Silk Road

After Silk Road, Online Illicit Marketplaces for Drugs and Weapons Grow, With More to Come

Anonymous sites do $500,000 per day in deals that make the powers-that-be twitch

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Silk Road lives!

Well, the online marketplace for illicit goods' competitors and successors live, anyway. The original Silk Road and its operator were taken down by the United States federal government in an over-the-top campaign that featured stunningly corrupt federal agents. Beyond its employees' sticky fingers, the federal government almost certainly hacked servers hosted overseas in the course of its efforts and then shrugged its institutional shoulders over the legal status of the tactic. But even as the feds brutally targeted Ross Ulbricht and his underground marketplace, new sites proliferated on the anonymous TOR network to more than replace what the U.S. Government had shut down.

"Far from causing the demise of this novel form of commerce," write Carnegie-Mellon University researchers Nicolas Cristin and Kyle Soska, "the Silk Road take-down spawned an entire, dynamic, online anonymous marketplace ecosystem, which has continued to evolve to this day."

The tech-savvy duo presented their findings earlier this month at the USENIX Security Symposium in Washington, D.C. They studied anonymous, illicit online marketplaces from 2013 to 2015 to track their popularity, their responses to legal setbacks and scams, and their adoption of increased security measures. In the course of their research they examined 16 different online ventures (out of a much larger possible sample) established to connect buyers and sellers.

Cristin and Soska scraped the various online marketplaces for the data they needed. Several of the sites require feedback for transactions, which they found to be a good tool for estimating sales volume.

How much sales volume?

A lot. In early 2013 when Silk Road had the market largely to itself, say the researchers, they estimate that it was doing about $100 million per year in business. Closure of Silk Road turned out to be a speed bump, with "unprecedented highs" (pun not obviously intended, but we'll take it) in the fall of 2014. The more diverse market is now thought to be averaging $300,000-$500,000 per day, with occasional $650,000 days.

Who participates in the black market?

This is a pretty grassroots phenomenon. "[O]nline anonymous marketplaces are primarily competing with street dealers, in the retail space, rather than with established criminal organizations which focus on bulk sales," say Cristin and Soska.

What's being sold?

It's still mostly drugs. Marijuana, ecstasy, and cocaine make up about 70 percent of the goods. But that leaves room for "digital goods," weapons, currency, electronics (presumably illicit), forged ID, and the like.

Buying and selling of "digital goods" is a surprisingly small component of the market now, but it's an obvious direction for the illegal dealers to go if governments attempt further restrictions on things that can be distributed via simple clicks of a mouse button. There is—or should be—a lesson in there for the likes of UK Prime Minister David CameronFBI Director James Comey, and aspiring dynastic successor Jeb Bush, who would cripple encryption, and Senators Joe Manchin (D-W.Va.) and Charles Schumer (D-N.Y.) who feel the same way about bitcoin. Online businesses that deliver weed, cocaine, and guns to your doorstep are very nicely positioned to drop a variety of products straight onto your desktop.

Of course, the powers-that-be don't care for any of this. They've put significant effort into shutting down the very modern manifestation of an ancient desire to buy and sell stuff that the authorities don't like. Aside from the legally and ethically challenged attack on Silk Road, law enforcement agencies in several countries staged the internationally coordinated Operation Onymous last November to shut down a few sites (including Silk Road 2.0) and seize $1 million in bitcoin.

That $1 million in bitcoin seems a bit anemic when you think of it as 2 or 3 days of business. In fact, write Cristin and Soska, the online markets appear "to have withstood Operation Onymous quite well, since aggregate volumes were back within weeks to more than half what they were prior to Operation Onymous."

Security seems to improve after these attacks, too, with vendors increasingly adopting PGP for an extra level of assurance. And that assurance and the desire to buy and sell obviously prevail over fears. Participants in these illicit markets are only briefly deterred by even the worst scams (some markets have closed and stolen customers' funds) and most fervent police assaults. These incidents have measurable effects for no longer than 2-3 months.

All the signs point to the long-term survival and growth of the online black market. The Carnegie-Mellon duo consider it unlikely that law enforcement will ever be able to shut down the new online market. "[C]onsidering the expenses incurred in very lengthy investigations and the level of international coordination needed in operations like Operation Onymous, the time may be ripe to investigate alternative solutions," they drily suggest.

The few "successes" that Europol and the FBI have claimed to-date in their efforts against illicit online markets have required them to identify and arrest the operators of sites, but that task seems poised to become more difficult. After all, you can't arrest an operator if there is none—or if every participant plays part of that role.

This fall, a decentralized prediction market called Augur debuts. Operating as a peer-to-peer network not located in any particular space, Augur will enable the placing of bets on predictions, leading Reason's Jim Epstein to say it "could do to the neighborhood bookie what electric refrigerators did to the ice delivery man." Politicians with a powerful dislike for sports gambling may find their personal preferences more irrelevant than ever before.

And those of us tracking the fascinating evolution of online black markets may be getting a glimpse of the near future.

NEXT: Fraternity Writes, 'Hope Your Baby Girl Is Ready for a Good Time.' Anti-Sex Hysteria Ensues.

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  1. (from what i have heard) You can get hreally high quality and exotic stuff on these marketplaces for cheap prices. Outside of the darknet it is harder to find dmt, mescaline, shrooms acid, pure mdma etc. And there is a far lower likelihood of getting laced product on the market due to the communities reviewing of vendors.
    However, in order to use the darknet you must be committed and willing to drop cash in order to buy vpn and pgp. The semi-complicated nature of acquiring the necessary security infastructure and the fact that you have to drop cash for the security system are a barrier of entry for the average joe looking to get high.

    1. yeah but it’ll just keep getting easier. if you continued to draw the curves of technological advance and law enforcement’s ability to do anything about it into the future, they would just keep getting further and further apart, i suspect. once 3d printing comes to the point of being able to print drugs the whole idea of controlling what chemicals people have access to just won’t make sense anymore

      1. Idk, I think as the tech advances (and the dnms become decentralized like openbazzar) it will be much harder for le to bag people. However, I do think that as the tech advances it will become even more complicated to use and the non-tech-savy will need to use “proxy-buyers” in order to attain their product.
        But as you point out 3d printing will make the above point moot. I am excited for when 3d printing advances to that stage. I feel that 3d printing can deal a serious blow to both the drug war and gun control

        1. But they still will try.
          Progies won’t let you get high.
          Drones descend from sky.

        2. However, I do think that as the tech advances it will become even more complicated to use and the non-tech-savvy will need to use “proxy-buyers” in order to attain their product.

          That hasn’t been the history. Over time nearly every sort of tech becomes simpler for the average user. That’s only countered by the linked trend for tech to become more complex as average users can handle the complexity.

          Compare writing a novel in DOS to today’s word processors, or printing presses to todays desktop publishers.

          1. right the only area of technology i really know much about is music technology, and you see that happening exactly. you can do stuff with a laptop now that people couldnt even imagine doing on those giant old modular synths (which, unfortunately, seems to have so far resulted in those obnoxious dubstep bass wobbles, but someone will figure out something actually cool to do with it someday), but at the same time you can plug a 90 dollar keyboard into your usb port and play all sorts of free software synths. i don’t think there’s any conflict at all between stuff becoming more complex and easier to use at the same time

            1. “software instruments” i should have said, it goes way beyond synthesizers. but at any rate i was wondering is the disconnect between complexity and difficulty of use like an artifact of digitalness? the only obnoxious audiophile difference i really hear (aside from records skipping) is analog synthesis still sounds quite a bit better than any digital emulation, but tech like that is so much more physical i dunno if it would work the same way

  2. This is bullshit. Drugs should be legal and the stupid illegality is the reason for all of this. No one is against encryption or bitcoin per se, they are defending moronic drug laws. I’m all for infringing the privacy for someone who is planning a murder. The real issue here is the simple point that drugs should be legal.

    1. You are wrong. People are against encryption for anyone other than themselves. LOTS of people are against bitcoin, because it confronts their own power in the monetary system. Like everything else, this is consolidation of power.

  3. It’s been a few years since I’ve looked at darknet stuff, but last I did the prices for drugs on there seemed pretty steep relative to their typical street prices.

  4. So breaking up Silk Road was all about antitrust and making room in the marketplace for the smaller, nimbler entrepreneurs. I’m not a fan of antitrust but it appears the market has responded quite favorably and profitably (as if the market is capable of responding any other way) to the heavy regulatory burden.

    And if PGP and other effective encryption tools become ubiquitous due to that heavy regulatory burden, then we might witness a decrease in losses due to fraud and hacked accounts to offset the cost of added security.

  5. Security seems to improve after these attacks, too, with vendors increasingly adopting PGP for an extra level of assurance.

    The free market at work: bad businesses go out of businesses, good businesses continually improve.

    It’s kind of ironic that the federal government suppresses free market mechanisms for legal businesses but lets them operate for illegal ones. That can’t be good in the long run…

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  7. Seems to me that if the Drug Warriors were competent, they would have subverted SilkRoad and used it for a surveillance asset. Throwing Ulbrecht in a dungeon only ushered in the next round of more sophisticated operators.

    -jcr

    1. Seems to me that if the Drug Warriors were competent…

      Anyone competent long ago realized that the drug war is stupid and impossible, and quit.

  8. “Anonymous sites do $500,000 per day…”

    Does that mean these sites have no name, no URL? Is that why none of these sites are named or linked to? If I wanted to buy some illegal LSD or illegal bomb-making materials or hire an assassin, reading this article wouldn’t get me any closer to my goals. It appears the author has no direct knowledge or experience of these black markets.

    1. Are you a cop?

        1. Mounted by which species?

    2. Any direct link the author published would be changed before you or the cops could click on it.

      1. Why so coy though? The author seems more concerned with concealing rather than revealing anything about these sites.

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  10. Prohibition had already died. Now it’s buried.

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