The CaptchaCoin Lite Paper

1. Introduction

In this lite paper we will discuss CaptchaCoin, a cryptocurrency designed around mass-adoption as a truly usable currency, both online and offline.

By leveraging the already existing and well established concept of CAPTCHAs, CaptchaCoin allows for an equitable approach to mining and currency distribution with true decentralisation. By removing the traditional barriers to entry which many cryptocurrencies suffer from and providing real use cases, CaptchaCoin is uniquely positioned to benefit from the network effect which is essential for any medium of exchange.

We invite you to read this lite paper and join the conversation. If you'd like any clarity on the statements made below, or even wish to contest them, please join the chat in our Telegram group.

2. The Problem

Despite very high public awareness, cryptocurrencies have failed to live up to the "currency' portion of their name. Both online and offline the ability to easily exchange any cryptocurrency for goods or services with mainstream sellers is non-existent.

There are multiple reasons for this lack of adoption:

Difficulty mining coins: Mining requires a combination of technical knowledge and sufficient computational power. This alone prevents the vast majority of people from ever mining a single unit of any cryptocurrency.

Very high volatility: A currency which can double or halve in value in a short time frame will never be used as a reliable means of exchange.

Minimal novel use cases: Minimal novel use cases: Most people can already carry out much of their desired economic activity using the locally issued fiat currency. There is no incentive to acquire a niche currency which doesn't meaningfully increase the functionality of their money.

Combined with the significant risk from not properly securing your coins or an exchange defrauding you of your funds, it is no surprise that cryptocurrencies today exist almost entirely as a speculative asset and have failed to achieve adoption as a medium of exchange.

3. The Solution

CaptchaCoin's primary innovation is through the introduction of CAPTCHAs as a mining tool. Any user can contribute to the network by solving a CAPTCHA, which will reward them with Caps and logs.

Mining is not dependent on a user's hardware or their pre-existing balance, and is accessible to anyone with an internet connection. Leveraging the already well-establish and accepted concept of CAPTCHAs ensures there is no learning curve to the mining process.

Every single user is equal, which allows for true decentralisation of the mining process and the highest level of fund distribution equality of any existing cryptocurrency. By minimising the size and number of "whales" this will reduce the ability of a small number of actors to induce price volatility, especially in the long term.

CaptchaCoin operates as a traditional cryptocurrency: the presence of a blockchain with funds sent through transactions signed by private keys. However, for most users it is expected that they will interact almost entirely through the familiarity of a website, with a simple login system that governs access to their funds. Maintaining this familiarity is essential to keeping the learning curve low and encouraging mass-adoption.

Novel use cases can also be deployed through the familiarity of CAPTCHAs. The CapWall allows for the monetisation of content creation, which will naturally evolve into microtransactions as adoption spreads. The presence of logs will reduce the need for the average internet user to be faced with CAPTCHAs, allowing for a better online experience for both browsers and site developers. By serving as a proof of human-ness, logs can also give social media users confidence that they're reading the opinion of an actual person and not a bot.

4. Tokenomics

4.1 Caps
The primary unit of account is the Cap, of which there is a maximum supply of 1 billion (1,000,000,000). Each Cap is divisible to 9 decimal places.

Caps are primarily earned through mining. By solving a CAPTCHA, the miner contributes to network security and earns some amount of Caps as a reward for doing so.

It is also possible to earn Caps passively. If a user has mined in the last 24 hours then they will earn an amount of Caps mined by other users proportional to their log count. The purpose of this is to encourage consistent mining.

During the pre-launch phase Caps will be rewarded on a sliding scale per CAPTCHA solved, such that early miners are rewarded with proportionally more than later miners. At most 10% of the total supply will be issued this way.

Post-launch, the schedule will change to a fixed return per day, where a finite amount of Caps are distributed proportionally to each miner relative to the amount of CAPTCHAs solved. This will continue to be on a sliding scale where earlier miners get greater rewards. Passive mining will remain a feature.

4.2 logs
Miners are also rewarded with logs which have several unique properties:
In most instances, they are permanently tied to the wallet (cannot be traded)
They gradually decrease after 48 hours of no mining activity
They can be destroyed in certain situations for bad actions (such as a double spend)

Logs are destroyed when transactions are sent. However, if a user has mined in the last 24 hours, they will be given a proportion of their total logs as free logs. This allows a user to send transactions for truly zero cost.

As mentioned above, logs also grant the wallet a proportion of the Caps mined. This gives logs explicit value, and because they are permanently tied to the wallet that gives the wallet itself value.

5. CAPTCHAs & mining

Solving CAPTCHAs plays an integral role in mining and blockchain security. Each time a user successfully solves a CAPTCHA they generate a private key. This private key can be used to derive an address which is already stored in the blockchain. The user then signs a message with the private key, which allows the blockchain to acknowledge that the CAPTCHA has been solved and then issues rewards to the user's wallet.

6. Decentralisation

CaptchaCoin aims to replace all traditional CAPTCHA systems, meaning the number of users contributing to the security of the network will be in the millions and by far the most decentralised & secure cryptocurrency. Mounting a 51% attack would require the simultaneous coordination of millions of bad actors.

7. Scalability

CaptchaCoin is currently designed to issue one block every minute, with a soft limit of 1 MB per block. Transaction fees will increase if prior blocks exceed 1 MB, allowing for increased capacity during periods of high demand but at higher cost. These parameters will be adjusted prior to launch to balance block size versus capabilities of miner's hardware and internet speed.

CaptchaCoin does not prioritise high TPS on-chain, with an estimated standard capacity of no more than 500 TPS. Instead, off-chain solutions are built into the blockchain and tokens. By leveraging the indirect value of a wallet with many logs it is possible to secure off-chain activity and guarantee honesty from off-chain operators, such that the main chain can punish bad actions. Through this mechanism it will be possible to achieve limitless TPS.

8. Use Cases

8.1 Offline Transactions
The introduction of logs allow for offline transactions to be carried out in some instances. A transaction can be created which will destroy the sender's log balance if the transaction lacks sufficient Caps to send to the recipient. Therefore, provided the amount of Caps to be sent isn't too high relative to the sender's log balance, a recipient can be confident of receiving payment even if the transaction cannot be broadcast to the network for some time.

8.2 Instant transactions
It is possible to tie one wallet to another wallet, such that funds can only be sent if both wallets sign a transaction. Typically, a low log wallet will tie itself to a high log wallet. Anyone receiving funds from such a transaction would be confident the transaction will complete as the high log wallet would stand to lose their logs if they approved a transaction for which the low log wallet had insufficient Caps. This allows transactions to effectively be confirmed as soon as the recipient receives a signed transaction, even before it's been broadcast to the network.

8.3 CapWall
A simplified version of a paywall, the CapWall requests that a user solve a CaptchaCoin CAPTCHA before they can access the requested content. This is intended for content creators who, despite potentially having millions of followers, struggle to monetise their audience outside of advertising. Only a tiny fraction of users will contribute to a Patreon account, while the CapWall allows for smaller-scale monetisation across almost all users.

As CaptchaCoin grows, it is expected that some users will opt to instantly pay the small fee instead of solving the Captcha. (see Micro-transactions below)

8.4 Traditional CAPTCHA filtering
Existing CAPTCHAs are an accepted part of internet use. The most popular, reCAPTCHA, is provided by Google at a cost of 0.1 cents per assessment for moderate users. At large volumes the cost of the reCATPCHA system starts to become non-trivial.

The use of CaptchaCoin's CAPTCHA solution would instead allow websites to get paid in Caps every time they serve a user with a CAPTCHA. As such there is a great incentive to switch.

Over time as the CaptchaCoin userbase grows it will be possible to use a wallet's log balance to prove a user is human and not a bot. This will make browsing websites frictionless for actual humans and near-impossible for bots.

8.5 Micro-transactions
CaptchaCoin is designed to facilitate ease-of-use, especially when interacting with websites. A separate off-chain wallet can be created with a small amount of Caps (approximately $5 worth) which is used to make low-value purchases online. This will allow news sites and other forms of journalism to charge a very low fee to read single articles, rather than relying on subscription models which suffer from low conversation rates.

9. Usability

Many cryptocurrencies are primarily focused at highly technical audiences who are comfortable interacting with hex strings and safely storing private keys, but this is off-putting to a more general audience. Alongside the simplification of mining, CaptchaCoin removes two further barriers:

9.1 Website integration
The ability to create a wallet, mine, store and send funds all through the familiar interface of a website will give users the comfort of dealing with cryptocurrency without the usual steep learning curve.

While the blockchain itself operates in a similar, complex manner to other cryptocurrencies, layers have been designed to ensure users do not have to interact with it directly if they do not wish to. However, crypto enthusiasts are of course still welcome to create and secure their own private keys.

9.2 Human-readable addresses
Many existing cryptocurrencies rely heavily on QR codes or character representations of bytes to facilitate address sharing or the creation of transactions. This creates an inherently unfriendly user experience and greatly discourages adoption outside of a technical demographic.

To solve this, CaptchaCoin users will be able to create a username associated with their wallet. While any name can be chosen, the current suggested format is to include an @ symbol in a manner similar to email addresses. This will allow many people who want a similar username to obtain it under a different "domain". For example, John could have one of the following addresses, depending on availability:
John
John@USA
John@NYC
John85
John85@caps

The blockchain stores a 6 byte hash of the username, not the username itself. It will also be possible to have non-Latin characters to allow for wider global adoption.

10. Rollout

CaptchaCoin's rollout is intentionally staggered to grow the userbase in a steady, consistent manner. The primary aim of this is to also encourage steady and consistent price growth, while ensuring the earliest miners (who are rewarded with proportionally more Caps) are those who are passionate about the project rather than looking to make an easy profit.

The market capitalisation will inevitably start at a low point, and during this time price volatility will occur as medium-sized purchase or sell orders can have a significant impact. However, as CaptchaCoin grows and becomes a functional medium of exchange, the benefits of the staggered rollout will reap rewards as the more equitable distribution of Caps prevent the existence of whales who are able to dictate price.

11. Conclusion

By replacing traditional CAPTCHAs and introducing the CapWall, CaptchaCoin will gain an organic presence throughout the internet.

With a key focus on usability for the average web user, CaptchaCoin is accessible to everyone rather than a niche asset for technologically-minded investors. By breaking down all of the barriers present in existing solutions while also delivering practical and needed use cases, CaptchaCoin will position itself as the first cryptocurrency to be used as a genuine medium of exchange.