Bitcoin’s Role in the Online Piracy EconomyBy Kyle Torpey
One of Bitcoin’s key selling points for people who don’t care much about the technology’s underlying cypherpunk ideology is that it enables monetization models for online businesses — usually of the black market variety — that would likely not exist due to the restrictions and regulations placed by the legacy financial system.
While most people think of things like darknet markets, online gambling, or porn when it comes to the online financial activities enabled by Bitcoin, one of the other, perhaps overlooked, digital economies that gets a boost from Bitcoin is online piracy.
Earlier this year, the World Intellectual Property Organisation (WIPO) announced a new blocklist that would help advertisers block pirate sites from profiting off of copyrighted works. In recent years, there has been a strong push from various intellectual property rights groups to cut off piracy sites’ sources of revenue. The goal is to make it much more difficult for pirate sites to profit off of pirated content (or exist at all).
The latest efforts to clamp down on these sites’ advertising revenues could push them to more experimental monetization models focused around Bitcoin due to the censorship-resistant nature of the peer-to-peer digital cash system. In fact, many piracy sites have already turned to cryptocurrency to help fund their operations in one way or another.
Piracy Sites are Already Using Bitcoin
The most widely-known ways in which piracy sites have turned to cryptocurrency is through donations and the use of in-browser cryptocurrency mining, usually of the Monero altcoin. Indeed, the bottom of The Pirate Bay currently states, “By entering TPB you agree to XMR being mined using your CPU. If you don't agree please leave now or install an adBlocker.”
The in-browser mining model basically uses the site visitor’s computing power to mine cryptocurrency on behalf of the site owner. Various forms of malware are also known to contain cryptocurrency miners in order for hackers to monetize control over their victim’s machines. A report from earlier this year indicated one group was responsible for mining more than one percent of the total Monero supply via mining malware.
Pirate sites have also been known to offer traditional subscription services for access to copyrighted content, with many even offering cheaper access to live sports packages. As the number of streaming services required for people to gain access to all of the latest shows and movies continues to grow, paying $15 per month for access to everything on one platform doesn’t seem like such a bad deal — as long as you’re willing to allow someone else to profit off of a copyright holder’s content.
With some services, a payment is needed to gain any access to the platform at all, while other services require payment for premium features such as priority customer support when requesting new content or higher video quality.
As the screenshot above shows, sites are already willing to provide a discount to those who decide to pay via Bitcoin. Others, such as the pirated live sports streaming services easily found on Reddit, will only take payment via Bitcoin.
These sorts of services don’t want there to be any chance that the proceeds from their online platforms will be eventually seized by a service like PayPal. When Bitcoin is used, there is no counterparty risk for the site operators to worry about in terms of the potential for their funds to be seized due to the nature of their online business.
Indeed, a 2016 report from the European Union Intellectual Property Office indicated that Bitcoin is a threat to various anti-piracy efforts.
On a related note, hacked accounts for various streaming services are often sold online via darknet markets and discussion forums in exchange for Bitcoin.
The Lightning Effect
With the development of the Lightning Network, there is an opportunity for online piracy websites to experiment further with the use of Bitcoin for monetization purposes.
One obvious way in which these sites could utilize the Lightning Network is by offering content a la carte via microtransactions as opposed to subscription-based models. Some of their users may be more interested in paying twenty-five cents worth of Bitcoin to watch a movie rather than buying a month or year-long subscription.
The Lightning Network may be especially interesting to those who are selling access to pirated live events such as a UFC fight or an English Premier League match. With the Lightning Network, streaming payments could be used to allow viewers to make tiny payments every second that a stream is viewed rather than making a lump sum payment for the entire event.
A basic implementation of this sort of setup, known as Streamium, was first made available in 2015, but the project is no longer actively maintained. It should be noted, however, that Streamium was built on basic payment channels rather than the Lightning Network.
It’s unclear if any of these specific utilizations of the Lightning Network will make sense for pirate site operators, but the key point is the faster, cheaper payments associated with the second-layer protocol will open up a new avenue of experimentation when it comes to the monetization of these sorts of websites.