The law and bitcoin: Who is responsible for the contents of the blockchain

Recently it became known that bitcoin can be banned in 112 countries due to references to child pornography in its blockchain. Does this mean that the blockchain will die, strangled by law enforcement agencies?

At the end of March, a scientific article began to be discussed on the Internet, which implies that children's pornography is stored in the bitcoin blockchain. The authors conclude that any of the thousands of nodes that store a full copy of the blockchain, or even just load the history of transactions, violate the law. And since the removal of any data from the blockchain is impossible without violating the functionality of the system, this legal problem can lead to the collapse of the idea of cryptocurrency.

Unfortunately, these discussions suffered from a lack of understanding of how the law works. Yes, the blockchain in its current form may contradict the literal reading of the law, but neither the legal system nor the technological sector does not really adhere to the extremely pedantic approach.

Both sides are able to show not obvious at first glance flexibility, and nobody will put innocent users of the blockchain in prison. Nevertheless, the very conversation about how blockchain its existence violates the law, for example, the United States, is interesting.

A blockchain is a publicly accessible registry, with records of cryptocurrency transactions, the blockchain allows you to track a transaction of an arbitrary block of data. This can be compared to a note on the back of a check, and this is not a bug, but a useful feature of the system, and bitcoin users have long used it to insert messages — from congratulations on Valentine's Day to fragments of Wikileaks documents.

The authors of the article under discussion, which was presented at a recent Financial Cryptography conference, sequentially scanned bitcoin blockchain and found about 1,600 pieces of non-transactional data, including a few examples of what they thought was undesirable or illegal content. They conclude that everyone supporting a full-fledged node in the Bitcoin network, which means storing a full copy of the blockchain, keeps illegal content on the computer, which can be child pornography, and this is a very serious crime.

This is not the first apocalyptic article devoted to the law in relation to cryptocurrencies — and not the last. It is often argued that the blockchain will largely kill criminal law, taxation and financial regulation, as it will become impossible to prevent many things. Now on the contrary: the blockchain will die, strangled by law enforcement agencies. According to this logic, one person who has kept child pornography on the blockchain "poisons" it for everyone else.

In fact, both are wrong: the blockchain will not kill the law enforcement system, and it will not kill the blockchain, because both the law and software products have the ability to adapt to changing conditions.

Let's first discuss the assumption that if there is illegal material in the blockchain, every owner of a copy of the registry is a criminal.

It's too straightforward, so the law doesn't work. Usually, to commit a crime, you need to know that you're breaking the law. And the General idea that your computer may have unwanted data is usually not enough; you have to specifically imagine what you are doing.

For example, in American copyright law there is an exception to section 512 of the DMCA for good faith intermediaries. Section 230 of the communications Act provides for similar protection, so Twitter and Facebook are not yet closed after the first libel case or the first photo of a naked child, and from a legal point of view, users supporting blockchain sites are similar to Internet service providers and hosts.

American case law is full of subtleties. For example, in the early 2000s, Kazaa and Grokster peer-to-peer networks were shut down as their owners were aware that they were mainly used for copyright infringement.

At the same time, the main content of the blockchain is financial transactions, and even if it is possible to record child pornography in the blockchain, no one will say that this technology is intended for it.

Similarly, when Tiffany sued eBay for the presence of counterfeit goods on the site, the site was not found guilty because, knowing about this potential, it took some reasonable steps to resolve disputes.

There is, however, a difference: given the assumed immutability of the blockchain, the user can not delete unwanted data on demand — this, in fact, is the essence of the technology. And all EV's intention and awareness are important.

Let's imagine an analogy: the launch of a full — fledged Bitcoin network node on your computer is as if you took control of a bookstore, on one of the shelves of which, somewhere in the second row, child pornography was hidden.

Now let's imagine that a policeman comes to the store and finds her. The owner will have good protection: he sells thousands of books, and does not choose each separately, ordering them from a distributor in the catalog. In this situation, despite the signs of a serious criminal offence, the Prosecutor's office will not press charges due to lack of intent. And the owner of the copy of the blockchain will say the same:

"This is a system for storing financial transactions, how do I know that there is still some additional content?»
The authors note that sometimes the intention or knowledge can be reasonably assumed, and refer to the doctrine in German criminal law, according to which blatant disregard for the truth is sometimes regarded as an intention. Since now-thanks to the work of the authors — we know that illegal materials are stored somewhere in the blockchain, we can not deny that by saving a copy of the blockchain, we also became the owners of these materials.

This provocative, but apparently incorrect interpretation. Yes, legal liability is possible, but it does not mean that it will be, or that users will be afraid of it.

For example, there is such an anonymizing Tor network, and people supporting so-called output nodes are in exactly the same position as blockchain node operators. One can be sure that the computers of the majority of Tor operators, which are thousands around the world, temporarily store child pornography, but law enforcement agencies, albeit reluctantly, resigned to this, because the main purpose of the network — legal activities, including the protection of activists in authoritarian countries.

It is also worth noting that until now bitcoin blockchain stored mostly links to sites with child pornography. The authors found one image that was believed to be child pornography, but did not confirm that it belonged to this type of content. Here, as in the case of intent, there is a legal difference between possession and display of the content.

If attempts to "poison" the blockchain will become a regular, whether it is possible to provide to the user the possibility to remove unwanted content? If the information is stored in a simple form, then Yes.

The fact is that bitcoin blockchain allows the user to include arbitrary data into the transaction, something like comment fields, and it could be made this field editable or deleted. While non-financial data is most often stored in blockchain in this way.

Nevertheless, it is necessary to assume that the attacker will go further, and encodes the prohibited materials directly in the form of transaction data, as if the bestseller publisher said that in the first letters of the lines of the newly released novel encrypted pornographic image of the child. Can the police arrest the owners of the book? Common sense suggests that no, and most lawyers will agree with this view. The ability to remove problematic content once identification is not the sole limitation of liability for owning them.

Users who support bitcoin sites do not want anything bad — the responsibility lies with those who deliberately use the Bitcoin network to store illegal materials. It is important to remember American business "Valentine against Christensen". The defendant tried to circumvent the ban on the distribution of printed advertising on the streets by printing a political demand on the other side, but the Supreme court found him guilty because he deliberately tried to circumvent the law. We suspect that in a situation where someone placed something illegal in the blockchain, the relationship will be similar, however, because of the anonymity of the blockchain, it may not be easy to track such a player.

The first reaction to the sensational article about the legal risks inherent in bitcoin can be excessive. We can recall how back in 1995 Time published an article on Internet pornography, and it made an extremely strong impression on the American Congress, although it was based on a student work full of methodological errors. However, when it became clear, it was already late — next year Communications Decency Act (the law on morality in communication networks) which as we know, could considerably slow down development of the Internet if the Supreme court partially didn't cancel it was adopted.

Yes, the presence of sensitive or unwanted content in the public blockchain is a problem. For example, we have not even discussed how the so-called "right to oblivion" (relevant laws exist in the EU and Russia), requiring the possibility of retrospective removal of content, can be implemented in this context.

On the other hand, innovation and the law are always hard to get along at first, but this is not the first such experience, and programmers and lawyers will have to work together to solve the problem. One thing is certain: no one will put innocent blockchain users in jail.
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