Silk Road

Anonymous Online Drug Sales: Its Glories and Limitations

An economist thinks about how online drug sales post-Silk Road will, and won't, change the illegal drug market.

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Quartz had an interesting and insightful overview of the world of online "dark web" drug sales in these post-Silk Road days, from economist Allison Schrager. 

She starts with the basics, familiar to readers of Reason (see my feature from December 2014 on the rise and fall of Silk Road for a primer) then gets to some interesting observations and wrinkles.

Some data from darkweb drug sales researcher Nicolas Christin of Carnegie Mellon University:

most vendors are casual dealers, selling relatively small amounts, and spend only a few months on a site. About 70% of vendors sold less than $1,000 worth of product in the period they surveyed. Only about 2% sold more than $100,000, and just 35 kingpin vendors sold over $1 million. The top 1% accounted for 51.5% of all the transactions. Despite the variety of things on offer, cocaine, MDMA, and cannabis made up about 70% of sales; and while most listings were for cannabis-related products, an overwhelming majority of the revenue came from selling MDMA and cocaine.

Schrager details some of the expensive and time consuming ways people receiving drug packages take to hedge or minimize the risk of getting arrested for having drugs mailed to them. Then she notes the (unusual for a legal market) huge price disparities for illegal drugs across these black markets, which she credits to:

 information asymmetry. You don't know how good an illegal drug is until you consume it, and you can't turn to the law to enforce agreements, return a substandard product, or complain to your dealer if he tries to rob you. That prevents price discovery and risk compensation, key features of a well-functioning market.

She sees the possibility of darkweb drug markets changing this:

Suppliers have detailed reviews on their product, the market is competitive, and people can shop around easily. Aspiring sellers struggle to get a foothold without a history of good reviews; sometimes they offer special deals and an easy exchange policy in return for good reviews. And the markets are global, so it's possible to see prices in other countries. All this produces a well-behaved price distribution like the one you'd find in any functional, legal market.

While admitting online markets ability to turn competitive advantage in illegal drug sales from muscle and territory to quality and service, she thinks there is a natural cap to these markets ability to transform the illegal drug trade entire, and she theorizes that it is drugs where the seller can for the most part also be the producer that will dominate these dark markets:

Drugs like heroin and cocaine already have established distribution and production channels that the web in its current form can't disrupt. Opium poppies and coca leaves are grown in only a few developing countries, and turning those commodities into consumable drugs, transporting them, and distributing them is the domain of large, well-organized, powerful and very profitable cartels who, so far, don't benefit from participating in dark web markets.

But according to the Theeconomist1, "Certain drugs are prime for bulk orders for distro [distribution]." He explains that RC (LSD), alp powder (Xanax) and MDMA thrive on the web because because vendors can participate in their production, and they are easy to ship in bulk. Theeconomist1 speculates that vendors for RC and possibly alp buy the chemicals overseas (often from China), press them into pills, and then sell the final (or intermediate product) on the web.

That all said, I'm not entirely sure that people seeking more risk-averse customers even in markets like heroin and cocaine can't benefit in the last dealer-customer step of getting the drug to market and find people prefer getting drugs in the mail to meeting dealers in person.

She also makes what seem to me absurdly prejudicial declarations that supposedly highly addictive drugs like heroin and meth will never prosper on online markets, since their users are allegedly too desperate and addled to either "have the mental energy to deal with bitcoin" or to wait for the mail. Markets are always going to know more than journalists or economists, so we'll have to wait and see.

I suspect Schrager is in the end underestimating the benefits to the end user of online drug sales (though one cannot forget the risks of package delivery); I think it likely safety and sanity that bitcoin-enabled online sales bring to drug markets will make them a game changer even vaster than Schrager theorizes. Still, she's written a smart and nuanced look at fine distinctions likely at play in these markets, still thriving post-Silk Road.

On the conviction of Silk Road founder Ross Ulbricht, I wrote on the harm reduction glories of that site and its brethren.

NEXT: The Justice Department's $1 Billion GM Shakedown for the Cobalt Debacle

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  1. The top 1% accounted for 51.5% of all the transactions.

    This is why you vote for Bernie.

    1. Nobody needs 39 strains of marijuana while children are starving in America!

      1. Everybody needs 39 strains when Bernie if Jefe.

      2. Glad to hear someone knows what I need. I’m assuming you’re a government official.

  2. RC (LSD)

    WTF?

    Do they call it “Just Acid” and have a picture of Claviceps purpurea on the package?

  3. But can I use the DARKWEB to build roads? Can I use the DARKWEB to build roads in Somalia?!

  4. OT –

    While some news outlets were focusing on a bunch of yakking politicians, the *Salt Lake City Weekly* was doing an in-depth review of a cutting-edge issue:

    “Spenst Hansen knows better than to take his body for granted.

    Born in the midst of his parents’ divorce, the 24-year-old Salt Laker was, of course, a major sticking point in the split. More surprisingly, so was his circumcision status.

    “”My mother and her side of the family really wanted to get [the procedure] done?so much so, apparently, that they were threatening to get it done behind my father’s back,” Hansen says. “My father was very adamant and very passionate about letting me keep my whole and unaltered body. From what I understand, he actually put out a court-ordered cease and desist for every pediatrician in the state.”

    “To Hansen’s relief, his father’s legal threat proved remarkably effective. “No doctor would even see me at that point,” he said. “I met the lawyer personally and thanked him.””

    1. Ahem,

      an in-depth review of a cutting-edge issue:

      1. So, what do you think?

        1. I like to post circumcision and deep-dish pizza articles for trolling purposes.

          Duh.

            1. Jean Luc says answer the question Eddy.

              1. I actually don’t know a whole lot about it, thank you for asking so politely.

                1. It is creepy. It is also a reminder of how warped religious collectivists can be.

    2. “To Hansen’s relief, his father’s legal threat proved remarkably effective. “No doctor would even see me at that point,” he said. “I met the lawyer personally and thanked him.””

      He nipped that in the bud.

      1. Your remark sliced right to the meat of the issue.

        It was very much on point, if cut short.

    3. He protected his child from genital mutilation. A real man.

      1. Are we being a wee bit snippy?

          1. Or “off”, as the case maybe…

    1. SHE WAS ALREADY DEAD TO ME AND NOW SHE’S DOUBLY-DEAD

  5. Oh, internet, will you really strip human interactions out of *everything*?

    Just when I was getting over my sadness at the loss of the video store, the record store, and the Mom & Pop Corner Porno Shop… now you come along, and you’re going to take my Hippy Friend of a Friend Whose Number I Have On a Card In My Wallet away from me….

    …its truly sad that millions of people will never know the feeling of awkward danger you feel letting a sketchy stranger into your house to sell you some possibly dangerous substance who then smokes a cigarette and drinks one of your beers and checks his pager before he gives you a knowing nod and a fist bump and then fucks off to someone else.

    1. Think of all the jobs lost! That smelly hippy is a small businessman, with a commune of his own. Will you deny them their daily patchouli? For shame. Stop the internet destroying local economy!
      Fuck, just imagine if Walmart got into the business. Do you really want to get your weed from someone making $10 an hour?!?!

  6. OT and apologies if this has already been mentioned here today, but Popehat threw a little woodchipper love out there today. I can’t decide if he has lowered himself to our level or he decided we really aren’t as bad as he previously stated.

    1. He is as bad as previously demonstrated.

  7. This sounds too good to be true.

    I need some good shit by next weekend too.

    1. Getting tired of sniffing glue?

      1. Graduating from glue and going to ganja merits praise; shriek is only demonstrating that he wants to be a winner in the Darwinian sweepstakes.

      2. He picked the wrong week to quit.

    2. Need it? By next weekend?

      What’s on the calendar?

      1. “What’s on the calendar?”

        Posting here about how wonderful Obo is?
        Posting here about BOOOOOOOOOOOOOSH?
        Trying to work on his daddy issues?
        Turd’s got enough on his plate…

  8. Hey, guys, you had this conference in St. Louis and didn’t invite me?

    http://www.riverfronttimes.com…..lText=true

    1. I spot a booth hawking what initially looks like a children’s picture book, titled Bedtime Bible Stories. I find myself staring at a lushly colored illustration of a blood-covered Grecian solider, a baby slung over his shoulder by its umbilical cord. At the soldier’s feet are a coil of intestines and a woman with a slashed abdomen. In classic cartoon fashion, X’s are drawn where her eyes should be.

      “See, if you’re reading your Bible, it’s Hosea chapter 13, verse 16, where God literally commands soldiers to kill pregnant women and rip babies from their womb,” says Joey Kirkman,

      Joey Kirkman, you mendacious fuckhead. The Book of Hosea documents, in the form of anachronistic “prophecies”, the fall of Samaria to the Assyrians in 726 BC . Only with willful misreading of the passage could one suggest that it was a commandment to the ancient Hebrews to kill…other Hebrews.

      1. Joey Kirkman, you ignorant piece of shit. Not only did you misconstrue the passage to fit your ideological agenda, but your visual depiction is so historically ignorant that it is clear you have no fucking clue about events that date earlier than last Tuesday. The Samarian-killing Assyrians wouldn’t have been wearing Roman lorica segmentata, which wouldn’t have been invented until 700 years later. (Nor would they be wielding gladii)

        And yet, you can bet the smug asshole Kirkman, would froth at the mouth at an equally stupid depiction of cavemen riding dinosaurs in some Young Earther Creationist museum.

        1. You want my respect, Joey? You want to be seen as a truth-telling, no compromises free-thinker?

          Illustrate the Koran.

        2. Hey, what good is a little creative anachronistic artistic license if it can not serve a larger ideological cause?

            1. One of my favorite actors in Joe Stalin’s troupe.

              So, if he were ever to illustrate the Koran, Joey should fear the Moor’s midnight knock on the door, metaphorically speaking?

              1. So, if he were ever to illustrate the Koran, Joey should fear the Moor’s midnight knock on the door, metaphorically speaking?

                I don’t know…if he has the good sense to exercise his right to bear arms, then no. However, I have a feeling he doesn’t.

      2. “Joey Kirkman, you mendacious fuckhead. The Book of Hosea documents, in the form of anachronistic “prophecies”, the fall of Samaria to the Assyrians in 726 BC . Only with willful misreading of the passage could one suggest that it was a commandment to the ancient Hebrews to kill…other Hebrews.”

        Sorry, HM, *nothing* in the bible “documents” anything at all.
        And if you find a passage that says “don’t!”, I promise someone else can find one that says “do!”
        Dunno about Kirkman, but he’s likely no more an ignoramus that Jack Chick.

        1. The quotes around the word “prophecies” wasn’t good enough for you?

          I appreciate your point, but everybody knows you never do a full Kirkman.

          1. Heroic Mulatto|9.17.15 @ 11:43PM|#
            “The quotes around the word “prophecies” wasn’t good enough for you?”

            Have no idea what you mean here. Are you suggesting they really weren’t prophesies and therefore I shouldn’t make fun of them?
            How much of the comments am I to ignore to find the “real” comments?

            1. Where are you making fun of anything? So far, all you’ve written is a claim that Biblical narratives have no claim to historicity at all and a claim that the Biblical canon contains contradictions in what is considered ethical behavior. The first claim, if one is to take your statement as written, is patently false. While I agree the historicity of events in the Old Testament are often exaggerated, of the events that have been verified through archaeological discoveries…many of them lie in the pre-Babylonian exile period that Hosea references anachronistically.

              As for your second claim, while it may be true that the document contradicts itself at times, that has nothing to do with the validity of Kirkman’s painfully obvious willful misrepresentation of the specific passage in question. To be honest, I’m at a loss in understanding what you find so objectionable about my comment. Do you think Kirkman is right in misrepresenting the passage, and consequently the views of the group he criticizing, to make it seem more lurid and gruesome just because it represents something he doesn’t like? Come on, man. There really is no defense of Kirkman here. Is blood libel ok since it criticizes the practices of an Abrahamic religion?

              1. By the way, if you want to know more about Samaria and how well Biblical depictions of its fall match up to the archaeological record, I’d recommend looking up John W. Crowfoot’s work and make your own judgements.

                Night all!

                1. HM,
                  “I’d recommend looking up John W. Crowfoot’s work and make your own judgements”
                  Got a bit more specifics in mind?

                  1. Uh, HM, according to Amazon, there are no works from Crawford; got a hint here?

              2. “While I agree the historicity of events in the Old Testament are often exaggerated, of the events that have been verified through archaeological discoveries…many of them lie in the pre-Babylonian exile period that Hosea references anachronistically.”

                Let’s see the cites. I’m interested in history, but AFAIK, the bible and the OT in particular have so far been notably unreliable.
                ———————————
                “To be honest, I’m at a loss in understanding what you find so objectionable about my comment. Do you think Kirkman is right in misrepresenting the passage, and consequently the views of the group he criticizing, to make it seem more lurid and gruesome just because it represents something he doesn’t like?”

                I ask you to read this again:
                “Sorry, HM, *nothing* in the bible “documents” anything at all.
                And if you find a passage that says “don’t!”, I promise someone else can find one that says “do!”
                Dunno about Kirkman, but he’s likely no more an ignoramus that Jack Chick.”

                I found your comment to claim there was direct documentation in the bible, and I’ve yet to see one example of it. And I find any claim that the bible proposes X-action to be countered nearly instantly by the equally plausible claim that the bible proposes anti-X-action; “kill”, no “not kill”!
                Regarding Kirkman, I was drawing comparison to Chick; both pitching propaganda and both therefore promoting hyperbole.
                That’s what I found objectionable; if I’m wrong, I’ll be happy to eat crow;

                1. Sevo, you are a ferocious debater, but HM’s got a whole lot of anthropological, archeological, antiquity, cultural, and linguistic ken.

                  1. Libertymike|9.18.15 @ 12:54AM|#
                    “Sevo, you are a ferocious debater, but HM’s got a whole lot of anthropological, archeological, antiquity, cultural, and linguistic ken.”

                    All I ask is evidence; either HM has it (and I eat crow), or HM doesn’t.
                    Eddy never has it, Gilmore thinks his rep passes for it, trueman hopes sophistry passes for it, commie-kid, turd and Tony just post bullshit and think that has some value. Ditto Jack.
                    The bible ain’t evidence in any serious discussion I’ve ever seen.

                    1. “All I ask is evidence”

                      Short of the second coming, you seem kind of disinterested in anything regarding ancient history overall.

  9. I only skimmed the title of the previous post but is the DOJ now shaking down kobolds?

    1. Wow, talk about punching down!

  10. Anonymity on the internet has always proven to be an illusion.

    I suspect in person buys are often more anonymous than a lot of people realize–but I”m not sure that’s really an advantage.

    I suspect people buying from friends they’ve known since high school may be preferable to a lot people–rather than buying anonymously.

    When people are busted for buying, isn’t it often because they bought from someone they didn’t know? When people are busted, isn’t it usually for simple possession? They get pulled over, and the officer smells something…

    I don’t understand why anyone within a two day drive of Washington or Colorado would buy marijuana anonymously like that. And the medical card seems to be so easy to get in places like California, I’m not sure how many people get turned down.

    1. What if you are driving through Iowa or Nebraska with a Rhode Island plate and a trooper pulls you over and asks you if you have in been Colorado?

      1. I didn’t say there wasn’t any risk. I’m talking about the relative risk.

        Anybody that thinks anonymity on the internet is going to make all this good stuff happen, I just don’t see it. Anonymity on the internet has proven to be an illusion over and over again.

        Pirate’s Bay, Anonymous, Silk Road, Ashely Madison, et. al.; historically speaking, if you want to make a great big fool of yourself, depend on anonymity on the internet.

        If the sellers used drones, and it wasn’t attached to any mailbox or home address, they just used a drone to drop the package at such and such GPS coordinates at such and such a time? Even then, the information about where you’re going to be and at what time is going to be out there just waiting for the authorities to discover.

        Maybe they’ll have a drone there at that time, too, taking pretty pictures of you.

        1. Silk Road was taken down mostly by Ulbricht’s very silly mistakes. Anonymity is working out pretty well for the rest of the dark markets. Homomorphic encryption and other innovations are only going to put them further and further ahead of the authorities.

          1. Are the authorities setting up accounts on these dark sites?

            1. Maybe. That won’t help them take it down but they can sting buyers.

  11. “Opium poppies and coca leaves are grown in only a few developing countries, and turning those commodities into consumable drugs, transporting them, and distributing them is the domain of large, well-organized, powerful and very profitable cartels who, so far, don’t benefit from participating in dark web markets.”

    Assuming the dark web markets are successful, Ima guess ‘leakage’ is gonna change that arrangement very greatly and very soon.

  12. Are any of these darkmarkets going to offer some kind of securities investment? ‘Give us 1 BTC we give you back 1.1 BTC a month later’ kind of deal.

    1. toxic, why wait? You can start the arbitrage right now!

      1. I don’t think this is arbitrage. I mean like a bond or something.

        1. That’s an arbitrage.

  13. This is the worst late night links thread ever.

    1. How can that be with no Tony post and only one shriek post? To boot, shriek’s post wasn’t even bad.

      1. It was a warning. He’s telling us that he’s going to fly off the handle this weekend.

  14. OT: It appears HM has a fan at Instapundit – see the bottom of this post; http://pjmedia.com/instapundit/214668/

  15. I’d like to walk into a store, say CVS, and be able to buy some psychedelics like LSD or Psilocybin mushrooms. Even some MDA or MDMA.

    1. I doubt it will be at a CVS. Didn’t they quit selling cigarettes in some areas? Larger liquor stores around here have a cigar area. I think the recreational stuff would fit nicely next to that.

  16. As far as I’m concerned, anyone offering to sell something illegal over the internet is probably a cop. Not gonna do it.

  17. Gloam soar.

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