# Microsoft AI image watermarking privacy concerns > Live situation record from CLSTR: https://clstr.news/situations/microsoft-ai-image-watermarking-privacy-concerns > Updated: 2026-08-26T20:54:15.000Z. Sources: 10. Developments: 2. Security researcher Xusheng Li has identified a mechanism within Microsoft Paint and Photos applications that embeds invisible, server-issued watermarks into AI-generated images. Technical analysis reveals that even when image generation occurs locally, prompts are sent to Microsoft Azure servers for moderation. The servers return a 128-bit Globally Unique Identifier (GUID) which is then encoded into the image pixels via a component known as ‘Watermarker.dll’. This invisible watermark is distinct from visible Copilot logos and is not explicitly disclosed in Microsoft’s documentation. The researcher noted that these GUIDs are linked to the C2PA manifest as a ‘soft binding’ value. Because the application sends the previous generation’s ID back to the server during subsequent moderation requests, the mechanism could potentially allow Microsoft to link successive user requests, reconstruct a history of user interactions, and map specific AI-generated content back to original user prompts and accounts. ## Timeline ### 2026-08-26: Microsoft Paint and Photos embed traceable AI watermarks, researcher finds Researcher Xusheng Li found that Microsoft Paint and Photos embed invisible, server-issued GUIDs into AI-generated images, potentially allowing user accounts to be traced via these watermarks. 2 sources. https://clstr.news/cluster/microsoft-paint-and-photos-embed-traceable-ai-watermarks-researcher-finds ### 2026-08-24: Microsoft Paint embeds invisible GUID watermarks in AI images Researcher Xusheng Li discovered that Microsoft Paint and Photos embed invisible, server-issued GUID watermarks into AI-generated images, potentially allowing for the tracking of user prompts and interactions. 8 sources. https://clstr.news/cluster/microsoft-paint-embeds-invisible-server-side-ids-in-ai-images --- Cite as: Microsoft AI image watermarking privacy concerns. CLSTR, https://clstr.news/situations/microsoft-ai-image-watermarking-privacy-concerns