framework for protecting user assets and data. This multi-layered approach ensures that Capsule-powered wallets remain secure against a wide range of potential threats while maintaining a seamless user experience.