In 2013, the then-nascent Bitcoin was the subject of a study that found pedophiles likely had been using it to trade links to child pornography. The links were hidden in the blockchain, the vast decentralized ledger that powers Bitcoin, in hexadecimal code hidden in the blockchain using seemingly innocuous if non-sensical transactions. Worse, users could add notes to transactions that potentially led to child abuse. However, now that Bitcoin is traded around the world, this dirty laundry may be a serious problem, and might even shut it down in most of the world.
In the U.S., having the blockchain on your phone isn’t illegal due to the links. You’d have to find the sites in question and go to them. But as researchers point out, the rules are different elsewhere in the world. Via Gizmodo:
The team found that 99 percent of the files consisted of either text or an image and a relatively small number of files contained sexual content—only eight. But one of those files was identified as a pornographic image of a subject who was likely underage. Two other files contained a total of 274 links to child abuse, 142 of those links directed to the dark web.
The researchers write, “our analysis shows that certain content, e.g., illegal pornography, can render the mere possession of a blockchain illegal.” According to the paper, 112 countries prohibit the possession of child pornography and of those countries, many have other restrictions that prohibit the distribution of that kind of material.
This is an enormous problem, because the entire point of the blockchain is that it’s permanent. There’s no way, at least at the moment, to delete these blocks, and while they represent an extremely small proportion of the blockchain, it’s unlikely many users, or world governments, are willing to decide being used to unwittingly spread child pornography is just the cost of doing business. It’s certainly possible to remove the transactions, at least in the sense that theoretically as long as everyone has the same blockchain, Bitcoin can keep going. But it’s likely to roil Bitcoin, and force many governments to consider it as more than just a financial instrument.