Thread on images on the blockchain: As long as there is user-provided data, systems that store that data can be commandeered to store what is being called "illegal content." True for Google Docs, true for blockchains.
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Ok, your argument comes down to "it will always be possible for a user to determine the side effects/meta-data, and ergo, they can always encode something on a chain whose removal is problematic." This is true for Bitcoin, but there's no impossibility result backing it.
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There's also the legal issue of whether the Section 230 exemption should apply to nodes in a peer to peer system. There are many arguments and counterarguments, so I won't touch that one right now, but it's not a settled question that storing bits without a decoder is possession.
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And lastly, channel capacity matters a lot in steganography. A channel that requires millions of transactions to encode an image, costing tens of thousands of dollars, is interesting to ponder intellectually, but not a realistic threat on our way of life.
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Indeed that matters if your goal is to distribute Evil Data. It doesn't matter if your goal is just being able to jail arbitrary people participating in the blockchain.
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There's also very compact but highly illegal data you might want to distribute and make undeletable. Think things like leaked classified docs, doxing of gov't officials or other high-profile ppl, etc.
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I don't think these pose any greater threat with blockchains than they do with any other medium. If anything, a viral leak on Twitter becomes undeleteable, and visible, much faster than on Bitcoin. Your previous point stands though: sovereigns could use such data as a pretext.
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But at this point, I am not worried that states will crack down on the entire area of blockchains because of a few, or actually, just one according to the study, instance of vile material.
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Maybe not. We'll have to wait to see. But I also suspect there will be attempts to manipulate currency through this sort of thing.
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