In 2014, Colin LeMahieu, frustrated from watching inefficient cryptocurrencies with no solution in sight, began development on a new distributed network with a unique architecture called the “block-lattice.” After working on the project for a year and a half, he announced the development of Nano (then Raiblocks) to the world on October 24, 2015, through a post on bitcointalk.org titled “Block lattice.”
The Genesis Block was created shortly after with a supply of (2¹²⁸ — 1) / 10³⁰ or 340,282,366.9 Nano; now there was a decision to be made about how to get them into circulation while spreading it as far and wide as feasibly possible.
Choosing a Distribution Method
In a Proof-of-Stake network, security correlates to fair distribution. Therefore, when choosing how to distribute Nano, it was essential to select a method that was accessible by as many people as possible.
There have been a variety of ways used to disburse the supply of a new cryptocurrency, such as an initial coin offering (ICO), airdrops or through Proof-of-Work mining each with its pros and cons. ICO’s can lead to a significant development treasury and a short distribution period, but favor whales with deep pockets and walk the line with regards to securities law. Airdrops are a great way to build interest in a new coin by piggybacking on the community of an established currency, yet rely on that coin having been distributed equitably. Proof-of-Work systems are typically viewed as the fairest method, though they require a monetary investment of specialized hardware and large amounts of electricity.
Instead, Nano implemented a novel faucet system with the goal of distributing Nano as fairly and organically as possible. Users faced complex CAPTCHA tests and upon completion were rewarded a percent of the allotted coins based on the amount of CAPTCHA’s solved. The CAPTCHA faucet allowed anyone with a computer to participate, similar to Proof-of-Work mining, though instead of hashing power, users earned coins through contributing a different resource: time and effort.
The Faucet Goes Live
To ensure as much fairness as possible, several iterations of the CAPTCHA were used throughout the faucet’s lifetime, including written and audio versions requiring users to transcribe challenging to read words or muffled letters to users. Each hour the faucet was active, a total of 17,000 Nano were distributed among the top 100 claimants. If a user participated in solving CAPTCHAs but was outside the top 100, their claims rolled over until they accumulated enough solves to be rewarded, allowing casual users to engage the faucet at their convenience.
One unique result of the faucet was the creation of so-called CAPTCHA farmers. Because anyone was able to participate, users from developing countries such as Venezuela and Indonesia who were able to provide for their families with the rewarded coins. This accessibility led to large communities built around Nano, many which continue to grow today.
In early October 2017, after much discussion within the community, it was decided that it was in the projects best interest for the faucet to be shut down so more time could be focused on the development of the protocol. Once the decision was made, a short period was allowed to allow users to access any remaining claims before distribution officially stopped on October 20, 2017.
Upon closure, the CAPTCHA faucet had distributed 39% of the initially planned supply, 126,248,289 Nano and a development fund was created with 7,000,000 Nano, leaving 133,248,297 NANO in circulation.
The remaining 207,034,069 undistributed Nano was sent an inaccessible burn address in 3 transactions, one each from the Landing, Faucet and Genesis accounts.
The burn address was chosen because when decoded to hex, it is all zeroes. Mathematically, it is guaranteed that no one can know the private key. Additionally, in the ledger code, the burn address is coded to not be able to send or receive transactions, rendering the account useless.
After starting Nano as a side project and working on the project in his free time for several years, Colin announced he would be working full time on the project on December 12th, 2017. He designed a unique blockchain technology, used an innovative distribution strategy, and now he’s working to disrupt our conventional concept of currency. He has since surrounded himself with experienced software developers and continues to improve and optimize the protocol and lead the project into the future.