On The Brink with Castle Island - Nitya Subramanian (Capsule) on Leveraging Crypto's Superpower (EP.494)

Episode Date: January 3, 2024

In this episode, we host Nitya Subramanian, founder and CEO of Capsule, which is building cross-application embedded wallet infrastructure. We discuss: Outstanding challenges with web3 onboarding How applications are integrating parts of the wallet experience How Capsule helps developers give their end users the key privileges Why interoperability is crypto's key superpower How Capsule simplifies the transaction signing process How Capsule's infrastructure is complimentary to smart contract wallets Learn more about Capsule here. Follow Nitya here.

Hi everyone. This is Ria from Castle Island. Welcome to another episode of On the Brink. Today, I'm joined by Nipia, who is the founder and CEO of Capsule, which as a disclaimer, is also one of my personal angel investments. In this conversation, Nithia and I talk about the core insight that led her to build capsule, the need for wallet infrastructure that allows developers to simultaneously give end users more flexibility, as well as control when they're transacting on chain, how capsule provides a solution to address some of the challenges associated with smart contract wallets, what lessons we can learn from Web 2

as we build more seamless onboarding experiences for Web 3 and Capsul's decision to build wallet infrastructure that above all facilitates interoperability across applications, which is one of the core values that Nithia and the Cappell team resonate with. With that, here's my conversation with Nithia. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast.

You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of constituted easing.

You print a couple trillion dollars, and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. Hi, everyone. Welcome back to another episode of On the Brink. This is Ria from Castle Island Ventures. And today, I'm joined by Nipia, who is the CEO and founder of Capsul, which is building cross-app embedded wallet infrastructure and tools for transaction signing.

Nitya, thank you so much for joining us today. very excited to have you on. This has been a long time coming. And I think we're having this conversation at an exciting time in Capsule's journey. But before we get into Capsule, I'd love for you to tell our listeners a little bit about yourself. And then maybe from there, talk about the unique insight that you have in your prior roles or experiences that ultimately led you to want to build Capsule. Absolutely. And thank you for having me on today, Ria. I'm a big fan of the pod. So maybe I'll just start with a bit about my background. So I studied computer science. Actually really thought that I wanted to become a theoretical computer scientist and then found the world of startups. So spent several years

working in FinTech was one of the early employees at a company called Blend, where I learned a lot about the financial system. I actually got excited about Bitcoin even earlier than that as a college student. But there was something about learning about really the ways in which the credit systems work and how existing financial systems work. And then around 2017, learning more about what was possible with the EVM and with smart contracts. And that really prompted me to move into crypto and I've been here ever since. One of the things I was working on was it was one of the first engineers on the Peselo Protocol, where they were really hoping to build an open financial system that anyone can access. And that was something that I was so excited about with crypto and then actually became

one of the, at the time where there weren't that many PMs in crypto, moved over to product there and let their product team for several years. Bringing that back to capsule, one thing that I realized during my time in emerging markets and working with folks who did have true value that could be gained from crypto is that until we have certain building blocks and, in my opinion, interoperable self-custody that doesn't require jumping through hoops and having all sorts of domain-specific knowledge is really the single building block in my opinion that is continuing to hold the space back. And until we have this, it's hard to see a world where we're able to reach the potential with crypto and reach the people that we're hoping to. What we're building with

capsule is just that we're building embedded wallets that are cross-app from day one. Got it. Can you talk a little bit more in your words about, I think at a high level, we all understand and agree that the process of onboarding into Web 3 and even once you have onboarded, participating and taking actions on chain is clunky and unfamiliar. But I would love to hear in your own words what you think the big, problems are. Absolutely. So with this, I actually think going back to where we started with wallets and where we started with crypto experiences is actually potentially really interesting thing to talk

about. So the earliest wallets let us do things like transfer assets from one place to another. And at a time when what we really had in crypto were these digital assets that were meant to be transferred from one place to another, that was all that wallets really needed to do. But then when we had this explosion of different actions you could take on chain, whether it was maybe staking something or swapping or then when we had NFTs buying an NFT or maybe depositing something in a lending pool. The explosion of functionality that wallets became responsible for just exploded as well. And if we think about how we do anything on the internet, we maybe log into a store, Black Friday was recently and want to buy something. Maybe we have a credit card on file already. Maybe we enter

credit card, but that end-to-end action of doing something takes place in one app. And what ended up happening with crypto is we wound up with the system where there's now two different applications that are needed to take an action on chain. First, you have the place where you've generated some intent to do something. And that's usually an app or an application. But then to actually go ahead and sign that transaction and put it on chain, you need a separate product. And I think that's created a lot of the friction that we see here, where there isn't this ability to have smooth end-to-end flows. There's risks of scams, things like that. And I think a lot of that is what originally led to this idea of being able to have the wallet functionality or to be able to have both the

application and the interaction with blockchain happen in one place. I think in that we actually forgot a little bit about why we had these standalone wallets to begin with. And the reason for that is that when we receive something on chain, the power of it being on chain is that we can take it with us and do things with it. They're within that app, but also in other places. And I think this is something where these two properties together are not a dichotomy. This is really a false idea that we can't have the best of both worlds. So that's why really from day one, we've been quite focused on making sure that anyone who uses a wallet with capsule can take it with them wherever they go. I think that's a really good segue and a really good summary and analysis of where we

started versus where we are today. Where we started was obviously separate app that you need to create an account on and then take that with you across different applications to use them, but then the pendulum swung in the complete opposite direction and we ended up in a world or in many cases have ended up in a world where you have a fragmented experience because now your Web 3 identity lives within the confines of different applications that you're interacting with. So let's talk more about how Capsule is reconciling these two things that we have maybe historically conceived as being in opposition? I think even as applications have started increasingly integrating parts of the wallet experience, I think another thing that's interesting to point out

as an observation is that this was starting to happen even before. So as soon as we started having different L2s with scalability solutions, having multiple different chains where transactions occur, maybe even having smart contract accounts on multiple chains, having different ecosystems even, Even as far back as a year and a half ago, most folks who would maybe consider themselves active on chain probably had things spread across many, many different wallets. And the reason for that was really the explosion of having wallets that are specific to apps, but then also many different chains. The main insight around this on our side was really that if you can have one signer that

works everywhere, as a user, this reduces the friction of thinking, about what's happening on chain to thinking about one place. And in doing that, you can really shift a lot of the hard work and a lot of the maybe decision making to the more developer layer, which is really nice because you can put the developer in control of something like switching networks or deciding whether to bridge something or deciding what the transaction should look like. And then ultimately being able to give the user just one thing that they have to keep track of, as opposed to dozens of different private keys. And then with the app-specific side of it,

I completely agree. I think the reason that so many apps are really excited about innovating this experience is having more control over end user experience and having it be easier to smooth onboarding and to have keys be something that users don't really have to think about. And that's absolutely, I think, the direction the space needs to go. There isn't really a pride in doing something

the hard way. I think in crypto, as our space grows, we need to get more comfortable with the fact that just because somebody has signed up for a wallet with an email address doesn't make them any different than someone who's holding a private key themselves, maybe in a paper wallet or in a ledger. But what I think we've missed is that the flip side of that, the person who signed up with an email should have the same privileges on chain as someone who is holding their private key in a standalone wallet and managing all of that themselves. And I think what we lose when we silo wallets to a particular app is on the end user side, we end up with this two class system almost of people who can take their assets with them and go elsewhere and others who are locked in

and then have to instead manage the equivalent of in Web 2 having a different login everywhere, as opposed to just having a single sign on. I really like that framing and definitely agree and think that if you have users that are not as Web3 native or even just want more convenience and want to assume less responsibility because maybe they don't trust themselves as much or just want to interact with Web3 in a way that's familiar, they shouldn't be considered second-class citizens.

So I'd love to understand having this insight and having this thesis and outlook, how exactly is capsule able to build infrastructure for developers that allows them to treat all users across the spectrum the same or give them the same privileges? I think one of the great powers of crypto is that we're all building on a shared infrastructure. Being able to make use of that infrastructure and standards that exist is really powerful.

What we're specifically building are developer SDKs that make it easy to create new wallets that can be portable across different applications in Web3. So the idea here is that as an application developer, you might have users that already have wallets and want to connect them into your app, and that's amazing. And you might have users that are brand new to crypto and are creating their first wallet in the context of your app. What we really offer is that in both of those cases, that wallet can do the same things afterwards. So, of course, when a user creates a wallet in the context of the application, we give the developer, or the developer really has a bit more control over things. So they can do things like switch network on the user's behalf. In early app cases, they can do things like sign transactions without any third-party pop-ops or anything like that.

But then what we really think is important is that all of the app cases, those users in that application can do everything Web3 has to offer afterwards. And I think this is important for the developer because it allows developers to really build applications that are part of a broader ecosystem. And at especially this point in crypto, we always talk a lot about what is worse about Web3 versus Web2 systems, especially in this topic with UX. But what we don't often talk about are the superpowers of Web3 and why they're important to preserve. And I do think that interoperability really is crypto superpower. What we really give applications is the ability to really leverage that.

Can you walk me through an example of how that would work, maybe through using the example of maybe a app that you're working with today or an example that you use as you're describing the power of what capsule enables to some of your end users? So maybe I'll describe a little bit about how capsule works as well and how the wall. were. Capsule wallet, when user creates it, it's a two-of-two MPC system where one portion is held by capsule and then the other portion is held by the user. And then we also have additional mechanisms to offer censorship resistance so that from the beginning, the user is able to take that wallet with them outside of the system if they so choose. So what an example of this would look

like is let's say I go to an NFTEEMS site and it's my favorite artist and they're offering an So what I could do there is sign up for my wallet with my email. And then after that, in the background, signing just happens with one click. So let's say it's a free mint that I can claim that I could do without funding my wallet. Otherwise, I could use one of our integrated fiat on ramps to do this. And then afterwards, let's say that this artist offered some merch in a Spotify shop. So maybe if I'm one of this artist's fans, I have access to a specialty hat because of that NFT that I minted. So with Capsule, what you can do here is, let's say that that Shopify store has a Capsule integration already. In that case, I can just log in directly and go ahead and then my

same wallet is accessible from within that store. If that's not the case, we support the Wallet Connect standard and all of the standard wallet connectors to make it as easy as connecting a wallet to that second application. And then on top of that, we also build a good amount of security features as well to make sure that when this multi-app sharing happens, that it happens without giving applications undue access to user wallets or opening up fishing type attacks. Can you talk a little bit more about that? And maybe before you expand on how exactly you prevent that from happening, articulate the challenge that users face when they connect a wallet today and give an application, undo unparalleled access to all of the assets and data

attached to that key pair? Absolutely. So today, this is actually an interesting thing because this is, I think, where a lot of the feelings of dichotomy come from when it comes to embedded wallets and an embeddedness versus the interoperability that standalone wallets have. And the reason for this is that in many cases with embedded wallets, applications are given quite a bit of access to the wallet and have quite a bit of control, whether that's the ability to have access to certain parts of the key material or to be able to perform transactions on the user's behalf. Part of that embeddedness is this elevated access in many cases. So if you think about this in a multi-app case, the reason this is not great is because you could have a scenario where it's the equivalent

of me putting my private key in five or six different applications. And then any one of those applications could be malicious and decide to join my wallet. And we've seen this in the regular wallet world over the last couple of years where every so often there will be a wallet that is compromised. And not only are the people who created wallets in that vulnerable app, victims of this at risk. Exactly. But even people who maybe just one day put their old seed phrase into that other wallet and then maybe have other funds at risk just creates these larger leakage problems. So that's really the core problem that needs to be solved. It's less of these two things are at odds, but they introduce this very important, very tricky problem that is, I'd say, what we've

put a lot of our effort and focus into solving. I think that's a really, really key feature in an important U.X issue to solve is being able to add constraints and permissions around what you give different applications access to. Another thing that I want to double-click on is, as you were describing how a user might use and benefit from an application that is leveraging capsules, infrastructure, there's a couple things that you mentioned. And one is that being able to enact one-click actions and the other is, actually, before we get to the other one, let's talk about the one click and how you enable that improvement in user experience where if they're trying to do something on chain, they don't need to go through a multi-step transaction signing process.

This is something I feel like I can go on a really long tangent about, but I think a lot of what we did with crypto was we took the trust assumptions of when I hit post on Twitter, something happens in the background and I just trust that the right thing's happening. And we made that really explicit. And that's great. That's what it means to be sovereign and to put users in control. But what ended up happening is that every single individual thing that happens is something that now a regular user, whether it's me, my friend, my mom, that all of us have to

read and inspect these things and make sure they're right before we do them. And it also opens up the surface area of people trying to trick people into they're proving the wrong thing. But what we're able to do is through the permissions system that we're building and through being able to make what's happening in the background explicit but still human readable and also to shift a lot of those approvals to the beginning of when you use a new app. So an example of this in the Web 2 world that I think we don't think about as much in crypto is actually SSO and an OWAT where sure it's not on a blockchain, but I think what OAuth has done really

well is make it possible for people to choose what information to share and to choose what privileges to share. And so in a lot of ways, we think that system is quite a strong precedent, actually, and quite a strong model for what an on-chain system could be, but even more powerful, of course, because assets are open, fully interoperable. But we think a lot about this as the ability for a user to know what they're consenting to, but not necessarily to have to have the ability to inspect the JSON if they want to, or if it's a brand new app, to choose not to trust that app. But once that trust is given, to then not have to deal with pop-ups on every transaction, not to deal with fear around wallet trading attacks and things like that.

I like that. Establish the trust up front and then make the process of transacting the user experience much more seamless. Another thing that you mentioned is this concept, as you were talking through the example of visiting an NFT Mint site, and if it's a free mint, then you can create an account or create a wallet but not have to fund that wallet, which is not the case today in most instances. You still have to fund the wallet to some extent to pay for gas fees. How exactly do you facilitate that? So we mainly take the approach of when it's a brand new first-time user, we make it easy to create that empty wallet. And then we do have some great partners on the account abstraction front where if people would like to do things like subsidized gas,

it's really easy to make the capsule signer, the owner of a smart contract account. What we think is maybe the next step from that, though. The magic here is that when someone has already created a capsule wallet, they can sign into this new app with their wallet already funded and already set up and not have to go through that friction of getting started every single time. And I think the analogy here that most resonates with me is how we think about credit cards. When I shop at Macy's, I don't need to get a Macy's specific credit card. I can use my regular one. Even more powerful if I'm online, I might have a credit card on file through my browser,

just making it easier to have these shortcuts and to not do duplicate work to get people on chain because it is considerable work. even today to overcome that friction of getting a funded, ready to go wallet. We just try to make it easier for apps to not have to repeat that work. Definitely. I'm glad you brought up the partners that you're working with on the account abstraction, smart contract wallet side. And I want to talk a little bit about your stance on smart contract wallets.

I know that Capsule has taken a neutral approach and is positioned to be very complimentary to the entities that you're partnering with on the smart contract wallet side. So would love to start off with maybe your stance on smart contract wallets and how exactly you are able to be complementary to what they're building. This is actually a very early technical decision that we made on the capsule team was to focus on building at the signer layer, as opposed to the on-chain infrastructure layer. And our rationale there is really that both types of infrastructure are extremely valuable, but they're also different. And as a result, it's important that you have great options in both and that you can connect them when the need arises. And I think in

particular, what we've seen evolve is that we have smart contract wallets. Usually it's one per chain, one per app across different chains. We're definitely in a world where having many different smart contract accounts is a norm. And I think to be completely fair, the same point has been made about embedded or EOA wallets as well. We've actually moved towards this world where if you almost think about it as a two-sided graph, we can list all of the smart contract accounts that any individual has. We can list all the signers they have on the left side. And I think a lot of people are pointing out, it's getting a little bit confusing and complicated. But I think where we see our unique opportunity to help the space is in being the one signer that you can connect anywhere. And in being the way to

maybe get assets from one smart contract, maybe on one chain to another, and then to be able to bubble up all that friction into a single signer that a user can access from anywhere. And that just being the unique addition that we want to offer. So there is absolutely a world for all of these different technologies. But for us, it was more about seeing where we could be uniquely helpful. I think that is a hugely important point. And I want to do justice to how you're facilitating or addressing this fragmentation that exists today. Obviously, I agree and think that smart contract wallets are very powerful and bring us a significant step closer to offering a much better user experience on chain where you have control,

but also just flexibility in a way that you haven't in the past. But to your point, one of the shortcomings or maybe tradeoffs of smart contract wallets is that they're not portable across chains and maybe across apps. So if I'm understanding it correctly, Capsule allows users who might have different smart contract wallets across different networks and ecosystems and chains to leverage your infrastructure. to bring all of those things under one umbrella. Is that right? That's exactly right. And I think you put it really well. And the reason why what you said is so important just now

is because in terms of on-chain, you can put a lot of complexity and a lot of programmability on-chain. And it probably makes sense to have different contract accounts that maybe you have privileges on. Even leaving aside application cases, I might be a signer on

three different multi-sigs on three different chains. But because I do that, I shouldn't have to now take on the burden of managing three different wallets myself. And as users do more and more on chain, and as the complexity of the logic that they're able to authorize increases, that shouldn't lead to an explosion in the complexity of secrets they have to manage or accounts that they have to keep track of. They should similarly be in control of who has access to what, what applications have access to what, but at the end of the day, not have to worry about managing lots and lots of different signers everywhere. Definitely. So in this world where you're able to leverage one, and is it right to phrase this as being an off-chain signer that's aggregating

on-chain credentials, I just want to make sure I'm not misrepresenting what it is. I think that's a great way of putting it. It's a signer that can sign anything on. chain. And that extends to the ability to sign smart contract accounts and transactions there or as well as individual EOA type of transactions. Got it. So in this paradigm, security becomes of utmost important, even more so maybe than in a more fragmented world just because you have this one account that's managing a bunch of different accounts, assets and data. So how do you think about ensuring that this continues to be really secure and there are options that users have around managing this signer and having the ability to recover it in the case of loss or compromise. How do you think about that?

Absolutely. One thing I'll note as well is while there is a single signer and the ability to connect that everywhere we've talked through, we do also make it easy for users to generate maybe an additional one if they want to. So in the web two world, an example of this might be, I'm going to some website that I don't necessarily want to have access to my main Gmail account that I usually use to sign with Google. So instead, what I might do is just create a username password that's just for that website and leave it separate from the rest of my online life. We allow you to do the same thing with wallets. So if you do want to maybe claim some mint at some time and you don't really want to connect that to your main wallet, we make that possible as well. So it is really really,

we do enable choice at that level. Flexibility. Exactly, because that is still really important. I think a point that people have brought up, in addition to security, is privacy and that element. And so we do put the user in control of what they want to have being part of their different addresses. But to your point on security,

this is really foundational. It's actually the reason why from day one, we've built wallets with inoperability in mind is that it's a very foundational security decision. And a lot of it boils down to the security, model of what we give applications access to the decision to use distributed MPC instead of a Shamir secret or sharding style technique where you then have to reassemble keys somewhere. But from day one, we basically structured the system so that all of the private key is never in one place. And the

only person who ever has access to all the key material necessary is the end user. So they and they alone are in control of that. That's really a big part of it. And then building on that, on the more security front with how we thought about permissions, things like that. This is also something that we just recognize is so important in this space, something we've built from the start. I don't think I caught your question there or answered it particularly well. No, you did. I think talking about the decision to use distributed MPC and why you're doing that and then also have flexibility around what you bring under one umbrella versus what you keep separate. I think that covered it. So another thing that I wanted to talk to you about is this idea of programmable transactions.

And I think that this is a term that capsule has really championed and coined. So what do you mean when you say programmable transactions and how do you facilitate programmable transactions? So when we think about what the most foundational representation of something on chain is, it's a transaction. The transaction is how we modify stay. It's how we execute any action. And it is really the most atomic unit of crypto. And by programmable, what I really mean here is going back to the difference in how we interact with Web 2 and Web 3 in Web 2 systems, because applications have a lot of control,

there's all these trust assumptions, all these things that we know quite well. There is also a lot of exciting things that you get from that. Maybe a really small example. I can set a flack reminder to every week. to help remind people to add something to our notes doc. And I can do things like set these automations. And I can even execute things that maybe take multiple API calls by just clicking one button. And I think in crypto, what ended up happening is because we moved to this very explicit model, every single thing that is represented at the on-chain level as a transaction

ends up being something that a user has to see, inspect, and then approve on their own. So it's how we've wound up with things like certain workflows around, especially complicated multi-chain actions, like bridging or different types of staking actions, just end up taking multiple steps of click a button in the app, click a button in the wallet, and repeat that three or four different times. So by programmable transactions, what I really mean is being able to bring what we're doing on chain at parity with what we're doing in Web2 systems, where I can set something like, let's say a dollar cost average to swap from one asset to another, and do that without having to log in every week and sign a transaction. Or I can give an app permission to maybe execute a

transaction at any point within a one week window without me again having to decide when that happens. What this really refers to is being able to take all the things that we love about cryptographic systems and blockchain-based systems, but make the mechanism for interacting with them much more similar than what we're used to in other types. There is a framing that I've seen visa use, and I think they were talking about in the context of smart contract accounts, but the idea of moving from a world where you have pushed-based transactions to a world where you can have whole transactions where you define something up front, but you don't necessarily need to be there at the moment at which it executes and be there

clicking the button. And I think the example that they used is automated bill payments is not something that has been possible in the past, but we're moving to a world where now you could do something like that on chain. Exactly. I think this is actually where something like a crypto-based system makes that extremely powerful because now you have this ability to do something like maybe a recurring transaction, a bill payment. And you can even connect that and bring the composability of crypto to that, is I think really interesting, where you could go one step further and say, I'd like to do my automated bill payment. Further, I'd like to maybe withdraw enough funds from a staking pool to pay that bill every month. And maybe, by the way, I'd like to set aside some of that to cover taxes if I'm

swapping from one asset to another in the process. And it really gives us this ability to put people at the center of their lives. And I think in the financial case, at the center of their financial lives in a way that wasn't possible at all. So all of a sudden, this one thing that was maybe a feature that crypto didn't have or a feature that maybe we're bringing to parity actually turns into the Web 3-based system being much more powerful. I love that. I think going back to that specific example that you just used, doing that on Web 2 Rails, there's no way to automate and program that today in most cases. So that multi-app, multi-step process. So I'm glad we're moving into this world and Capsula is allowing us to move into this world where you really are able

to take advantage of the unique properties and benefits enabled by crypto? I think we've probably all had moments in our journey with crypto where there's a magical moment or we see that we're able to do something. And I think if we think back on it, most of these were actually things that spanned multiple different apps or multiple different protocols where the real power of crypto is when you have these flywheels effectively that can be created that maybe start in one application or start with one experience and then lead to another and another after that. I think that's something that we also think about as our obligation really to builders, to allow builders to take advantage of that superpower that they get with crypto and to allow their apps to be part of many different flywheels

and to cater to users who came from maybe many different experiences that are going to many different experiences next, but allowing them to build a really solid place within all of these different multi-app journeys that people go through. And I think if we look through crypto historically, that is most of the big consumer apps that we use are ones where maybe a journey starts there and goes elsewhere or maybe starts and ends there. So maybe one example is I might get an ERC 20 from somewhere and then I later go to Uniswap to swap it. Or maybe I want to buy an NFT. So I do it on open see, but then later on, I can go to a party because that NFT was my ticket, just really giving builders the ability to lean into that superpower. I love that. I want to shift gears and talk about

pass keys. It's been interesting to see past keys being simultaneously talked about in Web 2 contexts, as well as Web 3. I think it's a pretty big game changer for just authentication online, but I think it's a special potentially improvement. It's an especial improvement for Web3. So I would love to get your take on Pass Keys. Is that something that you guys are exploring and supporting today? Would love to get your thoughts there. I'm a big fan of Pass Keys.

I'll just start with that. But a lot of that actually comes from my earliest experiences with crypto and trying to work with just less crypto-native and maybe even less digitally native communities around self-custody and things like password management where I think one of the most interesting things about crypto is that a private key is not a password. And this is where all of the earliest abstractions around crypto have been challenged is that you can't reset your seed phrase if you lose it. At the end of the day, you need some way for someone to prove ownership of a private key. And that's really how you can get to a system where

key loss doesn't happen with the frequencies that it does today. And I think what PASC keys do that are so amazing is they lean into this element of hardware factor biometric, which I think is also really important because it allows us to give users the ability to really guard their keys or guard their secrets with their identity without us having to hold on to that or do KYC or any of these things that are just higher friction and again, start to leave people out. PASC has been part of the capsule flow since the very beginning. We're using the Web Authent standard here. And I think in terms of the curve adoption-wise that they're on, I think that decision has

I think been very much validated. So we had Paskey's in our flow as early as January of last year. So it's been part of the flow since the very, very beginning. And I think it's been cool to see more traction around them, more of an ecosystem around them. And I think what is really special about Passi is just that they make it really hard to accidentally lose something because you forgot it. I'm a huge fan of pass keys too.

I think they're really powerful. And I don't know if I fully understand the tradeoffs that they make. So I'd love to talk to you about that as well. But I think what's interesting too is that you're seeing the likes of Apple, Google, one password, pushing pass keys on their users and getting users to either leverage them as a second factor or even the first factor in some instances. and where I'm going with this is trying to understand from your perspective how you see potentially the work that you're doing right now for Web 3 bleeding into maybe Web 2 instances and even

making the experience in Web 2 better. So I think the reason that we're seeing so many people support past keys is because they remove this friction that none of us want. even if I can remember all my passwords or I can have a place to store all my passwords, I don't really want to do that if I can just use something that I already have on me to authenticate and I can know that it's going to be a lot harder to steal that than it's going to be to steal my password for back to that example of that random application that I just made a temporary username password for. So I think there's a real reason why we're seeing this

is it takes away this remembering element of passwords that have been a problem even in Web2. I think what's really unique about this in the crypto context is that what crypto allows is for something like an attestation of ownership of something to be shared and leveraged across many different places. So I think there even will be a world that we start to see where people start thinking about pass key and our operability and the ability to have a pass key authorize who can access what data. Again, we're seeing a lot of rhyming and parallel with SSO with capsule and what we do for on-chain data. and then even moving forward to what this looks like, to you know, to authenticate sharing different parts of ourselves with different parts of the internet. I think is really directionally where we can really start to see Paskis go

because they make things like recovery less of an issue, like forgot your password flows, seed phrase recovery in the crypto context, things like that. I want to talk about Capsules users today. So we spent a lot of time talking about your views on a bunch of different things and how exactly Capsule works and enables these unique properties that you do. I'd love to learn more about how developers are actually leveraging Capsule today. What types of applications are they building? And then what categories of applications are you really excited about

that are especially uniquely positioned to benefit from and take full advantage of the infrastructure that you're building? Absolutely. So we're seeing quite a bit of partnering in. And this was something that we've done a little differently than other vetted wallet providers, where we work with both existing crypto wallets as well as applications. On the crypto wallet side, a lot of this has to do with us offering wallets the ability to have an MPC-based system that's recoverable and doesn't require anyone writing down a seed phrase.

So it makes that onboarding a lot easier. So that's one category of partners that we have. And then what's even more powerful at that is that we're seeing some of these wallets in particular, extend that into making the app experiences for the most popular apps that they're connected to, more seamless as well. So allowing things like background signing and abstracting further some of that back and forth pop-up type of experience. That's really one category. And then the second has been around the more connected consumer side is maybe how I'll put it. So social, gaming, different types of products that are built on chain and are leveraging the fact that

they're part of a broader ecosystem where these more networked social identities, networked in-game assets in a multiple app or multi-app user journey context are really, really valuable. And I think you had a question as well around who is uniquely positioned to benefit from Capsule. And I really think it is builders that consider their application part of a broader ecosystem or as the center of point of a broader ecosystem where we talk to a lot of folks who are building an application, but envision those assets being something that have a much broader reach than their singular app. And so those are really the types of products that we've been most partnering with on this journey. That's amazing. Nithia, it has been such a pleasure to have you on. I'm so excited about

what capsule is building. I think that the insights that you guys have had from the beginning have been ahead of their time. And we're starting to see those hypotheses and assumptions really play out today. So I'm really excited to see capsule get leverage and widely adopted and the impact that it will have for bringing many more people into Web3 and in keeping them here. Thank you so much, Ria, for having me. It was really wonderful to chat about what we're up to and super excited for really the future of everything on chain. And as a quick last question, how can people stay on top of everything that you're personally working on and that capsule is working on in shipping. So our website is usecapsule.com and then we're just used capsule on socials.

And then I would love to chat with anybody who's excited about this area. So on Twitter, I'm just underscore NITYAS. So just my first name and last initial. But we'd really love to chat with anybody who is thinking about these topics. Perfect. Thanks, Nipia. Thank you so much, Rio. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com or just click on the tab in our website. Thanks for listening.