German researchers have found about 1,600 files of non-financial
data, some of which link to or contain child pornography and other
objectionable material, on the system that stores Bitcoin transactions.
The
discovery could place certain users of the Bitcoin network in legal
jeopardy, the researchers said, and could pose an obstacle for greater
adoption and mainstream acceptance of Bitcoin and other
cryptocurrencies. Bitcoin "miners" and people who have volunteered to
use their computers to maintain the network may be liable for the
possession of illegal content, the researchers said. But people who own
and trade Bitcoin but don't participate in the Bitcoin network are not
directly affected.
The researchers analysed about 1,600 files on Bitcoin's blockchain, the public ledger that serves as the infrastructure for cryptocurrency
transactions. Most of the files were harmless, the researchers
concluded, but some contained copyright violations and the disclosure of
people's identifiable information, and at least eight files had sexual
content. Some files depict or link to "mildly pornographic content," and
two files contain 274 links to child pornography websites, the
researchers found. Another file is believed to depict a nude image of a
minor, the researchers said.
"We thus believe that future
blockchain designs must proactively cope with objectionable content,"
the researchers from Aachen University and Goethe University Frankfurt
wrote in their research paper, which was presented last month at an
international conference on financial cryptography in Curacao.
Experts
say that the files likely got there when people added the material as
notes to transactions or inserted them as if they were transactions
themselves. People using the blockchain can add non-financial data to
describe a transaction's purpose, insert benign messages or record
information for other financial services. Anyone with access to the
Bitcoin software has the ability to upload content to the blockchain,
including miners, exchanges and other individual users.
It isn't known who uploaded the offending material. The seven researchers did not respond to a request for comment.
Although users on Facebook, Twitter and YouTube
may see objectionable content posted by others, people who maintain
aspects of blockchain-based systems may actually be in possession of
such content even if they did not produce it themselves. That's because
people who maintain the Bitcoin network have to download the entire
blockchain or parts of it.
"Since all blockchain data is
downloaded and persistently stored by users, they are liable for any
objectionable content added to the blockchain by others," the
researchers said. It's difficult to pinpoint who added the objectionable
files because users on the Bitcoin blockchain are pseudonymous and can
generate a new address for every transaction.
The researchers said
there is legislation in several countries, including the United States,
that suggests that illegal content held on the blockchain would be
unlawful to possess for all its users. The researchers suggested that
technologists creating new blockchain designs could address these
issues, perhaps by preventing people from inserting such files or
halting their spread, to protect users from potential liability.
Christian
Catalini, a professor and founder of MIT's Cryptoeconomics Lab, said
that the offensive material the researchers found in the blockchain does
not present a major problem right now because the blockchain was not
designed as a large-scale file storage system - meaning it's still hard
for people to use it to post offensive content. But as developers create
new blockchains primarily for hosting files, the posting of offensive
material could become an issue, he said.
As with certain
communications platforms on the web - such as social media, blog
platforms and chat forums - engineers could set rules or create filters
for illicit material. "The choice of accessing all sorts of content
already exists, and that is a result of having the internet," Catalini
said. "What's novel here is we have a new technology, but the solution
is the same."
While Bitcoin's value soared last year, the
cryptocurrency market has faced heightened scrutiny, even as more people
are turning to virtual currencies as an investment option. Google said
recently that it will ban cryptocurrency-related advertisements on its
platform, following a similar decision by Facebook earlier this year, in
an attempt to stem misleading ads. The Federal Trade Commission is also
cracking down on alleged cryptocurrency schemes and filed a lawsuit
last week.
As of Wednesday, the total market capitalisation of
cryptocurrencies was more than $350 billion, according to the
cryptocurrency tracker coinmarketcap.com.
