The Guardian discovers Silk Road and Bitcoin.
Mark Johnson* rifles through his mail as he gets home from work. Among the usual bills is a small padded envelope. Though it doesn’t have his name on, it’s the package he’s most interested in: inside lie two grams of, he hopes, relatively pure MDMA.
Johnson has no idea who has sent him the envelope: he has never met his dealer, and never will. The delivery was facilitated through a website called Silk Road, an underground eBay-like site which has become the core marketplace for buying and selling drugs online – and despite law enforcement authorities across the world being fully aware of its operation they have, so far, been powerless to stop it.
The site has been shrouded in secrecy even since it was founded in February 2011, but research due to be formally published later this year tracked its growth during six months of last year. Over those months, sales on the site doubled, hitting $1.7m a month.
Johnson, a TV executive, is one of those contributing to those monthly takings. Describing himself as “not excited or impressed by drugs per se”, but “interested” in them, he explains how he came to the Silk Road.
“I heard about it at a party, from the type of guy you only ever meet at parties,” he said. “I missed the last train. I might as well go hard. His brown envelope proved to be a veritable party bag, reminiscent of Hunter S Thompson. Where had he found all this? The Silk Road.”
Johnson said his view was that Silk Road was a site for connoisseurs: an easy way to track down better quality – not cheap – drugs. The site “isn’t easy to use”, but doesn’t require particular expertise: “If you can set up a direct debit and follow a recipe for risotto then you’ll work it out.”
Once you’re in, it works much like eBay: sellers’ reputations are verified through feedback, building trust. Money is typically held in an escrow (a trusted middleman) until delivery, with missing packages qualifying for partial refunds.
In all, he concludes, the quality is more consistent, the sale is safer, and the experience better than trying to find a street dealer. Johnson even claims the site helps combat addiction.
“There are some highly addictive and dangerous substances available on Silk Road, so instant access wouldn’t be advisable,” he concludes. “You must undertake the purchase soberly, with plenty of occasions to confirm your intentions.”
Silk Road today lists more than 10,000 items, 7,000 of which are drugs, with erotica, books and fake IDs among the rest. Notably missing are weapons of any sort (a sister site selling weapons shut due to lack of demand last year) and child pornography, both of which are banned.
Dr Nicolas Christin, who researched the site, believes Silk Road is far bigger today than it was in July 2012 when his fieldwork ended. “It’s not a matter of the police locking a few guys up to end this,” he said. “It is very distributed: we are looking at more than 600 sellers each month.”
How has a marketplace with millions of pounds of revenue survived the long arm of the law? The answer, according to its users, lies in the way it is structured.
Silk Road is no secret to law enforcement, who know where to find it online – indeed, shortly after the site’s existence was first reported in 2011, the senior US senator Chuck Schumer vowed to shut it down.
“It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen,” he said.
The site continued uninterrupted, thanks to two technological innovations that make it all but impregnable.
The first is that Silk Road runs as a “hidden service” on a popular internet anonymising tool known as Tor. This makes identifying the physical location of the computers operating the marketplace – or anyone visiting it – all but impossible.
The legitimate uses of Tor make disrupting the service morally difficult: it is a staple of activists avoiding internet censorship or government crackdowns the world over, including in China, Iran and Syria. Indeed, a large proportion of Tor’s funding comes – albeit indirectly – from the US state department’s internet freedom budget.
In his paper, Christin raised the possibility that authorities might instead try to disrupt Silk Road’s other protection: its use of the anonymous, stateless, encrypted online currency known as Bitcoin. But that’s a task that’s only getting harder.
Bitcoins are a currency controlled by no government, no company, and no group, but rather by maths: a series of complex cryptographic calculations rule how many Bitcoins are in existence and how many are traded.
Silk Road is probably the biggest use of the currency, followed by an unregulated online gambling site known as Satoshidice.
But more mainstream services are adopting the currency: the blogging platform WordPress accepts Bitcoins, as does the social news site Reddit. WikiLeaks opened up to Bitcoin when the mainstream banking system blockaded the site.
At the currency’s birth, Bitcoins were almost worthless – five cents each. Today, a single Bitcoin trades at $70 (£46) – and the total value of all the world’s Bitcoins has topped $800m (£500m). On the face of it, this makes Bitcoin the fastest-growing currency in the world.
Despite the present value of what they have created, several of the key players in the currency’s community can be found occupying a “political squat” in central London, mere minutes away from the financiers they intend to disrupt.
Walking through a corridor of conference rooms rearranged into makeshift lounges, Amir Taaki – a Bitcoin developer and activist, and convenor of Bitcoin conferences – rejects concerns that Bitcoins’ biggest use is unethical.
“People want drugs. The drugs war is probably a failed war,” he says. “I want to get rid of cartels. The way to do that is for people to buy their drugs straight from the producer. That’s what’s cool about things like Silk Road – you can bypass gangs.”
Taaki claims freedom to purchase is freedom of speech – and illustrates his argument by raising a service which allows Bitcoins to exist purely as a passphrase in a user’s head, ‘spent’ by typing (or saying) the key phrase.
“Can you imagine if we had restrictions of speech, or the surveillance state, 400 years ago? We wouldn’t have had the Reformation, or the Enlightenment, or the scientific revolution. Those would have been stopped – and we’re having other kinds of revolutions now.”
For many of those involved, Bitcoins are far more than a handy way to buy drugs. Instead, they are a challenge to the orthodoxies of mainstream finance: “extortionate” fees to transfer money, real-time customer tracking of every credit card foundation, even government oversight of banks.
Bitcoins’ value might be a bubble caused by people trying to cash in on soaring value, or a result of panicked savers in Cyprus and Spain looking for somewhere to move their money, or the result of people looking to buy drugs. To Mihai Alisie, editor of Bitcoin magazine, it hardly matters.
“At this point there’s no penalty for politicians saying ‘yeah, let’s ban Bitcoin, you can buy drugs online, so let’s ban it’. But if politicians would ban Bitcoin for that, it is like burning an entire village to roast a pig. It’s like shutting down the internet because someone’s posting pornography,” he says.
“Bitcoin is definitely more than a get-rich scheme. I think it’s the next big technology that will revolutionise our society. It’s as big as the internet – or maybe bigger.”
Interviews concluded, Taaki and Alisie climb to the roof of the office block that is their current home. Taaki walks to the edge, looks over to the clustered skyscrapers that make up the City of London, and raises his middle finger.
Miles across London, Mark Johnson slips his MDMA into his back pocket, getting ready to sample his latest delivery over the weekend.
*Names have been changed.