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You might as well release it. The idea is fundamentally flawed, advantage attacker, and there is nothing they can do about it. You won't be hurting them, you'll sort of be doing them a favor. They've already sunk time into the idea, this is a chance for them to cut their time losses and run.

Though they may take it wrong and try to start an arms race with your code, to which I'd say: An arms race in the CAPTCHA space is already a win for the attackers. In case of tie, spammers win.

I think you should release your wonderful algorithm not directly as a way to hack text-captchas but in some other useful forms.

Good job on the code and kudos for not just releasing the code without giving the author some time.