The discovery of illicit content stored on the blockchain could be the future of cryptocurrencies like Bitcoin at risk, according to German researchers.
A new report by RWTH Aachen University researchers found that the blockchain ledger – an unchangeable, open register that lists every transactions ever made on the platform – has been used to store illegal content, including child pornography and privacy and copyright violations.
Because of how the new technology functions, this could mean that anyone that owns Bitcoin, or any cryptocurrency based on the blockchain, is breaking the law, the researchers found.
“Our analysis shows that certain content, for example, illegal pornography, can render the mere possession of a blockchain illegal,” the researchers said.
“Since all blockchain data is downloaded and persistently stored by users, they are liable for any objectionable content added to the blockchain by others. Consequently, it would be illegal to participate in a blockchain-based system as soon as it contains illegal content.”
The blockchain ledger is typically used to store the financial information of the transaction, but can also list other information. While the ledger size is only 80 bytes, it can be used to include links to illegal content.
The researchers focused their research on the Bitcoin blockchain base, analysing more than 1550 files of the cryptocurrency. In these files, they found more than 600 privacy violations and at least eight with illicit sexual content.
“The harmful potential of single instances of objectionable blockchain content is already showcased by findings such as links to illegal pornography or serious privacy violations,” the report said.
The research report could have huge ramifications and is likely to impact all cryptocurrencies.
It could mean anyone that owns Bitcoin is breaking the law.
“Although court rulings do not yet exist, legislative texts from countries such as Germany, the UK, or the US suggest that illegal content such as child pornography can make the blockchain illegal to possess for all users,” the report said.
This would also apply in Australia, which shares similar laws in the space.
The issue is with one of the fundamental structures of the blockchain.
“Blockchains irrevocably record arbitrary data, ranging from short messages to pictures,” the researchers said.
“This does not come without risk for users as each participant has to locally replicate the complete blockchain, particularly including potentially harmful content.
“We highlight the importance for future blockchain designs to address the possibility of unintended data insertion and protection blockchain users accordingly.”
New forms of blockchain must act to address this issue, the researchers said.
“We believe that future blockchain designs must proactively cope with objectionable content,” they said.
“Peers can filter incoming transactions or rever to content-holding transaction, but this must be scalable and transparent.”
Blockchain-based digital currencies like Bitcoin have faced intense scrutiny this year after a rollercoaster end of 2017 which saw the cryptocurrency’s price rise and dramatically fall.
Blockchain-based currencies have also been at the centre of a number of controversies, including when $230 million-worth of Ether was “accidentally” deleted by a user.
The new security concerns risk preventing many of the benefits that the blockchain could provide to a number of industries. A report from Data61 last year found that the blockchain could deliver “profound” benefits to Australian innovation, and has the potential to disrupt entire industries.