Authors: Jamie Bartlett
Some of the newer markets have started using ‘multi-sig’ escrow. The feeling in the dark net markets community is that no site without
it can be fully trusted. One user summarised the mood in a March 2014 post on a Reddit forum for dark net markets, entitled ‘Do. Not. Use. Or. Create. New. Sites. Without. Multi. Signature. Escrow’:
Okay guys, time for some tough love. Remember that
Simpsons
episode where Homer walks into the same wall five times and says ouch? That’s you signing up for another site without Multi-signature Escrow (Multisig) . . . So fuck new sites. Seriously, fuck them. DO NOT sign up for sites because they (1) have pretty pirate graphics (2) claim to be competent (3) claim to be different (4) claim to be charitable (5) have a catchy name (6) Claim to be the fifth reincarnation of the Dalai Lama (7) use any other gimmick, branding or marketing technique. ONLY sign up for sites that claim to use proven security techniques, such as Multi-signature escrow. If you get scammed, you are an asshole because you have proven to them that it is profitable.
Defcon agreed. ‘[Multi-sig is] the only way this community will be protected long-term. I am aggressively tasking our dev[eloper]s on building multi-sig support for commonly used Bitcoin clients. Expect a generous bounty if you have the skill to implement this.’ When trying to choose between different untrusted markets, multi-sig makes perfect sense. It’s a strike against a centralised system. It provides an extra layer of consumer protection.
Dark net markets are always adapting to the challenges they face. Bitcoins aren’t quite as anonymous as some people think. Because of the way the technology works, every transaction needs to be
recorded in the public blockchain, to prevent double spending. So if I sent my Bitcoin directly from my wallet to my Silk Road wallet, the blockchain would keep a record of it. My privacy is intact, because no one knows that my Bitcoin wallet belongs to me. However, researchers have found that with careful statistical analysis of transaction data, some transactions can be de-anonymised. And if you transfer money in and out of your Bitcoin wallet using a real-world bank account, which most people do – including me – your Bitcoin transactions aren’t anonymous at all. They lead to you as directly as paying with a credit card.
Developers therefore created ‘tumbling’ services. I send my Bitcoins to a central holding wallet that pools together several users’ transactions at once, mixes them together, and then sends them along to their final destination. My Silk Road wallet now has the correct amount of Bitcoins – but they are different to the ones I sent, and so cannot be traced back to me. This is extremely clever, and amounts simply to a small-scale micro-laundering system. But it suffers the same weakness of the centralised escrow systems: you still have to trust someone else with your coins. What’s more, the tumbling service charges a small fee for its use. So other developers are working on free, open mixing services. CoinJoin, for example, works in a similar way, except that there is no central holder of the money: a number of anonymous users place their payments into a temporary address, which mixes them up and sends them only when everyone has approved the transactions.
It’s about to get smarter still. Many in this community are aiming for something bigger. When I started this chapter my aim was to understand how this community had created a marketplace that
people can trust in such unlikely circumstances. It turns out their ultimate goal is the precise opposite. The escrow payment system, multi-signature and CoinJoin are all part of a bigger plan to create a market where you don’t need trust, because everything is guaranteed to work with powerful encryption and decentralised systems that can’t be shut down or censored. They want to create a trust-
less
market. The future of these markets is not centralised sites like Silk Road 2.0, but sites where everything is decentralised, where listings, messaging, payment and feedback are all separated, controlled by no central party. A site that would be impossible to censor, or to close.
I follow the last steps: transferring my clean Bitcoins to the vendor’s wallet, and click ‘pay’. I’m immediately taken to a new page where I find a short message: ‘Your transaction was successfully completed.’
But there is still one final hurdle to overcome: actually getting hold of my drugs. For all the clever payment and tumbling systems, I have to provide a real-world address in order to receive my product. Some people use what’s called a ‘drop address’ – an abandoned house with a functioning mail box. The majority, me included, simply supply their home address, trusting in the power of ‘stealth’. Vendors are often ranked according to how quickly and easily their packages are delivered – or how cleverly they disguise the product. Although my vendor’s stealth methods were not discussed in his
reviews – for fear of tipping off the authorities, I learned in one forum – they were highly praised. And quite right too.
One morning, five days after I’ve placed my order, a white package arrives at my house. It’s about the size of a postcard, but a little bulky – padded with bubblewrap. The name and address I’d entered into the site using my PGP key was printed on to a small sticker. It looked, felt and smelled exactly like every other item of post I’d received that week. Inside, the product was carefully sealed, the correct weight and, according to an expert friend of mine, appeared to be extremely good quality.
The last thing I had to do before closing down my account was to leave a short and simple review: ‘The drugs arrived as described. 4/5.’
Buying drugs on Silk Road is extremely pleasant. Browsing through the endless options, I was bombarded with special offers, free packaging, complimentary extras. Vendors were attentive and responsive. The products were of a (reportedly) high quality and competitively priced, according to my research. Here, the customer is king.
The drugs market has always been characterised by local monopolies and cartels. Dark net markets have introduced a new dynamic to this world, what the famous post-war economist Albert Hirschman calls ‘Exit’ and ‘Voice’ – two features that keep organisations working to the benefit of those using them. Unhappy buyers can now express their ‘voice’ via feedback; and can ‘exit’ a poor vendor in favour of one of over 800 others. That means vendors are forced
to compete for buyers, and are pinned by the review system. Through the introduction of clever payment mechanisms, feedback systems, and the injection of real competition, power has shifted away from sellers and back to consumers. There is no clearer indication of who rules these markets than one of the last posts on the Silk Road 2.0 forum by the hard-headed administrator Libertas in November 2013:
Hi all. My apologies to all you experiencing slow Customer Support response times . . . We are implementing changes to ensure that messages cannot be missed in future, and again, I apologise for any inconvenience that any delays in responding to your tickets may have caused. Libertas.
Exit and voice on dark net markets are doing precisely what economics textbooks predict: creating a better deal for consumers. The most surprising statistics of all in the vendor data I presented earlier in the chapter are not the volume or range of drugs on offer, but the satisfaction scores. Over 95 per cent of the 120,000 reviews score the maximum five out of five; only 2 per cent were one out of five. When Professor Nicolas Christin analysed feedback scores on Silk Road in 2012, it was almost identical.
Once this sort of consumer-focused market is unleashed, it infects everything. The Silk Road 2.0, Agora, Pandora Market and the others are already competing with each other on security, commission rates and usability. In April 2014 Grams, a search engine for the drugs market, was launched. Grams searches the largest markets for products, making it easier to find what you’re
after. Grams has recently introduced trending searches; and vendors can even buy sponsored keyword listings space for their sites and products.
Six months after the bust of Silk Road, there are now more markets than ever. As of April 2014, they were selling three times more products than when I started writing this chapter in August 2013. They emerged from the turbulence of late 2013 more secure and customer-friendly, armed with multi-sig escrow, CoinJoin and search engines. Of course, individual markets or vendors will be caught. But each time the hydra grows a new head. Markets learn. This all empowers the consumer, forcing the quality of the drugs and the sites to improve still further.
Perhaps it won’t be Silk Road 2.0, or even Tor Hidden Services, that transforms the drugs industry. But now consumers are in charge it will never be the same again. What this means for the war on drugs is not clear. In October 2013, an ambitious study brought together data from seven different drugs-surveillance systems around the world. The paper, conducted by the International Centre for Science in Drug Policy, concluded that the war on drugs is failing. Illicit substances are more available than ever. Since President Nixon declared war on drugs in 1971 there has been no noticeable curb in supply, and certainly not in demand. Dark net markets make drugs available more easily. That’s nothing to celebrate. It will tend towards higher levels of use, and drugs use – legal or illegal – creates misery. There is violence and corruption at every point in the supply chain as drugs move from producers to street dealers.
fn4
The longer
the chain, the more violence and suffering; the more profits for dealers; and the more substances are cut and mixed. Silk Road won’t fix all of this – but it will reduce the length of the supply chain. There are approximately 7,000 organised crime gangs in the UK, and half of them are involved in drugs. Although reliable figures for the exact cost of street trading are notoriously difficult to find, a study by the United Nations suggests that the costs associated with drug-related crime (fraud, burglary, robbery and shoplifting) in England and Wales were equivalent to 1.6 per cent of GDP, or 90 per cent of all the economic and social costs related to drug abuse. This is also likely to reduce, as buyers cut out the street dealer. History suggests that those who want drugs will always find a way to get them. On Silk Road, they can get a better product and with fewer negative risks associated with buying drugs on the street.
Online drugs markets are transforming the dirty business of buying drugs into a simple transaction between empowered consumers and responsive vendors. It’s not anonymity, Bitcoins or encryption that ensure the future success of dark net markets. The real secret of Silk Road is good customer service.
fn1
This ad hoc dealing continues today, often on forums related to prescription drugs.
fn2
Charges that Ulbricht, at the time of writing, denies.
fn3
In 2014 Tor2Web offered users access to Tor Hidden Services using unencrypted browsers, although, because they do not mask the IP address of the user, they are rarely used.
fn4
One user of the website told me that he expected street dealers to begin buying products in bulk to break down and resell.
I RECOGNISE VEX
from across the street. She looks just like she does on my computer: early twenties, elfin, attractive, slim, with two nose piercings. She bursts into the café where we’ve agreed to meet, flustered because she’s late. She’s just finished a ‘cam-show’, where she earnt more money in an hour than many people earn in a week. Vex is one of the UK’s top cam-models. She makes her living by posing, chatting, stripping and masturbating live to thousands of people each week from the comfort of her bedroom. Every day or two Vex will perform a show on the website Chaturbate to between 500 and 1,000 viewers from all over the world. But there is a lot more to her job than taking off her clothes. In a typical day, she spends a number of hours checking and updating the several social network accounts and websites she maintains as part of her impressive brand. She communicates with fans, responds to emails and posts messages about her upcoming shows. She sends thank-you notes and, occasionally, gifts to regular viewers and big tippers, and takes photographs and videos of herself for members of her fan
club. It is a full-time job. But Vex considers herself an amateur, an ‘ordinary’, one who enjoys performing online, and one who is lucky enough to be able to make a living from it. She’s not alone.
The net has made pornography extremely easy to find. But it has also made it very easy to make and sell. With the advent of good quality webcams and broadband it is now possible for anyone to produce pornography from their home. We ordinaries are flooding the net with home-made pornography – everything from sexy selfies to hard-core videos. It’s no longer professional porn stars that dominate the market: it’s us. The four most viewed pornographic websites today are all free, and all feature primarily amateur material. The fifteen most visited porn sites contain between them almost two million explicit amateur videos. Although precise figures are difficult to obtain, the traditional porn industry – although not dead by any means – has been hit hard by these trends. The Free Speech Coalition estimated global (and American) porn revenues have shrunk by 50 per cent between 2007 and 2011, due to the amount of free pornography available online.
Long before the first webcam was connected to the internet in November 1993 people were using networked computing to get their sexual kicks. In the 1980s, users of Bulletin Board Systems would scour forums for a member of the opposite sex to flirt with and, hopefully, have ‘compu-sex’ with. Erotic story groups where people could read and write steamy prose became extremely popular on Usenet in the 1990s. The first erotic stories Usenet group, rec.arts.erotica, was created in May 1991, which was quickly followed by a number of spin-offs and subgroups catering for every predilection, including one titled alt.startrek.creative.erotica.moderated.
Although statistics about how much pornography is on the net are usually marked by exaggeration and moral panic, there has certainly always been a lot of it about. One pornographic Bulletin Board System earnt 3.2 million dollars in 1993 by selling hard-core images and videos to thousands of subscribers. By 1997 there was somewhere between 28,000 and 72,000 porn sites online. Porn is now estimated to comprise between 4 and 30 per cent of all websites.