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How does YouTube detect paid traffic?

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I heard that if YouTube discovers that a particular person is using paid traffic, they would rank the channel low and possibly penalize it.

But is is really a straightforward thing for YouTube to detect paid traffic? Would someone using paid traffic ever be caught by YouTube? How?
 
I do not think that Youtube is able to detect paid traffic or reduce the rank, since a very large number of people and online businesses are paying people to view their videos.
 
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