Silk Road, the online marketplace for drugs and other illegal services often referred to as “eBay for drugs,” has been shut down by the FBI and the alleged drug kingpin arrested. It’s set off a ripple effect in just the past 24 hours: the price of Bitcoins has dropped sharply, a mini-economy has been shut down, and, like any big business that goes closes its doors, those in the supply chain face serious consequences.
Ross William Ulbricht, alleged to be the “Dread Pirate Roberts” behind Silk Road, was arrested Tuesday and charged with engaging in a money laundering and narcotics trafficking conspiracy as well as paying hitmen to murder two individuals. The FBI seized over $3.5 million in bitcoins, though that’s just a drop in the bucket of the estimated $1.2 billion in revenue Silk Road is estimated to have made in two and a half years.
Just as Breaking Bad ends, we get a real story just as outlandish. Move over, Heisenberg. Hello, Dread Pirate Roberts.
Silk Road users were understandably concerned, and discussion of the fallout on Reddit has been widely covered. This morning the Silk Road subreddit was set to private (though it’s now public again) “Due to news agencies posting images of this subreddit without concern to peoples identities.”
I’d think they’d be more concerned about law enforcement agencies than BuzzFeed, but, hey, I’m no drug dealer.
Much of that discussion revolves around those affected by the shutdown: money that’s been lost, potential legal consequences and larger worries. As one user wrote:
“…all our money is gone. i just loaded mine 10 minutes before they seized it. im fucking screwed. it wasnt all my money and its very dangerous people i now owe large sums to. im a dead man.”
Others vowed to never use services like Silk Road again. “I’m never buying drugs on the internet again,” wrote one user.
Though not everyone was pessimistic: “On the bright side of this all, I think now that people know that getting drugs off the internet can quite easily be a reality, there will be a new website, and it’ll probably get just as popular.”
Bitcoins Take a Hit
As John Mardlin wrote yesterday, Silk Road collected “about 600,000 BTC in commission” — or roughly $80 million. “So that suggests that a huge portion of the bitcoin economy was shutdown today.”
A 3-day look at Bitcoins (source: http://bitcoinity.org/markets/mtgox/USD)
It goes to show just how much Bitcoin activity went through Silk Road.
“The criminal complaint revealed that the site had collected revenues of some 9.5 million bitcoin since 2011,” wrote Tim Fernholz. ”That suggests a huge amount of bitcoin activity went through Silk Road, a reminder that the currency’s primary use so far (besides as a speculative investment vehicle and point of departure for futuristic payment schemes) was buying illegal things online.”
A Look Inside Silk Road
Mashable ran an interview with a Silk Road drug dealer named “Angelina,” who said she used to run a $2 million dollar company before deciding a life change was needed:
“We are much less of a drug “dealer” than you might think, and more of an Internet retailer. We receive orders, process them, pack them, ship them. Day after day after day. We negotiate deals to obtain product at good pricing, research shipping methods and materials, and spend a lot of time comforting nervous first time buyers and tracking packages.”
I’m no expert on dealing drugs, but that is pretty much exactly how I imagined the day in the life of an online drug dealer. It’s natural to see the sites appeal. Look at any industry, especially the traditionally “shady” ones – gambling and pornography – and the boom they received from people being able to exchange money from the comfort of their own home.
The question is, now what? Will a dozen more Silk Road’s spring up to take their place? Or will it be something new and different?
“There is a negative public image of Silk Road but also a strong fascination,” Angela said. “The ‘illicit substance industry’ has been around a long time, but traditionally run by shady characters, thugs and outright criminals.”
For all the talk of a Utopian online marketplace, it turns out – no surprise – it still is.