The Dark Side of Bitcoin: What Crypto Can and Cannot Buy?

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by Dominik Stroukal — Economic Expert at SatoshiLabs and External Contributor to Trezor Blog

As a financial instrument, Bitcoin has established itself as a valuable resource, accepted in exchange for goods and services in the same way any other currency is used. The first Bitcoin transaction, a 10,000 bitcoin pizza led to a snowball effect where, within a few short years, virtually anything could be bought for Bitcoin, legal or otherwise. All the advantages of cash — anonymity, for one — on the internet.

There is no doubt that pseudonymous digital money encourages the purchase of illegal things. It is, of course, happening. Fortunately, many of the stories about the Dark Web are just myths. Most importantly, it’s not Bitcoin’s fault that someone buys something illegal. But it’s something we must deal with.

“The Dark Web is an illegal place in the depths of the Internet where you can buy literally anything,” is not a real quote, but a mix of quotes that try to describe the Dark Web. You’ve probably heard something similar: Murders, child porn, drugs, terrorism, guns… all of this can, allegedly, be bought for Bitcoin. But the reality is much more complicated, and the quote does not tell the truth about at least three things: The Dark Web is far from illegal, offering much-needed privacy, and it is not at all hidden in the depths but reachable in a few clicks. Finally, it is not true that you can buy anything there. A lot of stories are just myths, and don’t make sense.

However, the Dark Web and Bitcoin do belong together, for many reasons, and it would be a mistake to deny that.

What is it all about?

Dark Web — It sounds a little… dark, doesn’t it? “But the Dark Web’s not completely dark,” says the Encyclopedia Britannica. “It’s also used by political whistle-blowers, activists, and journalists who may be censored or could risk political retaliation if discovered by their government. Most notably, the WikiLeaks website has its home on the Dark Web,” continues the explanation.

It is the part of the internet that is not seen by web search engines like Google, which you need special software to access if you want to remain as anonymous as possible, such as the Tor Browser. Of course, anonymity helps criminals, but it also enables legitimate and legal activities that you just don’t want to share with the government, advertisers, or random strangers. You can find a mirror of the BBC website on the Dark Web, for example.

Anonymous access to information can be useful in much of the world. Since 2014, Facebook and other servers have been available on the Dark Web. Many use Tor to send sensitive documents to journalists, including The Guardian, who operate a secure channel for tip offs through Tor. It shouldn’t be a surprise that these sites are just a a few clicks away. The Dark Web is not a mysterious place in the depths of the internet. It is a legitimate tool; just download the browser and go to an address.

But sharing information isinformation on is only a small part of what the Dark Web can do. It was created for that reason, but it took the arrival of our favorite cryptocurrency, Bitcoin, for it to see its broader potential..

Sending information to the Dark Web for free is easy. But how do you pay for something? It doesn’t make much sense to be anonymous only to later complete a transaction through your bank, which knows everything about you. In 2010, Bitcoin was noticed by a programmer nicknamed Dread Pirate Roberts (taking his nickname from a character in the absolutely perfect movie Princess Bride — if you haven’t seen it, change that!) who introduced Bitcoin into the Dark Web.

The principle of the Silk Road, as he called his “dark market”, was simple. You buy goods, which then arrive anonymously by mail (yes, mail can be sent anonymously and receiving something illegal is not illegal, although you are obliged to report it if you did not order it), pay for the entire transaction in Bitcoins, and finally leave a review to help other customers.

It worked incredibly well. So much so that Silk Road was noticed by the FBI and, in 2015, the alleged founder Ross Ulbricht a.k.a. Dread Pirate Roberts was sentenced to double life imprisonment plus 40 years.

This was a huge test for Bitcoin. Silk Road had become a popular market, one of the first real places where Bitcoin could be used as money. When Silk Road closed for three days in May 2011, the price of Bitcoin temporarily fell. Coincidence? Probably not. As a result, Bitcoin has acquired the stigma of being known as a currency that is only used to buy drugs.

However, a number of studies confirm that cryptocurrencies are used minimally on the Dark Web. According to the latest analysis by Chainalysis, only 0.08% of overall incoming cryptocurrency transactions were used for purchases on dark markets. That’s twice as much as in 2018, but still so little that it is practically zero. Just for perspective, let’s compare the same statistic for the US dollar. In the US, it is usually estimated at 4–5% of GDP, which is difficult to convert into incoming transactions, but I believe that 0.08% would be considered a huge success.

In addition, a large part of the drugs people buy there using Bitcoin are very close to legalization. The Dark Web is a Plan B (as is Bitcoin). What is legal today may not be legal tomorrow and it is great to have a tool against unjust governments. Conversely, one of the most popular items on the Dark Web, marijuana, is illegal in most of the world today, but is gradually being legalized. In my homeland, the Czech Republic, one in five young people tried it at least once in 2018, and only half the population is now against legalization.

No hitmen

But the Dark Web is no libertarian utopia. One of the most common uses of the Dark Web has been, is and will be, is to distribute child pornography. Absolute hell, the worst of the worst. So terrible it is hard to even write about. Dark Web child abuse producers like Peter Scully are the sheer essence of the worst evil that has ever walked the Earth.

Young British scientist Gareth Owen calculated that 80% of visits to the Dark Web lead to sites with child abuse. Dark markets, by the way, account for only 5% of that. However, Nick Mathewson of Tor Project convincingly explained that the number of visits is not equal to the number of visitors, but rather can be much lower for child pornography. Users of dark markets easily spend a lot of time on them, but they are still on one site. Seekers of child abuse are likely to jump from one site to another before finding what they are looking for. We do not know how much of the Dark Web is child porn. But it’s probably much more than a lot of Dark Web fans admit.

On the other hand, we have myths. Myths about things which people think the Dark Web is full of but, in reality, are hard or even impossible to find. The most typical example is murder for hire. It just makes no sense.

When someone buys a drug through the Dark Web, it arrives in the mail. If it is intercepted by customs officers, they will most probably not find the sender and it is not illegal to receive things, though they are likely to make a note of your name somewhere in their databases.

Hitmen are different. When someone is killed, a murderer is sought. And the killer usually has a motive. If the hitman receives payment in Bitcoins, the motive still exists. It cannot be anonymized. On the contrary, it is much more dangerous to have a payment record forever in the blockchain. A “good old” briefcase with dollars serves the purpose better.

But when you surf the Dark Web, you’ll find hitmen services. The most popular at the time was the Albanian sect of bloody assassins called Besa Mafia. People did send them money from time to time, and there are documented cases where they were said to have believed it, but it wasn’t a gang of murderers on the other side of the computer, probably just a teenager who received easy money by scamming criminals.

If you pay someone for a murder and they don’t deliver, where do you complain? With repeated sales, such as drugs, there is much lower incentive to cheat because you want to continue trading and want good,verifiable references. People usually send even a photo with the product. It is clear that it can’t work like that with murders. Likewise, hackers who will grant you access to anything for a few dollars and discredit anyone are also a myth. Whoever sent them something just threw out his Bitcoins. No rumors of snuff or Red Rooms for Bitcoins, forms of killing on camera for money, have ever proved true.

Common scams on the Dark Web are offers of new phones for a third of the price, or counterfeit money. Only a very few cases have been reported, so it’s not unheard of but still rare. Equally unlikely are firearms. They were shown for sale on the Dark Web, but the trade simply didn’t work. Dread Pirate Roberts established The Armory, a special dark market for weapons, in 2012, but soon had to close it because there was no demand. It is even possible that there werewas never any real transactions at all. After all, how do you mail a firearm? Even if you find a way, it would be much more expensive than on the street. In contrast, drugs are often much cheaper and cleaner online.

The Dark Web is not just about whether selling something is theoretically possible. It must also make economic sense.

The Unstoppable Dark Web

The current Dark Web already looks unstoppable, so let’s think about the future. After the closure of Silk Road, dozens of other dark marketplaces emerged, moreover much safer and more decentralized. One head was cut off and another seven grew. And they were even bigger than the first. At present, however, at least since the closure of AlphaBay (the largest dark marketplace to date), the trend has been reversed and the markets are shrinking, with customers looking for proven sellers who may no longer necessarily need to be in the big markets.

Even fully decentralized markets have emerged. Of course, we are talking about OpenBazaar. The Dark Web is, suddenly, unstoppable. In addition, people are experimenting with innovations in dead drops, i.e. not delivering to mailboxes but, for example, somewhere in nature. Imagine if in the future, goods from dark markets were distributed by drones above our heads and passed it on to each other, thus significantly anonymizing the original transaction. I’ve heard a lot of fantasies over the long years I’ve been interested in this topic. But it’s moving so fast that they’re more predictions of the future than fantasies.

The Dark Web is growing. There are currently 180,000 unique .onion addresses. Before the pandemic, there were only 75,000. The Dark Web is on fire; people are obviously looking for alternatives to buy what they want and cannot get, but part of the increase can be attributed to the number of scams that are trying to take advantage of a bad situation to sell fake medical equipment, drugs for COVID-19, or even their own saliva, meant to cure the disease.

Is it good that the Dark Web is here? Undoubtedly. As a tool in itself, it is not a bad thing. Like Bitcoin. Of course, it can also be used for bad things, but what can’t? Try to look around and find at least one thing you are not able to commit a crime with.

No matter what, this is no excuse for the eighth circle of hell on the Dark Web, child pornography. We all should make as much effort as possible to destroy this part of the Dark Web. Free information, sharing, safe purchases of legitimate but potentially illegal goods; it is pretty easy to defend all of these. But nobody can defend violence against children.

The internet is defending itself, but it is not enough. The Anonymous attacks on child abuse servers, the revealing of rapists, the boycotts of sharing violent content and the blacklisting of the Bitcoins involved, all of it works but it is much less effective than we would like.

The Dark Web is a fascinating place just a short distance from your desktop. It is evolving at an incredible pace and is worth studying. Yes, it’s a place full of scary things, but many myths about it still prevail over the truth. And, whether we like it or not, it wrote a significant part of the history of Bitcoin. Let us not be afraid to admit its flaws, but carefully refute all the myths.

The Dark Side of Bitcoin: What Crypto Can and Cannot Buy? was originally published in Trezor Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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