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In many jurisdictions possession or distribution of certain information or content is illegal. Illegal primes, classified information, magnet links to copyrighted torrents, hate speech, outlawed pornography, incitements to terrorism, etc. Not all of this is efficiently encoded in the blockchain, but at least some can be.

Let's say a wealthy malicious actor wanted to disrupt the bitcoin network or crater the price. He could subsidize transactions containing illegal content. Moreover he could most likely do this anonymously or near-anonymously.

One or two instances would most likely be ignored by legal authorities. But persistent violations would most likely raise the ire of the courts. US federal judges regularly issue injunctions taking down websites. It's unlikely that they would make an exemption for block chains. Especially considering that most judges are technically illiterate.

Since all full nodes would contain the illegal information, it would become illegal to run the existing blockchain in the US. It would probably be impossible to enforce against your typical home user. But any public facing wallet provider or large-scale miner based in the US would be shuttered. GDAX, Coinbase, all the wallet providers, all the US-based exchanges, etc.

The scenario would be extremely disruptive, and either require a hard fork or make bitcoin untenable in the US. Very likely it would crater the price, as nearly all US demand leaves the market. Is there any possible remedy if such a situation were to occur?

EDIT Re duplicate question: The designated answer to the original question is fallacious. The assumption is that the protection of ISPs would extend to blockchains. Even if that was exactly true, it's still insufficient to protect against this attack.

Yes, US law exempts ISPs from copyright infringement liability. But only if they remove the offending content. A federal judge would likely extend the same logic to the blockchain in question. The only way to remove content from the chain is to hard fork at the point it was inserted.

Not only would that reverse all transactions that occurred subsequent to the offensive content. It would likely destroy split the currency every single time a content violation block is added. Theoretically that could be every single block. From the standpoint of US compliant parties, the network would be unusable.

  • StackExchange is not the place for legal advice or discussion. Consult a lawyer fluent in the necessary area. – Max Vernon Nov 30 '17 at 15:56
  • Max, this isn't a solicitation for legal advice whatsoever. This is a discussion of a (possibly major) vulnerability in the bitcoin protocol. Yes, the attack vector does happen to be through the legal system. But regardless, if you think a Federal injunction outlawing full nodes wouldn't massively affect all Bitcoin users, you are being naive. If I discovered major vulnerability in the Bitcoin Core, would you similarly dismiss it? – user79126 Nov 30 '17 at 21:43
  • I'm not dismissing your question. I'm dismissing that fact that a legal discussion is valid here. Perhaps a judge will make bitcoin illegal, and perhaps they won't. That won't affect the blockchain unless that judgement has worldwide effect. Do you worry that illegal content could make computers illegal? Would the US outlawing computers reduce the amount of illegal content? It's an open-ended discussion, and open-ended discussions are off-topic on stackExchange. – Max Vernon Nov 30 '17 at 22:40