A paper by Carnegie Mellon University suggests that online anonymous marketplaces established themselves as an entire, dynamic and fast-evolving ecosystem. These sites generate a substantial part of bitcoin transactions volume.

A paper by Kyle Soska and Nicolas Christin from Carnegie Mellon University explore the phenomenon of Dark Web marketplaces that have proliferated since the Silk Road take-down. 

The researchers carried out a long-term measurement analysis of this “novel form of commerce” that included scraping data from 16 different marketplaces over more than two years (2013– 2015).

According to Soska and Christin, during last four years online anonymous marketplaces formed “an entire, dynamic... ecosystem, which has continued to evolve to this day”. These marketplaces use bitcoin as means of payment generating a substantial part of the cryptocurrency transactions volume.

The analysis suggests that Darknet marketplaces’ sales volume were significantly underestimated before:

“In the short four years since the development of the original Silk Road, total volumes have reached up to $650,000 daily (averaged over 30-day windows) and are generally stable around $300,000-$500,000 a day, far exceeding what had been previously reported.”

For example, a leading bitcoin payment processor BitPay last year reported $158.8 m of total value processed (about $435,000 per day). Bitcoin trading volume in 2014 varied between $2.75 m and $141 m per day.

The paper states that marketplace ecosystem “appears to be resilient, on the long term, to adverse events such as law enforcement take-downs or “exit scams” in which the operators abscond with the money.”

About 70% of all sales was attributed to cannabis-, ecstasy- and cocaine-related products. However online marketplaces carved out a niche in the retail space competing with street dealers, “rather than with established criminal organizations which focus on bulk sales”. Only about 2% of vendors managed to sell more than $100,000 over two years. 18% of sellers sold between $1,000 and $10,000, and about 70% of all sellers never reached $1,000 mark.

Soska and Christin concluded their analysis suggesting a re-evaluation of intervention policies against anonymous marketplaces. The ecosystem’s ability of resilience makes current law enforcement efforts ineffective given the high user demand for drugs. Instead, a focus on reducing consumer demand through prevention might be worth considering, they conclude.

As we reported last week a court in Michigan charged man for weapon trading that involved bitcoins. 

This May, the Australian Federal Police in collaboration with the Australian Customs and Border Protection Service and the United States Homeland Security Investigations has carried out a six-month joint operation monitoring illegal firearms traffic in the Dark Web. The operation has seen four people in Australia charged with attempting to purchase illegal firearms and 17 more arrests made across Europe and North America as well as seizures of firearms, ballistic armour, illicit drugs and $80,000 in bitcoins

Ross Ulbricht, the founder of Silk Road, who ran a notorious Darknet market under the alias of Dread Pirate Roberts, has been convicted of seven charges including money laundering, drug trafficking, and computer hacking, and sentenced in May 2015 to a life imprisonment


Nadya Krasnushkina