Markets: Silk Road (v1)
Silk Road was an online black market and the first modern darknet market. As part of the dark web,it was operated as a Tor hidden service, such that online users were able to browse it anonymously and securely without potential traffic monitoring. The website was launched in February 2011; development had begun six months prior. Initially there were a limited number of new seller accounts available; new sellers had to purchase an account in an auction. Later, a fixed fee was charged for each new seller account. Silk Road provided goods and services to over 100,000 buyers.
In October 2013, the Federal Bureau of Investigation (FBI) shut down the website and arrested Ross Ulbricht under charges of being the site's pseudonymous founder "Dread Pirate Roberts". On 6 November 2013, Silk Road 2.0 came online, run by former administrators of Silk Road. It was also shut down, and the alleged operator was arrested on 6 November 2014 as part of the so-called "Operation Onymous". Ulbricht was convicted of seven charges related to Silk Road in the U.S. Federal Court in Manhattan and was sentenced to life in prison without possibility of parole. In November 2020, the United States government seized more than $1 billion worth of bitcoin connected to Silk Road.
Operations
Silk Road was founded in February 2011. The name "Silk Road" comes from a historical network of trade routes started during the Han Dynasty (206 BC – AD 220) between Europe, India, China, and many other countries on the Afro-Eurasian landmass. Silk Road was operated by the pseudonymous "Dread Pirate Roberts" (named after the fictional character from The Princess Bride), who was known for espousing libertarian ideals and criticizing regulation. Two other individuals were also closely involved in the site's growth and success, known as Variety Jones and Smedley.
In June 2011, Gawker published an article about the site which led to an increase in notoriety and website traffic. U.S. Senator Charles Schumer asked federal law enforcement authorities to shut it down, including the Drug Enforcement Administration (DEA) and Department of Justice.
In May 2013, Silk Road was taken down for a short period of time by a sustained DDoS attack. On 23 June 2013, it was first reported that the DEA seized 11.02 bitcoins, then worth a total of $814, which the media suspected was a result of a Silk Road honeypot sting. The FBI has claimed that the real IP address of the Silk Road server was found via data leaked directly from the site's CAPTCHA and it was located in Reykjavík, Iceland. IT Security Experts have doubted the FBI's claims because technical evidence suggests that no misconfiguration that could cause the specific leak was present at the time.
Henry Farrell, an associate professor of political science and international affairs at George Washington University, analyzed Silk Road in an essay for Aeon in 2015. He noted that Ulbricht created the marketplace to function without government oversight but found it difficult to verify anonymous transactions. To sustain a steady stream of revenue, he started increasing oversight to ensure low transaction costs. To do this, he added measures to ensure trustworthiness with implementation of an automated escrow payment system and automated review system. Later seizures
On 3 November 2020, after years of inactivity, observers of the bitcoin blockchain detected that two transactions totaling 69,370 bitcoin and bitcoin cash, worth approximately $1 billion in total at the time of transfer, had been made from a bitcoin address associated with the Silk Road. At the time of transfer, it was worth 58 times its value in 2015. It was subsequently revealed that the transfer had been made by the United States government in a civil forfeiture action. According to a press release by the U.S. Attorney's Office of the Northern District of California, the bitcoin wallet belonged to an "Individual X" who had originally acquired the bitcoins by hacking the Silk Road.
Products
In March 2013, the site had 10,000 products for sale by vendors, 70% of which were drugs. Drugs were grouped under the headings stimulants, psychedelics, prescription, precursors, other, opioids, ecstasy, dissociatives, and steroids/PEDs. Fake driver's licenses were also offered for sale. The site's terms of service prohibited the sale of certain items. When the Silk Road marketplace first began, the creator and administrators instituted terms of service that prohibited the sale of anything whose purpose was to "harm or defraud". This included child pornography, stolen credit cards, assassinations, and weapons of any type; other darknet markets such as Black Market Reloaded gained user notoriety because they were not as restrictive on these items as the Silk Road incarnations were. There were also legal goods and services for sale, such as apparel, art, books, cigarettes, erotica, jewellery, and writing services. A sister site, called "The Armoury", sold weapons (primarily firearms) during 2012, but was shut down, due to a lack of demand.
Buyers were able to leave reviews of sellers' products on the site and in an associated forum, where crowdsourcing provided information about the best sellers and worst scammers. Most products were delivered through the mail, with the site's seller's guide instructing sellers how to vacuum-seal their products to escape detection.
Sales
Based on data from 3 February 2012 to 24 July 2012, an estimated $15 million in transactions were made annually on Silk Road. Twelve months later, Nicolas Christin, the study's author, said in an interview that a major increase in volume to "somewhere between $30 million and $45 million" would not surprise him. Buyers and sellers conducted all transactions with bitcoins (BTC), a cryptocurrency that provides a certain degree of anonymity. Silk Road held buyers' bitcoins in escrow until the order had been received and a hedging mechanism allowed sellers to opt for the value of bitcoins held in escrow to be fixed to their value in US$ at the time of the sale to mitigate against Bitcoin's volatility. Any changes in the price of bitcoins during transit were covered by Dread Pirate Roberts.
The complaint published when Ulbricht was arrested included information the FBI gained from a system image of the Silk Road server collected on 23 July 2013. It noted that, "From February 6, 2011 to July 23, 2013 there were approximately 1,229,465 transactions completed on the site. The total revenue generated from these sales was 9,519,664 Bitcoins, and the total commissions collected by Silk Road from the sales amounted to 614,305 Bitcoins. According to the government, total sales were equivalent to roughly $183 million and involved 146,946 buyers and 3,877 vendors. According to information users provided upon registering, 30 percent were from the United States, 27 percent chose to be "undeclared", and beyond that, in descending order of prevalence: the United Kingdom, Australia, Germany, Canada, Sweden, France, Russia, Italy, and the Netherlands. During the 60-day period from 24 May to 23 July, there were 1,217,218 messages sent over Silk Road's private messaging system.
Similar sites
The Farmer's Market was a Tor site similar to Silk Road, but which did not use bitcoins. It has been considered a 'proto-Silk Road' but the use of payment services such as PayPal and Western Union allowed law enforcement to trace payments and it was subsequently shut down by the FBI in 2012. Other sites already existed when Silk Road was shut down and The Guardian predicted that these would take over the market that Silk Road previously dominated. Sites named 'Atlantis', closing in September 2013, and Project Black Flag, closing in October 2013, each stole their users' bitcoins. In October 2013, the site named Black Market Reloaded closed down temporarily after the site's source code was leaked. The market shares of various Silk Road successor sites were described by The Economist in May 2015.
On 3 May 2019 a similar website was shut down, and three German men were arrested by the FBI and DEA agents. The website, called Wall Street Market, allowed for the illegal sale of drugs and fake documents such as driver's licenses.
Book club
Silk Road had a Tor-based book club that continued to operate following the initial site's closure and even following the arrest of one of its members. Reading material included conspiracy theories and computer hacking. Some of the titles included mainstream books as well as books such as The Anarchist Cookbook and Defeating Electromagnetic Door Locks. Most of the titles on this book club were pirated. This book club still exists as a private Tor-based chatroom.
Silk Road 2.0
On 6 November 2013, administrators from the closed Silk Road relaunched the site, led by a new pseudonymous Dread Pirate Roberts, and dubbed it "Silk Road 2.0". It recreated the original site's setup and promised improved security. The new DPR took the precaution of distributing encrypted copies of the site's source code to allow the site to be quickly recreated in the event of another shutdown.
On 20 December 2013, it was announced that three alleged Silk Road 2.0 administrators had been arrested; two of these suspects, Andrew Michael Jones and Gary Davis, were named as the administrators "Inigo" and "Libertas" who had continued their work on Silk Road 2.0. Around this time, the new Dread Pirate Roberts abruptly surrendered control of the site and froze its activity, including its escrow system. A new temporary administrator under the screenname "Defcon" took over and promised to bring the site back to working order.
On 13 February 2014, Defcon announced that Silk Road 2.0's escrow accounts had been compromised through a vulnerability in Bitcoin protocol called "transaction malleability". While the site remained online, all the bitcoins in its escrow accounts, valued at $2.7 million, were reported stolen. It was later reported that the vulnerability was in the site's "Refresh Deposits" function, and that the Silk Road administrators had used their commissions on sales since 15 February to refund users who lost money, with 50 percent of the hack victims being completely repaid as of 8 April.
On 6 November 2014, authorities with the Federal Bureau of Investigation, Europol, and Eurojust announced the arrest of Blake Benthall, allegedly the owner and operator of Silk Road 2.0 under the pseudonym "Defcon", the previous day in San Francisco as part of Operation Onymous. The creator of the relaunched website — an English computer programmer named Thomas White — was also arrested in the course of the shutdown, but his arrest was not made public until 2019 after he pled guilty to charges stemming from running the website and was sentenced to five years in prison. Among the charges White admitted to was creating child pornography, and chat logs recovered by police showed White discussing the possibility of launching a website to host such material. Others
Following the closure of Silk Road 2.0 in November 2014, Diabolus Market renamed itself to 'Silk Road 3 Reloaded' in order to capitalize on the brand. In January 2015, Silk Road Reloaded launched on I2P with multiple cryptocurrency support and similar listing restrictions to the original Silk Road market. This website is also defunct. Advocates of dark web drug sales
Meghan Ralston, a former harm reduction manager for the Drug Policy Alliance, was quoted as saying that the Silk Road was "a peaceable alternative to the often deadly violence so commonly associated with the global drug war, and street drug transactions, in particular". Proponents of the Silk Road and similar sites argue that buying illegal narcotics from the safety of your home is better than buying them in person from criminals on the streets.
