In October of 2013, the FBI took down a website known as Silk Road, an online black market that peddled all sorts of illegal goods and services, primarily drugs. While the FBI succeeded in its mission to take down the site, it did relatively little to slow the steady growth of the online drug industry.
The RAND Corporation, a nonprofit, nonpartisan research think tank, released a report in August that examined the size and scope of online drug markets since Silk Road was closed. The report found that there are around 50 cryptomarkets, or online marketplaces, in operation today that are inaccessible through standard web browsers — unlike Silk Road.
A remarkable finding of the report is that since Silk Road was taken down, revenues of cryptomarkets have doubled and the total number of transactions has tripled, despite the pressure of multiple governments investigating these sites. The report gives a monthly estimate of somewhere between $14.2 million and $25 million, or $170.4 million to $300 million annually, assuming the span of time examined in the report is representative of the nature of the market.
Based on these findings, I believe we must reassess how we approach the issue of online black markets.
Some interesting questions arise when we think about the circumstances of Silk Road’s end. Why did the online drug market continue to expand as if nothing happened? Why were Silk Road’s users not scared off after the creator of the site was arrested by the FBI?
Silk Road was in operation from 2011 until its downfall in 2013, during which it was extremely successful. According to the report, it had a near monopoly on the online drug market. Following Silk Road’s shutdown, a vacuum was created, with competing sites fighting to come out on top. It is this competition that I believe is a large contributor to the online drug market’s vitality, despite intense pressure. When the market opened up, new sites emerged with different technological and business innovations.
The RAND Corporation’s report noted that a large component of the online drug market is trust between buyers, sellers and site administrators. While distrust has obviously increased following Silk Road’s fall, users are mitigating this through several channels, such as encrypting communications, operating on several different sites and creating their own single-vendor shops.
The nature of online drug markets makes it very difficult to propose solutions with any level of confidence in their effectiveness. Given that increasing competition has naturally enhanced the market, a strategy to contain the market could be to decrease competition between sites, perhaps through selective takedowns.
This is purely an example, but if there are four main sites in the online drug market, taking down three of those sites could potentially leave the remaining site with a greater overall domination of the market, but a smaller market in total. Essentially, it creates similar conditions that Silk Road operated in.
Alternatively, we could search for ways to instill mistrust in online drug market site users. The RAND report noted that users often rely on self-regulation, similar to customer reviews on sites like eBay or Amazon, in order to ensure that only quality products are offered on sites. If through a great, almost inconceivable effort, authorities were able to flood these sites with negative reviews, this could prove to scare off wary users. Although, the report also notes that some members of these sites have strong, ultra-libertarian views. These users may elect to remain on their sites despite the reviews, giving a proverbial, gigantic middle finger to the federal government.
We also have to question whether controlling and containing this industry is even worth a great effort. Earlier, it was noted that monthly revenues of this industry float between $14.2 million and $25 million, or between $170.4 million and $300 million annually. On the other hand, the offline drug market is a multi-billion dollar industry. While illegal drug trade of any kind is a cause for concern, the online drug market is dwarfed by the offline market.
The online black market is an example of the dark side of the internet. Since its inception, law enforcement has struggled to pinpoint a truly effective strategy for slowing its expansion. If the online market follows the pattern of the offline market, it seems as though we will be in a constant cat-and-mouse game between drug suppliers and authorities.