Bitcoin. Cryptocurrency. Blockchain. The world of virtual currencies seems to be exploding all around us. This rapid expansion of new currencies has created a lot of confusion and even fear surrounding virtual currencies. Possibly the most well-known cryptocurrency, Bitcoin has been shrouded in mystery ever since its introduction. Satoshi Nakamoto the so-called creator of Bitcoin announced the “Peer-to-Peer Electronic Cash System” on October 31, 2009, however, Satoshi Nakamoto, a presumed pseudonym, has never actually been identified.
The concept of anonymity is one of the reasons that there have been security concerns regarding the trading of cryptocurrency. In a nutshell, virtual currencies have created a decentralized cash system that completely cuts out the middleperson, where currency can be sent online, directly, from one user to another.
Traditionally, these “middlepersons” have been banks, who the public have trusted to ensure that deposits and withdrawals are accounted for. With cryptocurrency, instead of having a central entity like a bank that would manage in-going and outgoing expenditures, peer-to-peer networks of computers act as managers of these expenditures. In other words, say X (the sender) sends cryptocurrency to Y (the receiver), this cryptocurrency would be sent from your computer and then blasted out to the entire network. Y, the receiver of the currency, would have a key or code to access the currency, but before the transaction can be completed a verification process needs to take place. This is so that transactions cannot be duplicated. This is done by what industry members call “mining” done by “miners.” What these “miners” do is they check the transactions to make sure it is not a counterfeit or duplicate transaction. And why would they do this? Mining takes a ton of computer power, so these independent “miners” invest some of their own-person computer power and in return they receive cryptocurrency, in this example, Bitcoin. This is the only way valid Bitcoins can be created.
Once you send money via a cryptocurrency there is no going back. The transaction is absolutely permanent and unalterable as it added to the blockchain. It is also generally anonymous as there is not central system and transactions are not actually connected with a personal identity.
There are benefits to cryptocurrency. Supporters argue that it cuts out 3rd parties like banks that have for too long manipulated the financial arena and they also allow for global transactions in areas of the world where access to banks or small loans are limited. They also remove the necessity of having hard currency in bills in cash.
However, there is no denying there is a dark side. Enter the dark web. The dark web is part of the internet that most of us probably have never visited or would even know how to get there because you cannot access it through Google. In fact, you need special software to access it and the information on it. What it does do though, is that it allows you to surf the web while encrypting your identification as you go so your IP address is unreadable. One of the most popular software programs used to access the dark web is called TOR which was actually created by the US government. And although it might sound like a shady spot on the internet, not all activities on the dark web are nefarious. TOR is still supported by the US government and plays a role in state security as well as allowing journalists to connect secretly with sources and has even been used by dissidents of authoritarian regimes to share information.
But what happens when these two worlds collide? In February 2011, a new website appeared on the dark web. It was called Silk Road, named after the ancient trade network that connected East Asia to Southern Europe. This website used the encryption power of the dark web combined with the anonymity of Bitcoin to sell drugs over the internet. It was like a black-market Amazon service where users to could buy and sell drugs anonymously. Once you placed an order on Silk Road, it was transmitted through the mail. The site even allowed you to place reviews on sellers and products. Shortly after it’s launch, Gawker.com published this article regarding Silk Road exposing it to the general public and politicians. Most notably New York Senator Chuck Schumer who called for a “crackdown” on Bitcoin, the complete shutdown down of Silk Road, and the prosecution of those behind it.
For nearly two years the owner of the site, going by the pseudonym “Dread Pirate Roberts” named after a character in the Princess Bride operated the site alongside a mysterious figure called Variety Jones. The owners of the site made their profits by attaching a “percentage” to the sales, which it seems buyers and sellers were willing to pay for in order to enjoy the access and security of this system. As the site grew, so did law enforcement's interest in identifying the owners. Undercover surveillance of the site began, with law enforcement engaging with the paid moderators of the site in an attempt to identify them and then to overtake their accounts to secure access to the Dread Pirate Roberts.
During this time, the site itself was also becoming vulnerable to illegal hacker attacks. These attacks would take down the site and require the Dread Pirate Roberts to pay millions in bribes to regain control of the site. It was after numerous shutdowns of the site that resulted in the Dread Pirate Roberts to initiate a murder-for-hire against another Silk Road user for blackmail. However, his murder-for-hire requests and payments were going right to an undercover police officer. If you want to hear the in-depth story of the investigation, check out this podcast: https://casefilepodcast.com/case-76-silk-road-part-1/.
On October 1, 2013, after a long-term undercover sting operation, a fake murder-for-hire, and the arrest of two corrupt federal agents, 26-year-old Ross Ulbricht was apprehended in a San Francisco library. He was arrested, charged and convicted and is currently service a double life sentence plus 40 years. According to the indictment, Silk Road had over $1.6 billion in sales from 2011 - 2013.
His family describe Ross as libertarian who created Silk Road so that users had access to a site which protected their privacy and allowed them to access goods that were traditionally illegal. He believed at the time that people should have the right to buy and sell whatever they wanted, so long as they were not hurting anyone else. He had always remained staunchly against hosting items such as stolen items, child pornography, and generally anything used to harm or defraud others.
Supporters of Ross have also made arguments that Silk Road actually reduced harm associated with the drug trade. They argued that it took users off the streets and reduced the risks of buying contaminated drugs as the review process kept vendors accountable. There have also been arguments from Ross’s family that he was not the one behind Silk Road. He graduated from University of Texas with a degree in physics, and then got his master’s from Pennsylvania State University. Neither of these areas of study fulfill the requirements for what would be needed to host a site as sophisticated as Silk Road. His family also argues that the sentence he received was not proportionate to his actions and to what others have received. Ross is still currently serving his time and his family is advocating for his release, so I guess the only question that remains is who is now running the still active Silk Road?