The online trade in illicit drugs is bigger than ever, according to a new report published this week.
This is despite the closure of the original Silk Road marketplace by the FBI in October last year, and a crisis in the Internet's underworld following arrests, scams and hacking attacks.
Last Sunday, CoinDesk reported on how, when US authorities closed Silk Road and arrested its alleged mastermind Ross Ulbricht, it didn't spell the end for online drugs markets. Silk Road reopened, new marketplaces quickly materialised, and existing ones grew to accommodate displaced buyers and sellers.
Now, despite the theft of thousands of bitcoins in February, Silk Road 2.0 is seeing an influx of customers jaded by scams and hacks on other sites, and trade is even better than in the heyday of the original site.
The thoroughly researched report released yesterday by the Digital Citizens Alliance – an organization that campaigns on Internet safety – provides a history of the anonymous deep web marketplaces, background on the main players, statistics about the online illicit drug economy and more.
It explains that once Silk Road was shut down, other marketplaces stood to profit as newly 'homeless' users and sellers drifted over. Black Market Reloaded (BMR) and Sheep Market, they say, were key players.
Soon afterwards, another similar site, Atlantis, closed in what many considered a scam that left it holding customers' bitcoins. Around this time, version 2.0 of Silk Road got up and running again – but this time playing catch-up.
Both Sheep Market and BMR benefitted greatly from these tumultuous events, the report explains, adding:
"Within two weeks of Ulbricht's arrest, the sites experienced serious growth. BMR saw the number of drug listings rise from 3,075 to 5,104, representing a 70% increase, while Sheep Marketplace showed explosive growth with the number of drug listings increasing from 855 to 4,165-an almost 400% increase."
However, in late 2013, Sheep Market "committed the largest scam in the history of anonymous drug markets," it says.
Like Atlantis, it went offline for good, alleging that it had been robbed of $6m in bitcoins by one of its sellers via a security vulnerability in the site, but making off with $44m in bitcoin from the site's users.
It was starting to look like marketplace users had more to fear from the site administrators than they did from law enforcement agencies.
Market leader once again
Ironically, it seems the shock caused by its rivals' two big scams undermined the confidence of buyers and sellers alike, and quickly helped Silk Road 2.0 leap back to the top of the pile:
"A series of scam markets, which appeared as opportunists tried to fill the void while the original Silk Road was shut down, created distrust among customers after the operators allegedly stole tens of millions of dollars worth of bitcoin. It is speculated that the resulting distrust may be one of the factors helping Silk Road rebuild its user base so quickly."
This effect was likely boosted by sensible policies at Silk Road. Most significantly, soon after February's hack, the site's operators announced that they would pay back bitcoins lost by customers.
Silk Road's moderator Defcon said at the time: "We are committed to getting everyone repaid even if it takes a year."
In anonymous drugs marketplaces, as in any market, confidence is key, it seems.
Currently, Silk Road 2.0 provides 5% more listings for drugs than its predecessor at the time of the FBI bust, with over 13,000 listings. According to the report, Silk Road's closest competitor, Agora, has only just over half of that amount with approximately 7,400 drug listings.
Now, the report says, "Silk Road and other deep web marketplaces continue to do steady business despite the arrests of additional alleged operators who authorities say worked for Ulbricht".
If there is one thing we can learn from this story, however, it is that the key factor in the success of any online drugs market – somewhat incongruously – is trust.