I have been holding this post for over a week and from some reason it slipped my publishing queue. but better late than never. The data in this study is a bit hard to verify and a better definition would be “debate” between researchers more than a real study, but it does show some interesting views so its worth mentioning:
Online black marketplaces such as Silk Road – which used untraceable bitcoin transactions and was shut down in October 2013 – may have actually reduced violent crimes related to drugs, a new report argues.
Online drug traffickers tend to buy larger amounts of stock, acting as wholesalers, and with Silk Road acting as the broker of deals, there was less chance of dealers meeting directly with trafficker sand therefore less opportunity for violence, intimidation, and territorialism, the new report “Not an ‘Ebay for Drugs’: The Cryptomarket ‘Silk Road’ as a Paradigm of Shifting Criminal Innovation”.
Carried out by University of Lausanne criminologist David Décary-Hétu and University of Manchester law professor Judith Aldridge, the research says the site was “transformative” rather than an “incremental, criminal innovation”, and that it was giving rise to “a new breed of retail drug dealer, equipped with a technological subcultural capital skill set for sourcing stock”.
The study found that large amounts of deals on the site could be best characterized as being business to business (B2B), with sales in quantities and at prices similar to those of drug dealers obtaining stock. High price-quantity sales generated between 31% and 45% of revenue on the site, making sales to drug dealers the key Silk Road drugs business. Essentially this means that end-users of the drugs were not the purchasers; the dealers were – and they were using it to stock up on products without having to interact with traditional suppliers.
The way Silk Road’s transactions took place meant that its vendors were able to trade in an environment with far less of the risks associated with traditional drug markets. In cases of dispute, Silk Road administrators would adjudicate the deals, and vendor’s reputations in their previous deals were available in eBay-esque feedback.
New buyers without a transaction track record were required by vendors to circumvent the protection that payment escrow offered them and release the funds to the vendor before goods were received, allowing vendors to remove the risk of non-payment, theft of product and cash, and potential for violence that may be apparent in face to face meetings during a trade.
Further research on the site suggested that dealers began to trade there for its “low risk, high traffic, high mark-up, secure and anonymous” environment. “It changed the entire paradigm for drug sales by creating a massive, relatively safe worldwide market for the drug dealers who sold there,” the study said.
However, this assumption is based on the premise of only the vendors being drug dealers – if Silk Road’s customers sourcing the products were also drug dealers, a deal would have to take place further down the line; potentially introducing violent or territorial situations.
Silk Road traffickers were more likely to sell less harmful and higer purity drugs than their street counterparts. Heroin, crack, and methamphetamine accounted for only a small share of marketplace traffic, which was dominated by sales of prescription drugs, with 3,953 listings and generating some $11.7 million of annual revenues. Cannabis accounted for $24.8 million of purchases over 2,661 listings.
The site catered mostly to recreational drugs, including ecstasy, cannabis, and psychedelics, which together represented $53.3 million in revenues. Opioids, prescription drugs, and stimulants together were worth 60% of that amount, or $32.2 million. In comparison, crack cocaine was only found in eight listings, while methamphetamine accounted for just three.
Sales on Silk Road increased from an estimate of $14.4 million in mid-2012 to $89.7 million, representing a more than 600% increase in just over a year, which the study argues demonstrates the demand for that kind of illicit online marketplace.
In spite of the huge growth in drug trading that the website was seeing prior to its shutdown, researchers Décary-Hétu and Aldridge admitted that in the overall scheme of the worldwide drug trade, it was forming only a niche and fairly negligible portion of the narcotics ecosystem. The Unit Nations estimates that the global market for illegal drugs is worth more than $300 billion; making Silk Road small in comparison, but nevertheless a fast-growing alternative to standard black market transactions. With a number of copy-cat drug trading websites cropping up to fill the gaps in the market left by Silk Road’s demise, the flow of narcotics hasn’t been stopped so much as it has been rerouted, spread out, and sent further underground.
The pair believe criminologists should examine Silk Road’s records for information on and clues as to the potential uses of cryptographic technologies and their effect on the worldwide drug trade by making use of ‘webometric’ and ‘big data’ – for example, using data stored digitally to look at criminal patterns rather than using traditional methods of research such as interviewing incarcerated offenders. By using webometric and big data techniques, researchers can use real data that has been obtained unobtrusively, as well as having access to much larger and more powerful data sets.