Silk Road: Breaking Down International Barriers?

Cryptomarkets are online marketplaces where payments are made anonymously through virtual currencies like bitcoins and where the market participants’ identities are protected by anonymizing services like the Onion Router (TOR) and the Invisible Internet Protocol (I2P). The purchases are shipped through the regular mail. Some of the cryptomarkets like Silk Road, Agora and Evolution center around the sale of illicit drugs. In theory, these cryptomarkets enable drug users to buy any drug from anywhere in the world and have it shipped wherever they need. In practice, we have come to realize that cryptomarkets actually have very strong domestic markets meaning that buyers are much more willing to buy from vendors who are located in the same country as them. As domestic purchases do not have to cross national borders, the risk of detection is much lower, reducing the risks that buyers get arrested for ordering illicit drugs. In this presentation, we will first present the characteristics of domestic markets as well as the differences between them. We will then build a predictive model which will explain why some vendors and buyers are willing to take more risks and make transactions at the international level. Our hypothesis is that the level of enforcement and differences in prices will explain the decision of some market participants to participate in international transactions. The implications for regulation and drug markets will be discussed.

This content has been updated on 8 August 2016 at 17 h 59 min.