Much previous research looking at the precise ways in which alcohol causes cancer has been done in cell cultures.
However, in the new study, researchers used mice to show how alcohol exposure leads to permanent genetic damage.
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They then used chromosome analysis and DNA sequencing to examine the genetic damage caused by acetaldehyde, a harmful chemical produced when the body processes alcohol.
The researchers found that acetaldehyde can break and damage DNA within blood stem cells leading to rearranged chromosomes and permanently alter the DNA sequences within these cells.
"Some cancers develop due to DNA damage in stem cells," said Professor Ketan Patel from the MRC Laboratory of Molecular Biology.
"While some damage occurs by chance, our findings suggest that drinking alcohol can increase the risk of this damage," said Patel, lead author of the study published in the journal Nature.
It is important to understand how the DNA blueprint within stem cells is damaged because when healthy stem cells become faulty, they can give rise to cancer, researchers said.
The new findings help us to understand how drinking alcohol increases the risk of developing seven types of cancer, including common types like breast and bowel, they said.
The study also examined how the body tries to protect itself against damage caused by alcohol. The first line of defence is a family of enzymes called aldehyde dehydrogenases (ALDH).
These enzymes break down harmful acetaldehyde into acetate, which our cells can use as a source of energy.
Worldwide, millions of people, particularly those from South East Asia, either lack these enzymes or carry faulty versions of them, researchers said.
When they drink, acetaldehyde builds up which causes a flushed complexion, and also leads to them feeling unwell, they said.
In the study, when mice lacking the critical ALDH enzyme - ALDH2 - were given alcohol, it resulted in four times as much DNA damage in their cells compared to mice with the fully functioning ALDH2 enzyme.
The second line of defence used by cells is a variety of DNA repair systems which, most of the time, allow them to fix and reverse different types of DNA damage.
However, they do not always work and some people carry mutations which mean their cells are not able to carry out these repairs effectively.
"Our study highlights that not being able to process alcohol effectively can lead to an even higher risk of alcohol-related DNA damage and therefore certain cancers," Patel said.
"But it is important to remember that alcohol clearance and DNA repair systems are not perfect and alcohol can still cause cancer in different ways, even in people whose defence mechanisms are intact," he added.
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