Cryptomarkets

A Research Companion

James Martin, Jack Cunliffe, Rasmus Munksgaard

• Publisher: Emerald Publishing Limited
• Year: 2019
• ISBN:
  9781838670320
• Topic: Ciencias sociales
• Subtopic: Criminología

Since the launch of the infamous Silk Road, the use of cryptomarkets - illicit markets for drugs on the dark web - has expanded rapidly around the world. Cryptomarkets: A Research Companion is an accessible, detailed guidebook which offers all the tools necessary to begin researching cryptomarket phenomena and the dark web trade in illicit drugs.
Offering an in-depth historical account of the development of cryptomarkets up until the present day, the book goes on to examine key trends and findings regarding the contemporary operations of cryptomarkets. The principal methodologies used to conduct cryptomarket research, as well as questions regarding research ethics, are further explored. Finally, the authors outline underdeveloped areas of the field and pose key questions for future cryptomarket research.
Whether an academic researcher, post-graduate student, law enforcement officer, or public health professional, this book is essential reading for those researching and working in the realm of cryptomarkets.

1

A MODERN-DAY HISTORY OF CRYPTOMARKETS

1.1. OVERVIEW

This chapter aims to detail the historical trajectory of the cryptomarket. To do so necessitates some reflection on the correct choice of words and the framing that is implicit to sketching out such a history. Should we consider the cryptomarket a radical re-organisation of the online drug trade? Should we see it as the fulfilment of crypto-anarchist prophecies of the inevitability of black markets online? Or should we merely consider it another iteration of a social practice, the trade of illicit goods online, which dates back to the first days of the internet. This is a matter of perspective, and this chapter remains cautious, leaving it to the reader to draw their own conclusions. This cautious approach sees the cryptomarket, paraphrasing its original designer and implementer, as the putting together of pieces that already existed. Thus, we propose that this was neither an inevitable outcome nor that the cryptomarket emerged from a social and political vacuum.

We separate the historical trajectory of cryptomarkets into three distinct phases, or epochs, and a prelude, for analytical purposes. As the proceeding chapters will show, trends and structural change cannot be isolated into distinct phases, but they do provide a frame of reference. We begin by sketching out the historical, social and political context from which the cryptomarket emerged, and proceed to introduce and discuss the history of illicit markets online, showing that these were flourishing even before the cryptomarket. We then consider the first epoch as the rise of Silk Road and the emergence of the cryptomarket, with the second phase marked by the chaos ensuing the fall of Silk Road. Finally, we discuss the current epoch – which we argue in Chapter 4 is still current. Briefly, these may be considered epochs marked by emergence, reconfiguration and settlement. Each of these were distinguished by different academic approaches, which are detailed more in proceeding chapters, and particular sets of challenges posed to cryptomarket denizens, whether they are buyers, admins or vendors. We limit ourselves from discussing first the ‘drama’ and intrigues of backstage cryptomarket activity, and the minute details of police investigations – to do so would simply be too long winded. The intricacies of the police investigations into Silk Road, the alleged murders-for-hire, and the conspiratorial sentiments surrounding the Silk Road trial are beyond the scope of this book, and the interested reader is directed to Ormsby (2014) for more detail. Rather, we focus on the broad changes and movements of cryptomarket history.

Some scholars have suggested cryptomarkets represent a new generation of illicit markets, an evolutionary stage (Przepiorka, Norbutas, & Corten, 2017), while others see them as proposing solutions for the problems that haunt illicit markets (Bakken, Moeller, & Sandberg, 2018; Moeller, Munksgaard, & Demant, 2017; Tzanetakis, 2018a). We propose neither a reconciliation nor a synthesis of these propositions but suggest a conceptualisation of the cryptomarket as a social institution drawing upon the new economic sociology (Granovetter, 1992, 2017), a conceptualisation that is compatible with both perspectives. Reflecting on the history of the cryptomarket, we argue that in the years following the implementation of Silk Road, we have seen a process of institutionalisation, in which a stable set of norms, behaviours and attitudes have settled a way of doing business. While the story of the cryptomarket continues, the mood amongst scholars and amongst some in the cryptomarket community itself seems to have settled on the rather mundane conclusion that not much seems to have changed since Silk Road. Markets still resemble Silk Road and despite the perceived threats to the system of the reconfiguration that distinguished the second epoch the technology very much remains the same. Most scholars no longer expect widespread adoption of technological advances like decentralised markets, nor do we expect mass adoption of sophisticated solutions to problems inherent in the centralised escrow model of cryptomarkets. Rather, the changes we expect to see in the cryptomarket, as we discuss in the final chapter, are an increasing overlap with the offline drug economy, and apart from that, business as usual with perhaps some slight change around the edges to account for unexpected shocks.

1.2. THE ‘CALM’, OR ANARCHY, BEFORE THE STORM

The original cryptomarket, Silk Road, did not emerge in a vacuum inventing an online drug trade where none had existed before and nor did it invent the technologies upon which it is dependent. Rather, in the words of its administrator, Dread Pirate Roberts, ‘everything was in place, he just put the pieces together’¹ (Greenberg, 2013). As such, a history of the cryptomarket necessitates an understanding of the history that came before the first post on the Bitcoin Talk forum that announced Silk Road to the wider world (Buxton & Bingham, 2015). Broadly, we may separate these antecedents of the cryptomarket under two broad themes: The online drug trade and the social, political, technological and organisational roots of Silk Road.

Before Silk Road and dating back to what preceded the internet, ARPANET, the sale of unregulated or illegal goods sale been a staple of the internet dating back to the 1960s (Walsh, 2011) and the first item ever to have been traded online was cannabis between graduate students (Markoff, 2005). As the internet has become ubiquitous, so has illicit online markets – which have emerged, vanished, and remained in a variety of forms: The sale of drugs on public social media (Moyle, Childs, Coomber, & Barratt, 2019; Stevens, 2016), the trade in stolen goods (Aniello & Caneppele, 2018), the sale of products associated with the wildlife trade (Lavorgna, 2014), and a range of illegal markets catering to the growing industry around credit card fraud and hacking are but some examples (e.g. Hutchings & Holt, 2017; Soudijn & Zegers, 2012).

The sale of illicit drugs online grew particularly in the years after 2000 as new psychoactive substances (NPS) were increasingly sold online (Orsolini, Francesconi, Papanti, Giorgetti, & Schifano et al., 2015). Often in a legal grey area, being neither illegal nor controlled but with psychoactive effects, the internet provided an easy way of distributing substances like Mephedrone, synthetic cannabinoids or psychedelics like 2C-B (EMCDDA & Europol, 2016; Martinez, Kmetonyová, & Běláčková, 2016). Likewise, performance enhancers (both mental and physical), steroids and prescription medicine also became readily available online during this period (Krebs, 2014; Littlejohn, Baldacchino, Schifano, & Deluca, 2005; Orsolini et al., 2015). Generally, these markets for drugs utilised single actor web shops on the regular internet (clear web) and allowed for electronic payments, mimicking licit online stores. As such, the online trade in psychoactive substances and drugs was not a novel phenomenon when Silk Road launched (as will be discussed in Section 1.3.1).

As the internet and online commerce grew to become ubiquitous a movement of hackers, activists and cryptographers, parts of a growing ‘digiterati’ (Ludlow, 2001), discussed, wrote and implemented technologies that sought to mitigate what was seen as almost inevitable exploitation of the internet for surveillance purposes and governmental regulation (May, 2001a, 2001b). While no one coherent political ideology can be identified for this movement or ethos, its ideological foundations can be traced back to a peculiar combination of politics ‘reconciling the anarchism of the New Left with the entrepreneurial zeal of the New Right’ (Barbrook & Cameron, 2001) – a mix of free market capitalism, opposition to governmental regulation and an adoration for values of privacy and personal choice. Noteworthy documents from this era are the Cipherpunk FAQ, an FAQ written by Timothy May which sought to synthesise the politics and analyses of a fragmented mailing list (May, 1994). Amongst other things, May argued for the inevitability of assassination markets (i.e. crowdfunded assassinations) and a state of anarcho-capitalism he termed crypto-anarchy (May, 2001b). Less radically, Perry Barlow (2001), the lyricist of The Grateful Dead, penned ‘A Declaration of the Independence of Cyberspace’ declaring the Internet naturally independent of the tyrannies you [governments] seek to impose on us. In this discursive environment, a mix of programmers, hackers, activists and cryptographers, some identifying as cipherpunks and crypto-anarchists, took upon themselves to begin building the technologies that would ensure the independence of cyberspace from governmental intrusion. The first mixnets and remailers, systems which allowed internet traffic and emails to be routed through a network of computers and anonymised, were developed in this context (Chaum, 1981; May, 2001a). Similarly, Phillip Zimmermann, in vehement opposition to impending mass surveillance, wrote and publicly released the PGP, Pretty Good Privacy, protocol for encrypting and authenticating messages, files and documents (Zimmermann, 1999). At this point, the first experiments with digital and untraceable currencies were taking place as well (Chaum, Fiat, & Naor, 1988). These technologies continued to be developed over the coming years.

Thus, when in 2011 the user altoid posted a link to ‘The Silk Road Marketplace’ on the Bitcoin Talk forums (Buxton & Bingham, 2015, p. 8), both a market for drugs and the technological building blocks of Silk Road existed. The URL to Silk Road ended in .onion, designating its status as a website that could only be accessed using the Tor network, a modern iteration of mixnets, effectively making the connection to a historical and political legacy explicit. Neither was it a coincidence that the link was posted on a forum dedicated to the emerging cryptocurrency Bitcoin, a decentralised, deflationary, digital and pseudonymous form of virtual cash: An implementation of May’s prophecies of currencies outside state control and thus in direct extension of the cipherpunks’ early experiments and concepts of digital cash (Golumbia, 2017; Nakamoto, 2008). Silk Road, of course, only accepted payment in this nascent virtual currency and was only accessible using Tor, meaning one had to ‘hook in’ to this technological and political legacy in order to buy illicit drugs.

1.3. SILK ROAD MARKETPLACE – A PARADIGM CHANGE

From January 2011 to October 2013, Silk Road reigned supreme, though not alone, on the Tor network as the principal platform offering illicit drugs (Soska & Christin, 2015; Van Buskirk, Roxburgh, Farrell, & Burns, 2014). An early competitor of Silk Road was the platform Farmers’ Market, which had been operational since 2010 and was shut down by the FBI in 2012 (Zetter, 2012). Later on, in 2013, Atlantis Marketplace launched, mimicking the style and organisation of Silk Road, though the website announced itself using a snazzy YouTube video rather than a link on a cryptocurrency forum (Ormsby, 2014). The organisational form which Silk Road developed during its reign, both in appearance and structure (i.e. administrators, moderators, vendors and buyers), is best described as a paradigm change because it became to be widely adopted. Of course, as acknowledged by the administrator of Silk Road himself, Dread Pirate Roberts, the pieces were already there. The pieces that Dread Pirate Roberts put together in 2011 remain largely the same as today, with the basic formula of the cryptomarket changing little since that time. Grouping these pieces, we may summarise them as the platform economy design, technologies for anonymisation and encryption and escrow and dispute resolution.

1.3.1. An Illegal Platform Economy

The formula which Silk Road presented was organisationally similar to eBay, Uber, Amazon, Etsy and other platform economies which sell legal goods online: The website offers a platform which buyers and sellers can use in exchange for a commission and in return, administrators provide some form of governance and organisation (Christin, 2013; Langley & Leyshon, 2017; Martin, 2014a). In terms of its design Silk Road and later cryptomarkets were, and remain, strikingly similar to licit platform economies, specifically those which Langley and Leyshon (2017) term online exchange markets. Typical functionality includes search bars, categorisation of products, and a feedback system, also known as reputation system (Resnick, Kuwabara, Zeckhauser, & Friedman, 2000). In comparison to previous modes of organising illicit trade online, the mimicry of licit platforms was highly innovative. Excluding trading inside closed social networks (e.g. via email or chat rooms), illicit online markets had typically taken the form of either forums or shops. The already existing Farmers’ Market followed a ‘forum structure’ similarly to the forums used by hackers, carders and fraudsters (Lusthaus, 2012; Soudijn & Zegers, 2012; Zetter, 2012). Depending on exclusivity, such forums will typically be limited to invited guests, require some form of vetting or be completely open for registration (Dupont, Côté, Boutin, & Fernandez, 2017; Holt & Dupont, 2019). Those who are members can post and comment in threads and subforums offering, for example, goods for sale or the provision of feedback. The shop-format would be one seller selling their goods on a dedicated website, as was prevalent with NPS, or utilised in the fraud and carding economy in the form of autoshops wherein buyers can easily sort and buy stolen credit cards and associated information. It can be argued that the platform organisation of Silk Road combined these by giving individual sellers a ‘storefront’ while simultaneously providing the services that administrators would offer in the forums like dispute resolution and rule enforcement, combining the shop and forum formats. However, more importantly, Silk Road allowed sellers to compete side-by-side, appearing alongside each other in search results, and remained open to all.²

1.3.2. Encryption and Anonymity

In addition to proposing a new mode of organising illicit online markets, Silk Road further combined the technologies discussed in Section 1.2 and utilised in other illicit markets. Specifically, Silk Road required the use of Tor and Bitcoin, and strongly encouraged the use of PGP encryption.

First, Silk Road was only available using the Tor network. The experiments with anonymous internet traffic in the form of mixnets and remailers had grown in sophistication since the 1980s and 1990s, and with funding from the US Defense Advanced Research Projects Agency (DARPA) research labs, the Tor Project had developed the code and implementation for a global network of computers collaboratively giving users of the network anonymity by routing their traffic through each other (Dingledine, Syverson, Mathewson, & Syverson, 2004; Tor Project, 2019). Though Tor’s primary function is the anonymisation of the origin and destination of internet traffic for the purposes of censorship avoidance and privacy, the protocol also allows the creation of ‘hidden services’ or ‘onion services’, websites which can only be accessed through the network thus anonymising any visitor from surveillance by the operator of the site and any surveilling entity (Moore & Rid, 2016). Similarly, the location and IP address of the website remain hidden thereby mitigating the tools of internet regulation traditionally available to law enforcement (Goldsmith, 2000; Hutchings & Holt, 2017; Spitters, Verbruggen, & Van Staalduinen, 2014). Web services which are only accessible using specialised software (e.g. the Tor Browser) are commonly referred to as the darknet or dark web. These terms are an extension of a division originally proposed by Bergman (2001), who argued that the web can be divided into a clear and deep web, of which the former is what is available through search engines while the latter is not. In contemporary research, a coherent definition of the three is provided by Gehl (2018). Gehl suggests first and foremost the use of web rather than net, to clearly designate that the content discussed is webpages (i.e. markup, HTML), and then distinguishes the three as (a) content that is available through search engines, (b) content that is not available through search engines, and (c) content that requires specialised software to access.

The ‘dark web’ has in recent years become of great interest both in popular and academic discourse. It is, in this context, important to stress two main findings in the literature on the dark web. Fi...

Table of contents

• Cover
• Title
• Introduction
• 1. A Modern-day History of Cryptomarkets
• 2. The Current State of the Cryptomarket Trade
• 3. Cryptomarket Research Methods, Ethics and Epistemologies
• 4. Charting the Unknown and Future Directions
• Bibliography
• Index