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Bitcoin, the Blockchain and the Sex Industry

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Bitcoin, the Blockchain and the Sex Industry

It is no secret that the sex industry is a very lucrative space, with its value speculated to be over $10 billion globally. However, there are a number of negatives associated with the industry. Human trafficking, forced sex work, and unfair revenue distribution between workers and other stakeholders are some of key challenges of the industry.

In addition, the sex industry falls under a number of trades, such as the sale of legal cannabis, controlled by morality clauses, which means that porn stars and porn-related businesses can easily have their accounts shut down by banks and other financial institutions. This means that most adult entertainment performers and sex workers are forced to operate largely with cash and are unable to access many of the services that are facilitated by the established financial system.

Bitcoin and Adult Entertainment

Leading pornography site Brazzers has been accepting payments in bitcoin (BTC) since 2014 when its parent company Mindgeek (formerly Manwin) rolled out the feature on its porn sites. Other sites under the Mindgeek umbrella include YouPorn, PornHub and XVideos. The company did this in an effort to increase revenue as well as capitalize on the number of users who wanted to pay in bitcoin. The main selling point of bitcoin payments in this area is the relative degree of anonymity that bitcoin overs over traditional payment methods such as credit cards.

There has also been a number of altcoins that have been created to cater specifically to the adult entertainment space, with each of them claiming to be able to better serve the industry and meet the needs of users than the next. These include sexcoin, wankcoin, titcoin and kencoin amongst others.

The most notable of these is titcoin. The altcoin was launched in 2013 in an effort to become the go-to cryptocurrency for the adult entertainment industry. The coin has since been nominated twice in a row, in 2015 and 2016, for the “Alternative Payment Services Company of the Year” during the XBIZ Awards. The XBIZ Awards recognize performers, companies, and innovations that further the adult industry. Most of the altcoins created for the sex industry are currently inactive due to slow uptake as well as limited utility.

Since bitcoin, and cryptocurrencies, are currently popular buzzwords, some adult sites are using the large global interest on the space to increase traffic to their offerings. For instance, Camsoda, an adult streaming website, has recently launched a line of sextoys that are connected to the price fluctuations of bitcoin, litecoin, and ether.  

The Blockchain as a Payment Processor

The blockchain has been the key to changes made within a wide array of industries, where it has been instrumental to ease payments, increase productivity as well as reduce fraud. Many believe that it has the potential to fix some, if not all, of the sex industry’s financial challenges due to its unique set of characteristics.

Performers in the adult entertainment industry regularly receive less than 50 percent of their earnings because the adult site and payment processors take their cut, leaving the performer with a small amount of money.

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Spankchain, a blockchain-based startup for the sex industry, is seeking to remedy this. The service aims to cut out the intermediaries who take a chunk of the performers’ earnings thus fostering growth in the adult entertainment industry while simultaneously increasing public interaction with cryptocurrencies.

Speaking to Forbes, Spanktoshi Nakabooty (a pseudonym which likely refers to the whole board of the startup) said, “Our belief is that payment channels are the key to near-term cryptocurrency adoption, and the adult industry is a perfect testing grounds for creating parallel economies that transcend the inefficiencies of legacy banking institutions. Our immediate goal is to disrupt the adult cam industry by charging only a five percent fee instead of the 50 percent industry standard and become the dominant cryptocurrency payment platform for the adult industry.”

It remains to be seen whether Spankchain will be adopted by the adult industry as an alternative to existing system, but it seems it may improve the situation for the performers if that was the case. It’s not exactly clear what it can offer above existing cryptocurrencies like bitcoin, which are more well-known, and whether viewers will be bothered to adopt it as well as ‘camgirls.’

Another interesting blockchain-based platform is PinkDate, which will provide an anonymous platform for escorting services, starting in Toronto, Canada. Utilizing monero, the platform will aim to ensure privacy for sex workers, raise capital through the private cryptocurrency, as well as pay out dividends in XMR to investors.

While tokens aimed at sex workers specifically might seem like a good idea, the market may realize the benefits of using anonymous cryptocurrencies instead.

Bitcoin Tracking and Human Trafficking

In August 2017, a team of researchers from the New York University Tandon School of Engineering and the University of California announced the creation of an Artificial Intelligence tool that would help law enforcement identify ads placed online by human traffickers and eventually identify them using the bitcoin payments placed to them.

The algorithm uses a mix of stylometry, which is defined as the “analysis of an individual’s writing style to identify authorship” and analyzing Bitcoin’s mempool and blockchain to identify those posting ads suspected to be involved in human trafficking.

Rebecca Portnoff, the UC Berkeley doctoral candidate in computer science who was part of the team, explained:

“The technology we’ve built finds connections between ads. Is the pimp behind that post for Backpage also behind this post in Craigslist? Is he the same man who keeps receiving bitcoin for trafficked girls? Questions like these are answerable only through more sophisticated technological tools, exactly what we’ve built in this work, that link ads together using payment mechanisms and the language in the ads themselves.”

Though the final determination of whether payments done in bitcoin are actually linked to human trafficking must be done by law enforcement, this tool makes it easier to sift through the large amounts of data on the internet and eventually find the criminals involved.

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