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It was a database of hashes that were taken from the intersection of multiple country CSAM databases.
Germany couldn’t just put a picture of a nazi in there and have every iPhone flag everyone that has a picture of a nazi on it unless multiple other countries also had that same picture in their CSAM db.
It also only happened when you uploaded the photo to iCloud. Know what they do now instead? Just scan for CSAM on iCloud like google, Microsoft, imgur, Reddit, etc all do.
The end result is the same in detecting CSAM, but the way apple proposed was more secure and valued your privacy more.