Outside of the storage/bandwidth challenge, there's way more possibility of illegal content being in the form of images than text.

So I imagine even if we figure out a decentralized way for relays to host images and mirror them between each other, they'll be hesitant to have that liability.

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yep

Yeah mere possession of certain images can get you in hot water in the US very quickly. For now, letting the larger services who have tools in place, host it, is probably safest for relay operators until a more protective solution is established.