Researchers discover illegal content within the distributed ledger, making possession of it potentially unlawful in many countries 
 
 German researchers have discovered unknown persons are using bitcoin’s blockchain to store and link to child abuse imagery, potentially putting the cryptocurrency in jeopardy. 
 
 The blockchain is the open-source, distributed ledger that records every bitcoin transaction, but can also store small bits of non-financial data. This data is typically notes about the trade of bitcoin, recording what it was for or other metadata. But it can also be used to store links and files. 
 
 Researchers from the RWTH Aachen University, Germany found that around 1,600 files were currently stored in bitcoin’s blockchain. Of the files least eight were of sexual content, including one thought to be an image of child abuse and two that contain 274 links to child abuse content, 142 of which link to dark web services. 
 
 “Our analysis shows that certain content, eg, illegal pornography, can render the mere possession of a blockchain illegal,” the researchers wrote. “Although court rulings do not yet exist, legislative texts from countries such as Germany, the UK, or the USA suggest that illegal content such as [child abuse imagery] can make the blockchain illegal to possess for all users.” 
 
 “This especially endangers the multi-billion dollar markets powering cryptocurrencies such as bitcoin.” 
 
 While the spending of bitcoin does not necessarily require a copy of the blockchain to facilitate, some processes, such as some mining techniques, require the downloading of the full blockchain or chunks 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. Consequently, it would be illegal to participate in a blockchain-based systems as soon as it contains illegal content,” the researchers wrote. 
 
 Since mining is essential for the function of bitcoin, as the process records the transactions into the blockchain to verify trades and generates new bitcoin in the process, having illegal content such as child abuse imagery within the blockchain could cause significant issues for the currency. 
 
 “We anticipate a high potential for illegal blockchain content to jeopardise blockchain-based systems such as bitcoin in the future,” the researchers wrote. 
 
 This is not the first time warnings over the ability to store non-financial data within the blockchain have been issued. Interpol sent out an alert in 2015 saying that “the design of the blockchain means there is the possibility of malware being injected and permanently hosted with no methods currently available to wipe this data”. 
 
 The agency warned that the technology could be used in the “sharing of child sexual abuse images where the blockchain could become a safe haven for hosting such data”. 
 
 But this is the first time such content has been shown to actually exist, creating a moral and legal quandary around possession and the blockchain. ||||| In recent months, Bitcoin’s supporters have pointed to its falling use in illegal transactions as a sign of the cryptocurrency’s growth toward mainstream acceptance. But German researchers say that links to child pornography within technology underlying Bitcoin could stifle its development. 
 
 While the blockchain is largely known to be an immutable ledger of Bitcoin transactions corroborated by copies held by participating computers, it also allows its users to leave coded messages. Bitcoin’s creator, Satoshi Nakamoto, famously left a cryptic message on the blockchain’s original block: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” 
 
 Like that very first message, most of the content left on the blockchain has been relatively benign—tributes to the late Nelson Mandela, or messages to loved ones on Valentine’s Day. But the ones that could be illegal, containing links to child porn, for example, could be an outsized problem for the Bitcoin community. 
 
 “While most of this content is harmless, there is also content to be considered objectionable in many jurisdictions, e.g., the depiction of nudity of a young woman or hundreds of links to child pornography,” the paper authored by members of RWTH Aachen University and Goethe University read. “As a result, it could become illegal (or even already is today) to possess the blockchain, which is required to participate in Bitcoin.” 
 
 The researchers said they found 1,600 instances in which transactions on the blockchain included non-financial information, representing about 1.4% of transactions. Since the Bitcoin blockchain is immutable, those who download it are also unwittingly downloading links to child porn. 
 
 The Department of Justice did not respond to requests for comment from Fortune. 
 
 It’s not the first time curious onlookers have found links to child pornography in Bitcoin’s blockchain. Users first pointed out the links in 2013. Though this is perhaps the first time researchers have been able to quantify the volume of potentially illicit material hidden in the blockchain. 
 
 Additionally, since Bitcoin has buyers and traders all over the world, items in the blockchain also raise questions about legality in other nations. As the blockchain researchers note: “In China, the mere possession of state secrets can result in longtime prison sentences. Furthermore, China’s definition of state secrets is vague and covers, e.g., activities for safeguarding state security. Such vague allegations with reference to state secrets have been applied to critical news in the past.” 
 
 The researchers pointed out that the blockchain includes online news articles concerning pro-democracy demonstrations in Hong Kong in 2014, demonstrations that were a point of irritation for Beijing. ||||| Bitcoin’s price rose above $9,000 for the first time in a week on Tuesday evening, despite reports that its underlying blockchain contains hundreds of links to child pornography. 
 
 The reports, based on a paper published by German researchers, points to a potentially serious legal flaw with the blockchain concept. 
 
 Blockchains, which are transaction ledgers that are stored on many computers, are supposed to be immutable, in order to guarantee the integrity of the information they hold. They can theoretically be altered, but only if most of the network’s participants agree to use a new version or “fork” of the blockchain, rather than the original. This has never happened with Bitcoin. 
 
 However, some blockchains, such as that underpinning the Bitcoin ecosystem, can contain all sorts of fragments of information, some of which may be illegal in certain jurisdictions—and if you can’t delete that information, everyone with a copy of the ledger could end up in trouble with the law. 
 
 It was already known that blockchains could seriously clash with European data protection laws, which say people must be able to have their personal data deleted or amended, wherever it is stored—transactions and public cryptographic keys, which are regularly stored on blockchains, usually qualify as personal data. 
 
 The issue of child sexual abuse material is even more politically and legally sensitive. Nonetheless, the Bitcoin community doesn’t seem to be concerned about the potential impact of the latest news on the cryptocurrency’s ecosystem. 
 
 Bitcoin price has instead been rising on news that G20 finance ministers aren’t cracking down on cryptocurrencies just yet. The leaders said on Tuesday that they will only propose harmonized global regulations in July, after collecting more information. 
 
 At the time of writing at 6 a.m. Eastern Time on Wednesday morning, Bitcoin’s price stood at $9,097. It fell below the $9,000 mark a week ago, after Google followed Facebook in banning cryptocurrency-related ads from its platform. Twitter is reportedly planning to do the same, amid concerns that people are being enticed by scammers offering “initial coin offerings” (ICOs) that have no real business behind them. ||||| Before he departed, Wilson cleared out personal cryptocurrency accounts and one related to his business, Defense Distributed, which sells a boutique milling machine for finishing unregistered AR-15 lower receivers. 
 
 The charges against Wilson stem from an alleged encounter with an unnamed victim on Aug. 15. A sworn affidavit by a police detective with the Austin, Texas, police department’s Human Trafficking/Vice Unit maintains that Wilson and the victim, who is under the age of 17, met at a coffee shop after exchanging nude photos on the website SugarDaddyMeet. The affidavit said Wilson then drove the victim to an Austin hotel in a car licensed to Defense Distributed. Wilson and the victim had sex and he paid her $500 in $100 bills before dropping her off at a nearby Whataburger, according to the affidavit. 
 
 As reported by Wired, Wilson “was informed by a friend of the victim that she had spoken to police, and police were investigating him for having sex with a minor.” 
 
 Bitcoin accounts identified as belonging to Wilson and his company by Hatewatch staff show that on Aug. 16, 2018, in a little over an hour, Cody Wilson emptied more than 60 bitcoin accounts with five transactions totaling $986,525. These transactions can be viewed through the cryptocurrency’s public ledger. 
 
 All funds were transferred to a new 1FBxL account with a value of around $1 million. 
 
 On Aug. 31, 2018, Wilson emptied this new account, valued at $986,525.37, and moved these funds to a new account, 1Q6B2, where it still sits. 
 
 No IP addresses or countries of origin are visible for those transactions through the public ledger. 
 
 Click here to download a PDF of the image below for clickable links to the wallets. 
 
 A commander of the Austin Police Department said Wilson’s last known location was Taipei, Taiwan, a country with no extradition treaty with the United States. 
 
 In 2014 Wilson created a short-lived project called “Dark Wallet” with British cryptocurrency pioneer Amir Taaki. Dark Wallet was intended as a secretive alternative to traditional cryptocurrency platforms, which typically allow transmissions of funds to be traced. Dark Wallet would hide account activity through a process known as “mixing,” which involves breaking up bitcoin transactions in between the sending and receiving addresses to make the transactions harder to trace through the blockchain. 
 
 Wilson publicly demonstrated his knowledge of cryptography and digital currencies. In an interview with the BBC’s “HARDtalk” he discussed his holdings in private key cold storage wallets. 
 
 In an email exchange with Hatewatch staff in February 2018, Wilson was evasive when asked about periodic transfers over the course of three years of Defense Distributed’s bitcoin into cold storage wallets. 
 
 Wilson responded: “Re: the BTC, I suppose your numbers are incomplete and I don’t recognize your characterization of my habits. What’s public is public, but I don’t ‘move’ bitcoin and also rarely spend any. I’d certainly never deny having it though.” 
 
 ﻿Two of Wilson’s projects are listed in the Intelligence Project’s 2017 report on domestic Hate and Extremism. The now-defunct Hatreon, listed on the Hate Map, was explicitly intended to serve as a fundraising platform for the racist “alt-right” in the face of efforts by tech companies to begin policing hate content. 
 
 When questioned in media interviews about his decision to provide material support for the alt-right after the disastrous aftermath of its Aug. 12, 2017, rally in Charlottesville, Virginia, Wilson dismissed the danger of promoting the alt-right. 
 
 No I’m not worried about [helping fund the alt-right]. When I’m talking about incitement or imminent lawsuits, I’m talking about, like, when you’re outside of someone’s home and there’s a mob and you say, ‘There he is, get him!’ That’s not protected speech. But these personalities that use Hatreon right now, these people who have been kicked off these services, these people are at worst trolls, performance artists, provacateurs, vulgarians. And at best, they represent through their hyperbole or through their extreme thinking or presentations, elements of a political speech that should not be censored. That’s entirely possible, and you don’t have to join my shitty little site with its dumb name. But you know no matter what that if you do won’t be kicked off of it. 
 
 Hatreon ultimately floundered after credit card companies blocked the use of their services on the site. The most recent update to Hatreon, on Feb. 9, 2018, reads, “Pledging is currently disabled while we upgrade our systems.” 
 
 In an appearance on the white nationalist podcast Red Ice Radio’s “Radio 3Fourteen,” Wilson supported maintaining public memorials to the Confederacy. 
 
 “And so when I see, like, the elimination of a symbol, right, the elimination — I’m not just sympathizing with Southern white racists — I’m basically recognizing a dangerous mode of post-politics: the need to eradicate a historical narrative.” 
 
 Wilson has himself hinted at racist views. In an appearance on “YOUR WELCOME” with Michael Malice, Wilson propagated a prominent white nationalist canard that holds that minorities are inherently more violent and are responsible for most gun-related homicides. 
 
 I mean it just comes down to how you interpret the figures and the statistics. I mean for our per capita gun ownership it’s actually a decent violent crime rate, right? It’s actually a pretty reasonable gun homicide rate. And when we do digest the numbers even further we see and can begin to see specific causes for the gun crime that we do see. It isn’t white people in North Dallas shooting each other to death on the streets, right? And I’ll probably leave my analysis at that comment. 
 
 Wilson also bragged in the appearance about calculations by Hatewatch that he generated a considerable portion of the alt-right’s fundraising in 2017. 
 
 Defense Distributed, Wilson’s main business venture, is listed among other antigovernment extremists based on its founder’s stated antigovernment beliefs. Wilson created the company to legitimize his plans to publish design files for a downloadable 3D-printed pistol, known as the Liberator. 
 
 Barred from releasing the files on the open web, Wilson instead began selling a boutique compact milling machine specifically designed to create unmarked AR-15 lower receivers. The Ghost Gunner has generated considerable revenue for Wilson, to the tune of around $6 million by the 2016 presidential election. It is unclear what percentage of that revenue was generated through cryptocurrency. 
 
 Many in the extremist community were excited by the potential of Wilson’s “Ghost Gunner” machine, particularly neo-Nazi hacker Andrew “weev” Auernheimer, who discussed an illegal moneymaking scheme utilizing the product on an episode of his podcast: 
 
 Gotta teach those niggas to use the Ghost Gunner my friend. That's a legal thing. You could literally rent out a Ghost Gunner to every fucking nigger that you wanted. Just rent time on it, go to the fucking hood and teach them how to… 
 
 
 
 Brent Fallin's Facebook post 
 
 Brent Fallin, a member of the neo-Confederate League of the South and Ph.D. student at Duke University’s Triangle Universities Nuclear Laboratory, shared a post in 2016 pondering whether he could 3D-print a weapon like Wilson’s Liberator on one of the university’s machines. 
 
 A recent lawsuit intended to block Wilson from posting gun files to the open web brought his name back into the headlines and garnered considerable public support from many on the mainstream right. 
 
 Ann Coulter tweeted, “So far, the only smart person I’ve seen talking on TV this week is Cody Wilson on Fox News Sunday. @Radomysisky” on Aug. 5. The NRA’s Dana Loesch was effusive in her praise of Wilson’s crusade to circumvent conventional manufacturing restraints on the private ownership of firearms. 
 
 Wilson shared two fundraisers to aid his pending legal battles against 19 state attorneys general, both of which raised around $348,000, with an option for funders to donate in cryptocurrency. 
 
 Wherever Wilson is now, his flight from the law will be greatly aided by his knowledge of and access to difficult-to-trace cryptocurrencies. 
 
 Photo credit Kelly West/AFP/Getty Images
– For anyone who carefully tracks bitcoin, Tuesday brought the good with the bad. On a positive note, the cryptocurrency's value topped $9,000, up from a weekend low of $7,335, reports CNBC. On a more dour note comes the news that child abuse photos are lurking within its blockchain. The Guardian offers a primer on the technology: The blockchain is the open-source ledger that keeps track of every bitcoin trade; it has the ability to store additional data, say, a note or file on what the transaction was for. Fortune says "benign" messages are also present, and it gives the example of a Nelson Mandela tribute (indeed, the study found six wedding-related images). But German researchers discovered there are more than financial notes and sweet memories being parked within the blockchain. They looked at the 1,600 files that have been uploaded to it and found eight were sexual in nature. One they suspect may depict child abuse; two compiled 247 links to child abuse content (Fortune reports such links were identified as far back as 2013, but this is "perhaps the first time" such content has been quantified). And that "endangers the multi-billion dollar markets powering cryptocurrencies such as bitcoin," say the researchers. Their reasoning is simple: If bitcoin contains content that is illegal to possess, then it's possible that downloading and storing the bitcoin's blockchain is "illegal to possess for all users." But Fortune reports people don't seem spooked: It notes bitcoin hit $9,000 as the reports on the study were coming out. (Read about an "intensifying guerilla warfare" over bitcoin.)