Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

It’s a website that sells products. Just like on Amazon, the products have customer reviews. “Was the harshest tar I’ve ever smoked. I’m never using this vendor again,” grumbled one customer. Another: “Nice big rocks.” A third: “F#cking fire.” One more: “Quality BTH, very strong, great for smoking and shooting.”

BTH stands for black tar heroin. And these are all reviews for drugs sold – openly, in plain sight – on illicit marketplaces on the dark web. The drugs have names like “Connoisseur Colombian Cocaine (off the brick) BEST IN THE US” and “Crystal Meth 99% (FREE SHIPPING).”

This piece is part of CoinDesk's Payments Week.

Each vendor has a bio and profile page. “I am a PHD student and I LOVE chemistry!” said one vendor in their bio. “Anything about chemistry absolutely gets my heart. I let this passion flow into my work.” And this work, of course, is making and selling drugs like MDMA. Customers rate the vendors on the usual metrics you see on Amazon – the quality of the product, the speed of shipping – but also something called “Stealth.” As one happy customer gushes, “Incredible stealth, great communication.”

You don’t pay with a credit card. You don’t pay with Venmo. You don’t pay with cash.

You pay for the drugs with cryptocurrency.

In the case of this dark market, you pay using monero, a privacy coin. And in some ways, this corner of the dark web is a throwback to the earliest days of cryptocurrency adoption. “A lot of purists don’t like to admit it, but Silk Road was the first major use case for Bitcoin,” said Eileen Ormsby, author of “Silk Road: The Shocking True Story Of The World's Most Notorious Online Drug Market.”

And to some extent, that use case has never really gone away. “The ecosystem is still quite vibrant,” said Nicolas Christin, an associate professor at Carnegie Mellon University, who has studied dark web markets since 2011 and wrote the original study of economic activity on the Silk Road. Cristin estimates that these markets still represent “between half a billion dollars and billion dollars per year,” as new sites pop up – inevitably – to replace the ones that shut down, such as Hydra. “We’ve seen this story five or six times,” said Cristin. “At this point, it starts to look a little bit like "The Fast and the Furious" movies. You think something new is going to happen, but it’s always more of the same.”

Before we go any further, some critical perspective: By any measure, illicit activity is only a tiny slice of the overall crypto pie. According to the most recent crime report from Chainalysis, transactions involving illicit addresses accounted for just 0.15% of all cryptocurrency volume in 2021, which is down from 0.6% in 2020 and 3.4% in 2019. That’s consistent with other findings. “Bitcoin transactions linked to illicit activity are below 1% of total transactions and have been for some time,” Jess Symington, research lead at Elliptic, wrote me in an email. “We have seen a clear downward trend in the overall proportion of illicit activity as mainstream acceptance of crypto-assets has rapidly increased.”

It’s also true that cryptocurrency is generally easier to trace than cash (more on that in a bit), which means that when people use bitcoin for shady purposes, law enforcement is more likely to catch them. Saying “crypto is for crooks” is one of the oldest misconceptions in the space. This has long been debunked. It’s classic “FUD.”

All of that is true.

That said, CoinDesk’s “Payments Week” is exploring the various ways that cryptocurrencies are actually being used to pay for goods and services. There are other features covering how crypto can be leveraged as a force for good, such as improving international remittances. Crypto helped people send aid to Ukraine with breathtaking speed; this almost certainly saved lives. Illicit activity is only a small piece of the overall crypto puzzle. So, this is not about moralizing or pearl clutching. (And to put cards on the table and in full disclosure, I personally own bitcoin.) But if we’re exploring the current state of play for how cryptocurrency is actually being used as a form of payment, it would be intellectually dishonest to ignore its role in illicit activity.

Okay. So with that said, on these dark markets, what are people buying with their cryptocurrency?

The short answer is drugs, drugs and more drugs. “You can find anything, but the vast majority of it is cannabis, cocaine and MMDA,” said Christin, who calls these drugs “the big three,” and estimates they account for 50% to 75% of the illicit action, which can vary from market to market. This trend is not new. The high percentage of drugs “has been surprisingly stable over the past 10 years,” he noted.

Kim Grauer is a coauthor of the Chainanalysis crime report. She agrees that on marketplaces like the Silk Road, drugs are by far the biggest category. “We see any drug under the sun,” said Grauer. They also see less common items: stolen passports, stolen credit cards, skinny pills, Ivermectin, weapons like grenade launchers and even vials of COVID. (She stresses that this is rare.)

The weapons market might be smaller than you think. “That’s a blip,” said Cristin. “That’s almost nothing.” The reason? “The largest market for this [weapons] would be the United States, and you don’t need to go to the dark web to buy a weapon, no questions asked,” he said. Cristin acknowledges that the demand might be higher in countries with stricter gun regulations (like in Europe or Australia), but there are other practical constraints. “It’s very easy to drop MMDA in the mail,” said Cristin. “But it’s really hard to send a Glock in the mail. It’s incredibly hard to send a bazooka in the mail.”

An easier item to send or receive: hacked customer data. And the dark market for hacked data is on the rise, said Ormsby. The real goodies are something known as "Fullz," as in the “full information” on a customer. Fullz can be bought and sold. “Someone says, ‘I hacked Big Company X, and I have all of their customer names, phone numbers, and Social Security numbers. I’m willing to sell one million of these to anyone who wants to buy them,” said Ormsby. Then the buyers can use these Fullz to open new bank accounts or create bogus identities.

Then there’s the darker stuff. “Hit men sites are still prolific,” said Ormsby, adding that these are usually scams. Here’s how it works, as Ormsby describes it: You pay upfront to ask a hit man to kill someone, but then he takes your crypto and he bails. “What recourse does the guy have? The hit man has no incentive to carry out the murder,” said Ormsby. “The fake hit men, they take in lots of money.” (Aside: Hey Netflix, free show idea. DM me.)

Ormsby, Grauer and Christin all agreed that the truly despicable dark stuff – such as sex trafficking, or anything involving children – is largely absent from the dark web marketplaces. “They won’t touch certain things that will make them an immediate target [by law enforcement]. Child sexual abuse materials is definitely one of them,” said Grauer. “For anything that would be like a red, red, flag, a lot of these marketplaces say in capital letters at the top, that they don’t do that stuff.”

Ormsby found the same thing. “There’s no dark-net market that will allow child abuse markets on it,” she said. “Mainly because they would turn customers away in droves. For most people that are buying drugs online, that’s their only crime. They’re buying drugs online for themselves. … They don’t want perverted stuff on their site.” As for porn? Crypto’s use at sites like OnlyFans has been well-documented (and debated), but Ormsby adds that dark-net markets sometimes sell “log-ins to premium porn sites. A way of getting the stuff that you’d normally pay for. That’s as far as they’d go.”

At this point, you might be wondering, why the hell are people buying drugs online, given the risk of getting traced and tracked and caught? “People really like buying their drugs online,” said Ormsby, explaining that it’s for the same reasons we enjoy buying legal goods online – convenience and trust. “At least when you’re buying online, you have pretty good feedback on vendors.”

Just like on Amazon, drug vendors have star ratings that users can see. “They depend on repeat customers,” explains Ormsby. “They don’t want to sell bad drugs once, and then [the customer] never comes back and tells all their friends. They do their best to live up to their reputation.” And as for how vendors can broadcast their “reputation” without fear of exposure? “Tor is a complete privacy browser,” said Ormsby, referring to the anonymous browser used to access the dark markets. “It scrubs out information from people on both sides. It can host a site that can’t be found.”

Using Tor itself is not illegal. They’re used by whistleblowers and investigative newspapers. (The New York Times has a Tor page.) The CIA has a Tor website so that people can anonymously report tips on, say, a possible terrorist attack. “You just download Tor,” said Ormsby. “That’s legal. That’s simple.” And suddenly you’re in the dark web.

Some of these dark markets accept bitcoin, some only take privacy coins like monero. It’s common for buyers to pay for their drugs with bitcoin, and then for the vendors to swap their bitcoin into a privacy coin. But this can be tough to do at scale. Vendors could face a liquidity problem.

“If you have $600 million in monero hacked, you’re going to have trouble liquidating all of that monero,” said Grauer. “It’s just not as liquid as many of these other cryptocurrencies.”

So how common are privacy coins compared to bitcoin? It’s a tricky question that still puzzles the experts. “It’s a complicated ecosystem that we’re throwing our heads together to try to figure out,” said Grauer. She adds that ChainAnalysis currently has R&D efforts underway involving monero, but she’s not yet allowed to share any details.

There are two final points to consider.

First, it’s true that the amount of illicit activity from cryptocurrency is a tiny slice of the overall pie. “It’s a really tiny percentage, and as a percentage it’s going down all the time,” said Ormsby. Grauer – who studies the role of cryptocurrency in crime – believes that “the industry is becoming more safe overall.” This has broad consensus.

However, there’s one complicating wrinkle that’s rarely discussed: We also know that the bulk of cryptocurrency transactions are related to investing, speculation and financial trading. Actual legitimate payments for goods and services are a small slice of the crypto pie. “The vast majority of transactions are for cryptocurrency derivatives, Binance futures and things like that,” said Cristin. “To the tune of between $50 billion and $100 billion per day.”

Why does this matter? It’s true that illicit activity only accounts for a small fraction of crypto. But much of crypto is used for financial speculation. What if we ask a different question: When we look only at the scope of cryptocurrency payments for goods or services, what percent is used for illicit activity?

“That’s such a good question,” said Grauer. And it’s one that no one seems to have a solid answer for, not even using the sophisticated tools at ChainAnalysis. “It’s something that we have trouble figuring out,” explains Grauer, because there’s no obvious way to tell if a transaction is used to pay a merchant or to buy and hold bitcoin. So how can Chainanalysis track illicit activity with confidence, but only have a fuzzy sense of legal payments? “Crime data is just easier,” said Grauer. “If you identify a ransomware wallet, you don’t have to speculate as to what’s happening with the funds.” It’s just easier to track dark payments than normal payments.

And finally, to underscore a point made earlier, in general, using cryptocurrency for illicit activity makes it more likely that you’ll get busted. This is the ultimate irony for crypto and crime. In the early days of bitcoin, people thought it was the perfect way to do naughty things online. Then they found they could get traced and caught.

Just ask Michael Morell, the former acting director and deputy director of the CIA. Morell conducted a sweeping review of crypto’s role in illicit activity. In his report, he noted that one expert said that “if all criminals used blockchain, we could wipe out illicit financial activity.”

Morrell, a 33-year veteran of the CIA, concluded that “Based on our research, I have come to believe that if there was one financial ecosystem for bad actors to use that would maximize law enforcement’s chances of identifying them and their illicit activities, it would be blockchain.”

More from Payments Week:

The evolution in interest among TradFi, which was once dominated by diehard crypto skeptics, from crypto curiosity to crypto commitment is perhaps the industry’s most important move yet.

Porn, gambling and even furniture sales are deemed “high-risk” merchant categories. Sometimes the risk is financial; other times it’s just bad publicity.

How and why those original digital payments projects are no longer with us today can give us an idea of what needs to be done to do it right. This piece is part of CoinDesk's Payments Week.

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CoinDesk - Unknown

Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

CoinDesk - Unknown

Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.