The capacitor mod eliminates in-game snapback by having the electrical signal that corresponds to the mechanical overshooting of the stick knob when released within flick inputs be 'evened out' by a capacitor.
Capacitors work by 'buffering' a signal, so that small, short changes are ignored, which is just what is appropriate for the snapback problem. Below you can see an oscilloscope reading of In case you are not familiar with the capacitor snapback mod:
Left: no capacitor, right: 224 (220 nF) capacitor.
Whenever you plug the controller into a running console without an Arduino, you'll have to recalibrate the controller by holding X+Y+Start. Until you do this, there will be drifting due to the controller not calibrating properly initially with the capacitors. (Even if there is no drifting on the character selection screen, the control stick is not calibrated centrally, so some inputs would be off if you skip the recalibration step.)
With the modular capacitor mod, there is a pair of wire slots for each axis that you buy:
The capacitor I put into the S2b wire slot is the smallest one sufficient to keep the snapback signal curve within the dead zone limits for that respective axis and present PODE level, as decided from measurements with an oscilloscope. This capacitance should be seen as reference.
If you eventually do get snapback, you increase the capacitance in minimal steps for the according axis. The longer wires are for horizontal, the shorter ones for vertical. For example, if you sometimes get jump from downward flick, you would switch out the 224 capacitor that's put into the two wires reaching less far downward and put in a 334 capacitor instead.
If accidental jumps from downward flick still happen, you go another step up to 474, test again, and so on.
On the contrary, if you sometimes get sluggish inputs (for example, crouch jab becoming crouch dtilt or dash jump nair becoming walk jump fair), you'd switch to smaller capacitors, also with one step each (not skipping in-between sizes).
The spare capacitors you always get included with S2b are included in the back shell of the controller:
Here, instead of adjusting capacitance by replacing the capacitor in the slot, you do so by flipping switch. For each axis, there are two switches that toggle one capacitor each, and by flipping both to 'on', you get the sum of their capacitances.
For example, on the controller above, with the configuration of the switches seen, horizontal capacitance is 690 nF and vertical capacitance is 550 nF.