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. ||||| Following the launch of the first production-ready version of Ethereum this month, bitcoin businesses are moving to investigate how they might apply the blockchain platform as part of their existing products or services. 
 
 So far, startups as diverse as cloud money platform Uphold, bitcoin mining firm BTCS and hardware device provider Ledger are among those that have announced Ethereum initiatives. And in what may be one of the most high-profile signs of interest, bitcoin startup Coinbase plans to hold an internal event on the platform this week. 
 
 However, exactly how these companies will seek to use Ethereum, and whether they will do so in a way that is consistent with the vision of the next-generation blockchain platform remains unclear. Announced in 2014, Ethereum is distinguished by its support for smart contracts and ability to support decentralized applications or dapps. 
 
 Despite these wide uses, interviews suggest bitcoin startups are adding support for Ethereum through services that aim to boost the liquidity of its transaction token, ether, and that while they are excited about its larger potential, they're not sure how to define this opportunity or what it may mean for their business. 
 
 Uphold EVP Jorge Pereira, for example, said that his firm is seeking to add support for ether as a first step, but that it will remain open to other applications as they emerge. Still, he spoke to overall change in perception that has brought about this shift. 
 
 Pereira told CoinDesk: 
 
 "Before, Ethereum was a curiosity. No one knew whether it would take off. Now it's achieved a number of goals that make it something that has sizeable potential. The first thing we can easily do is provide support for holding and converting ether, however, with Ethereum we don't see the goal being that." 
 
 Elsewhere, members of the bitcoin community struck similar tones. 
 
 Ledger co-founder Thomas France noted his firm sees its support of Ethereum as a necessary step toward applying its technology to a wider variety of blockchains. Ledger recently announced support for Eris Industries, for example, which offers permissioned blockchain solutions. 
 
 "The core of our business is to provide ways to leverage secure hardware for developers and companies," France told CoinDesk. 
 
 Other industry businesses have sought to offer services for those seeking to buy or sell ethers in a similar manner as digital currencies, even as the platform's creators indicate ether is not meant to be a payment method or store of value. 
 
 Tapping new markets 
 
 Of interest for many of those interviewed was finding new lines of business. The statements suggest Ethereum may become a way for some firms to seek to grow their market size at a time when adoption of bitcoin as a digital currency appears to be stalling. 
 
 BitGo engineer Jameson Lopp, for example, said that the bitcoin wallet and security specialist is discussing whether it would be worth developing a wallet for the blockchain platform, though he cautioned such talks remain in early stages. 
 
 "Our business is helping people secure crypto. It mainly comes down to how much demand there is to secure ether from institutions," he said. 
 
 Not all those who are interested have a long-term focus in mind, however. Charles Allen, CEO of bitcoin mining outfit BTCS, noted that his firm recently built custom Ethereum mining rigs as part of a pilot program due to the escalating price of ether. 
 
 In recent weeks, ether has been one of the more volatile currencies, rising to highs of around $13, up about $10 from six months ago. Allen indicated that BTCS is well-positioned to roll out hardware for Ethereum mining, given its background in creating specialized hardware for bitcoin mining. 
 
 "You can't ignore [Ethereum] right now, at this price level, with a $1bn market cap," Allen said in a recent interview. 
 
 He went on to indicate that the pilot seeks to examine whether mining Ethereum would be profitable given that it plans to transition from proof-of-work to proof-of-stake mining, meaning eventually, its transaction verification process would transition to the point where it would not require hardware. 
 
 Still, he said that since Ethereum runs on graphics processing units (GPUs), it's possible for the company to resell the hardware it purchases. 
 
 "For us, this is opportunistic. You can't mine Ethereum forever, [but] if we can jump in and make some money it makes a lot of sense," he said. 
 
 'Unfortunate' attempts 
 
 In interview, representatives of the Ethereum project reported mixed feelings about the recent trend. 
 
 The platform's inventor, Vitalik Buterin, noted he has been disappointed by how bitcoin industry firms are seeking to leverage the technology, noting that, to date, most initiatives have failed to "capture what the platform is about". 
 
 He told CoinDesk: 
 
 "Some of that is fairly simple, there's [we accept] bitcoin, we're just going to accept ether, which is nice, but it's kind of unfortunate. The whole thing is to do all the blockchain stuff other than currency." 
 
 Buterin suggested that many industry firms haven't digested the platform's value propositions, which he acknowledged may be more abstract than bitcoin's, and to an extent, a threat to some industry business models. 
 
 "A more traditional company might ask can we accept ether. But, that's not the point. The point is that you will be replaced by a smart contract that is fully autonomous and doesn't charge fees," he remarked. 
 
 Still, there are problems in the Ethereum ecosystem that Buterin indicated he hopes innovators in the bitcoin space and beyond will solve. 
 
 For instance, he pointed to the centralization of Ethereum's mining pools and the relative newness of its wallet applications as areas where it could benefit from the knowledge of other open-source technology communities. 
 
 Wait and see 
 
 Interviews suggest that these opportunities are resonating with industry businesses, even those that may have just taken initial steps to embrace ether. 
 
 For example, Andrew Lee, CEO of bitcoin deals platform Purse, noted that his startup is accepting ether, but that it has explored how Ethereum could be used to automate certain parts of the online commerce process and as part of conversations about the future of supply chains. 
 
 Lee suggested it remains to be seen whether applications like smart contracts become a use case for Ethereum, or if other efforts are successful at replicating this functionality on the bitcoin blockchain, an idea industry startup RSK Labs has raised $1m to undertake. 
 
 "I think what I foresee is there will be a limit to what bitcoin can do, and if we get there, Ethereum would be a good alternative," Lee said. 
 
 Others noted that this exploration process is likely to take time, and that the ecosystem can be expected to continue to look for ways to apply Ethereum as the project matures. 
 
 Pereira added: 
 
 "With Ethereum, we're still figuring it out as a community." 
 
 Stolen idea image via Shutterstock 
 
 The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
– 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.)