Security & Key Management

How AlgoKYC balances Zero-Knowledge privacy with legal accountability using Shamir Secret Sharing.

The Accountability Problem

Zero-Knowledge KYC cannot mean anonymous crime.

Law enforcement requires a legally compliant path to reveal identity when a valid court order is issued for crimes like financial fraud, money laundering, or terrorism.

AlgoKYC implements Conditional Anonymity: User data is perfectly private and encrypted to everyone in the world, except an authorized legal proceeding hitting a multi-signature threshold.

The Encrypted Identity Blob

During proof generation in the browser, a separate encrypted package is created and stored in Algorand box storage long alongside the ZK Proof.

encrypted_blob = ECIES.encrypt(
  plaintext: {
    aadhaar_number: 'XXXX-XXXX-XXXX',
    name:           'User Full Name',
    dob:            '01/01/1995',
    address:        '...',
    phone:          '...',
    nullifier:      '0xABC123...'   // Linking key
  },
  publicKey: issuer.publicKey       // Only issuer can decrypt
)

This blob is stored in the Algorand Smart Contract’s box storage. Key: nullifier_hash Value: encrypted_blob

Shamir Secret Sharing: 3-of-5 Custodian Threshold

The issuer’s master private key is never stored in one place.

It is split into 5 cryptographic shares using Shamir’s Secret Sharing. Any 3 of 5 shares can reconstruct the key. No single entity—not even the protocol creators—can unilaterally decrypt user data.

Custodian 1: UIDAI Representative

Aadhaar authority — the natural custodian for identity data.

Custodian 2: Ministry of Finance

Financial crime jurisdiction — required for AML cases.

Custodian 3: Licensed KYC Provider

Regulated KYC entity under the RBI/SEBI framework.

Custodian 4: Algorand Foundation

Protocol-level accountability.

Custodian 5: Independent Judiciary-Appointed Custodian

Production Key Storage

Each custodian’s private key SHALL be stored in a FIPS 140-2 Level 3 certified HSM (e.g., Thales Luna, AWS CloudHSM). Key operations occur exclusively within the HSM secure boundary. Private keys never enter system RAM. Every decryption operation produces a tamper-evident audit log entry.

The Court Order Flow

AlgoKYC implements a secure Dashboard specifically for this decryption process.

1. Crime Detected: A suspect wallet is flagged by authorities.
2. Chain Query: Government queries Algorand; the Nullifier linked to the wallet is identified.
3. Order Issued: A court order is issued to the AlgoKYC Issuer.
4. Threshold Verification: The 5 custodians log into the AlgoKYC Dashboard and independently verify the court order PDF.
5. Decryption: If 3 of 5 custodians hit “Approve”, they cryptographically combine their HSM shares.
6. Identity Revealed: The master key is reconstructed in-memory for a fraction of a second, the specific user’s blob is decrypted, and their Name/DOB/Aadhaar is revealed.
7. Wipe & Revoke: An audit log is written, the key is wiped from memory, and the “Revoke” button permanently bans the Nullifier from the ecosystem.

Threat Model Mitigation

Threat	Impact	AlgoKYC Mitigation
Proof forgery	False KYC claim	Cryptographic soundness of PLONK BN254.
Blob decryption	Identity exposure	ECIES encryption — requires issuer private key.
Single issuer compromise	Mass deanonymization	Shamir 3-of-5 split. Complete key doesn’t exist.
Cross-app tracking	Privacy destruction	Per-app nullifiers (Poseidon(uid, app_id, secret)).
XML forgery	KYC bypass	UIDAI RSA-2048 signature verified as the first circuit constraint.
Smart Contract Hacks	Ledger corruption	Python (PuyaPy / AlgoKit) ARC-4 specs and strict ARC-56 compliance.