Cryptomarkets: The Darknet As An Online Drug Market Innovation
Aldridge, Judith & David Décary-Hétu. (2015). "Cryptomarkets: The Darknet As An Online Drug Market Innovation." Online: http://daviddhetu.openum.ca/files/sites/39/2017/04/Nesta-Final-Report.pdf.
servers. The best-known cryptomarket was Silk Road 1. Before being shut down by the FBI in October 2013, this cryptomarket enabled anyone to mail order illegal drugs and other goods with anonymous bitcoin payments. Following its demise, cryptomarkets have proliferated, in spite of another law enforcement crackdown in November 2014 shutting several. Cryptomarkets hold the promise to change online commerce by providing an anonymous shopping experience for both illicit and licit products and services. Just as the Internet enabled a revolution in the entertainment industry with the creation of peer-to-peer software, cryptomarkets hold the promise for disruptive impact of online commerce. The funding we received from Nesta enabled us to build a crawler to scrape data from hidden ‘post Silk Road’ (second-generation) cryptomarkets to enhance our understanding of them as a phenomenon, and of the increasingly blurred boundary between legitimate and illicit markets. In this report we aim to answer these questions:
Are cryptomarkets geared towards sale to consumers or resellers? Drug cryptomarkets have been described as selling exclusively to drug users making purchases for personal use, but our preliminary research published in a working paper (Aldridge & Décary-Hétu, 2014) suggests that the majority of the revenue generated on Silk Road resulted from purchases in quantities typical of drug dealers sourcing their supply. This is important: ‘business-to-business’ sales will have a qualitatively different and larger impact on the distribution of products by shifting distribution channels.
Are cryptomarkets truly global in reach? Online retailers have access to a worldwide market, and may therefore facilitate the distribution of goods and services in places that were previously hard to reach. There are however increased risks for vendors and buyers when dealing with partners located in different countries, and in order to reduce this risk cryptomarket vendors may elect not to exploit cross-border opportunities. To understand the impact of cryptomarkets, it is essential to understand the balance between security and efficiency that is struck through national and international transactions.
Are cryptomarkets inevitably a ‘bad’ innovation? It is often assumed that technological innovation is a socially positive development by driving economic growth, but in reality innovations have implications both positive and negative. Even cryptomarkets specializing exclusively in illegal goods and services – which may appear to exacerbate social problems, for example by increasing access to illegal drugs – carry with them clear positives. Drug cryptomarkets, for example, may substantially reduce problems of violence in drug markets, and increase access to better quality substances. And of course, not all cryptomarkets involve the sale of illegal goods and services: it’s not only those with ‘something to hide’ who may wish to transact business anonymously online. We will document both the socially ‘positive’ and ‘negative’ aspects of this innovation.
How did we create the crawler? The Nesta funding that we received was used to create the web crawler, what we’ve called the DATACRYPTO tool. In conversations with Nesta during the course of the project, we were asked to describe how we did this in technical terms. The final section of the report details this process.
This content has been updated on 18 April 2017 at 15 h 40 min.