Share Button

Photo source: http://www.flickr.com/photos/100239928@N08/

Photo source: http://www.flickr.com/photos/100239928@N08/

There’s a reason that the criminal underworld tends to be a violent, dangerous place to do business. It’s a closed system where everyone involved faces serious criminal consequences should something go wrong. Control of a city’s drug market is generally limited by a handful of suppliers, and they’ll all fight tooth and nail to maintain their market share. It’s a cash-only world, meaning untrustworthy and often dangerous people must meet face to face to do business, each understandably wary of the other’s intentions. With no alternative means of negotiation or arbitration available, disagreements over turf, money and quality frequently escalate into violence.

But what happens when the street-level dealers can buy from an online marketplace? What if they don’t have to buy from the violent, in-and-out of prison gangs that bring the supply in from somewhere else? What if those dealers can actually shop around for price, quality and — believe it or not — customer service? What if the drug networks were completely disrupted by an online marketplace? And what if that anonymous marketplace used bitcoin to ensure that payment was legitimate, timely and fair?

In other words, what impact did the Silk Road have on the culture of drug dealing?

According to a recent study by University of Lausanne criminologist David Décary-Hétu and University of Manchester law professor Judith Aldridge, now-closed darknet black market site Silk Road may have strongly reduced drug violence during the year it was most active. The study, “Not an ‘Ebay for Drugs’: The Cryptomarket ‘Silk Road’ as a Paradigm Shifting Criminal Innovation,” was published last month, but it gaining new attention in the virtual currency community thanks to an article on CoinDesk.

As CoinDesk’s Nermin Hajdarbegovic explains:

The researchers’ argument is simple: online drug traffickers act more like wholesalers, and since online markets limit the scope of direct interaction between the traffickers — blurring or removing territorial boundaries, there is less of a chance for violent confrontation. … [The] paper argues that a substantial proportion of transactions on the original Silk Road could be characterised as ‘business-to-business’ deals, made at substantial prices typical of those paid by drug dealers sourcing stock. … In other words, a lot of Silk Road purchases were not made by end users, but rather by resellers. The result is that researchers concluded the platform was a potentially transformative for the illegal market.

The paper claims that Silk Road’s anonymous nature, as well as the semi-anonymous nature of its payment system, largely removed the incentives for violence in drug deals. The suppliers and buyers didn’t know each other at all, making “turf” a meaningless concept. Because they were using bitcoin for the transactions, there was little chance of anyone involved getting ripped off. A transaction happened or it didn’t. If the supplier didn’t deliver as promised, they faced the same problems Amazon or eBay sellers face: Negative reviews. That’s a huge de-escalation from violence and murder.

Other ‘skills’ came to the forefront. On illicit cryptomarkets, good customer service and writing skills were more important than muscles, the paper found. … The added layer of anonymity offered drug traffickers and their clients more security, not just from law enforcement, but from each other, the paper asserts.

It’s worth noting that the study’s authors admit to a lack of hard facts to back up their inferences. Due to the Silk Road’s anonymous nature, the only hard data available was price and volume information. While the authors strongly suggest that there must have been some reduction in violence from the estimated $89.7 million in transactions taking place on the site, they note that this amount is a tiny fraction of the $300 billion global drug trade. They also noted that the most popular drugs on the Silk Road, namely “cannabis, ecstasy and psychedelics,” tend to be less commonly associated with drug violence than so-called “hard drugs” like heroin, crack and methamphetamine.

Given the explosion of Silk Road-like sites that have sprung up in recent months, all of which use bitcoin as their trading currency, a decline in drug violence over the coming years might be increasingly tied to the utter disruption of the old model. That disruption has largely been powered by bitcoin.

Share Button