It’s still mind-boggling to think that Silk Road, a supposedly anonymous black marketplace for illegal goods, could operate for such a long period of time without police interference.

New evidence has come to light, though, suggesting the Feds were actually involved in the operation for a long time before the website was taken down.

recent document released by The Smoking Gun makes clear that Steven Lloyd Sadler - a top drug kingpin from Silk Road - was actively working with the Feds. The anonymity of Silk Road’s web presence actually made it easy for cops to make undercover drug deals and subsequent busts.

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Indictment of Steven Lloyd Sadler and a co-conspirator. The documents reveal that Sadler was cooperating with the government’s investigation of Silk Road. Source: The Smoking Gun

The sheer fact that Silk Road used government-supported institutions such as the US Postal Service to send black market items like illicit drugs to customers should be a red flag in anyone’s mind. One would have to consider that the seemingly enjoyable roller coaster of obtaining illegal items in relative anonymity would have to stop at some point.

But even with that in mind, many people still took the ride and it seems people are continuing to do so, despite the risks. But that doesn’t mean it will deter the overall growth of the bitcoin network.

Bitcoin’s bounce

There was a belief that the conclusion of Silk Road might result in a slow tapering off of bitcoin’s growth. But since the arrest of Ross Ulbricht, the alleged mastermind of the now shuttered online black market, the price of bitcoin saw a steady rise after a quick drop.

It’s bounced back up from a recent low of $99.81, the same day of the fed crackdown on Silk Road.

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Thirty-day chart of bitcoin prices. BTC has bounced back up since quickly dropping after Silk Road’s closure. Source: CoinDesk Bitcoin Price Index

When is the last time we saw a $200 bitcoin price point? Back in April, when a huge run-up surrounding the restrictions around Cypriot banks caused a massive surge in speculative investing and media coverage of bitcoin.

Hopefully, this rise in price levels does not epilogue in a major crash, as previously the largest exchange, Mt. Gox, simply could not handle trading volume and halted operations for a period of time. Although, the price is no longer at the $200 mark it reached earlier in the week.

Regardless, the fact that the currency held its ground after the demise of Silk Road makes it clear that BTC does not depend on illicit goods to thrive.

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Year-to-date chart of bitcoin’s price. On January 1, 2013, the bitcoin closing price was $13.30. Source: CoinDesk Bitcoin Price Index

The risky activity continues

Those who bought and sold drugs on Silk Road should realise that law enforcement does not take too kindly to boisterous criminal activity like sending narcotics through the mail.

Amazingly, there are still people who believe in the concept of selling illegal goods on anonymous sites and, for some reason, they continue to talk to the media. This was best exemplified when a large illegal goods broker going by the alias ‘Angelina’ made comments that no matter what drug enforcement agencies attempt to do, technology will still enable this type of criminal activity.

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The number of recurring Tor users based on requests from directory mirrors has seen a sharp rise since August. Source: Tor Project Metrics

“It doesn’t matter who, or where or how exactly — as long as there are buyers there will be sellers,” Angelina recently told Mashable. And although these comments were before the demise of Silk Road, Angelina’s wares are still being offered on sites like Sheep Marketplace and Black Market Reloaded.

It’s fair to say that bitcoin has gained a bad reputation because there is a portion of the bitcoin economy that uses it to purchase illegal goods. But decentralized currencies don’t encourage people to buy drugs, they are bought because people want to purchase them, and they likely think that going online and using bitcoins is a better method of obtaining drugs than on the street, with cash.

This isn’t going to change, but bitcoin is not a reason to break the law, and this can undermine the good that it does represent.

It’s a tough balance: In the face of enormous positives, any news that paints bitcoin in a bad light will be highlighted, because that makes for a compelling storyline. At the same time, the fact that the price of bitcoin didn't crash post-Silk Road proves that it continues to be valuable, with numerous legitimate and innovative uses for it arriving on a consistent basis.

What do you think about the illegal use of bitcoin? Will it overwhelm the positives that it can bring to society? Let us know in the comments.


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