created: 19 Oct 2013; modified: 13 Dec 2018; status: finished; confidence: log; importance: 7
This is an annotated transcript of the chapter
Your Crack’s in the Post (pg219-244) & an excerpt from the chapter
Prohibition in the Digital Age (pg262), of Drugs 2.0: The Web Revolution That’s Changing How the World Gets High, Mike Power (2 May 2013); it is principally on the topic of Bitcoin, Tor, and Silk Road 1.
Your Crack’s in the Post
by Mike Power
The first time you see the Silk Road website1 there’s a creaking disconnect between your eyes and all the evidence they deliver, and your preconceptions up to that point. There’s a strange smile, mixing recognition, revelation and confusion, playing on your lips. It all looks familiar to anyone who regularly shops online, but is in some way uncannily different. It can’t be real, can it? Yes, it is. You can buy any drug you want right now on the web. Every drug you can think of, and a dizzying few dozen more, are on open sale on the site, from old-style illegal Class A drugs such as crack, heroin and LSD, to research chemicals of every hue, including Shulgin’s creations, Nichols’ work, Karl [Jansen]’s2 ketamine variants and Kinetic’s mephedrone. If there’s a drug missing that you really want, you can always ask for it to be offered, imported or synthesized. And if you’re a chemist yourself, there are syntheses and precursors for sale too.
Rather than waiting for the drug laws to change, activists, dealers and users have declared an independent state online where all commerce, within certain boundaries, is permitted by the site’s mysterious owner. Its guide to vendors is pretty laissez-faire:
Do not list anything who’s [sic] purpose is to harm or defraud, such as stolen items or info, stolen credit cards, counterfeit currency, personal info, assassinations, and weapons of any kind. Do not list anything related to pedophilia [sic].
The site has Norwegians selling Cambodian mushrooms, Canadians selling Afghan heroin, and Brits selling concentrated cannabis tinctures from ancient Nepalese cannabis landraces grown under artificial sunlight in lofts that may well be in Basildon. Appropriately for a site named after a trade route that first brought these drugs to the West, there are also opiates, including opium, prescription morphine, and white and brown heroin from Afghanistan. Most of the products are illegal, but whether you want a quarter gram of heroin or a gram of glittering Peruvian escama de pescado cocaine3, you’re in the right place, and there’s not a great deal the police or customs can do to stop you.
The Silk Road is a cyberpunk dreamland - except it’s happening today, in dozens of countries, not in some dystopian future in a William Gibson novel. For all that, it’s a website like any other, if web design skills were locked down in the ancient pre-Google, pre-Amazon days. You almost expect each page to be soundtracked by the screaming of a modem while the bits crackle slowly down the phone lines. But instead of books or household goods, there, in the most stark and simple language possible, advertisers lay out the drugs they offer and their prices. In a neat left-hand navigation bar there’s a list of different categories. Psychedelics are well represented, along with research chemicals and standard options such as LSD and an abundance of mushrooms. There are 2C-B, 2C-I and a few other Shulgin-created delicacies for the chemical cognoscenti. There’s DMT - the drug William Burroughs travelled months in the Amazon to find. One vendor,
Seakong, has a gram of the more hallucinogenic cousin of MDMA, MDA, for sale, synthesized, he says, by an aspiring chemist friend. At just ฿12, it’s an absolute steal for such a rarely seen drug. The ฿ symbol stands for bitcoin, the mysterious currency whose use is compulsory in this online market, of which more later.
There are tranquilizers, such as Valium, lots of crystal MDMA and Ecstasy pills, dissociatives such as ketamine, and stimulants, including crack, ice and other amphetamines. There’s high-grade kush marijuana, with enthusiastic recommendations from satisfied customers for one particular vendor, detailing how he vacuum-sealed and wrapped and triple-packed the highly fragrant goods into an envelope small enough to be posted through most standard letterboxes, negating the need to sign for the packets - or for the raising of any red flags at customs. That the strain is one of the world’s oldest and earliest genetic examples of the plant, brought to Europe and thence to the US along traditional trading routes, is an irony probably not lost on the Silk Road’s intelligently combative and articulate owner, who operates under the pseudonym Dread Pirate Roberts.4
Buying is a simple matter of adding the goods to your shopping cart, and paying for them. The money is held in an escrow account hosted at the site, and although you have to supply a delivery address, this can be encrypted, and is deleted as soon as you have received the goods. The site also gives detailed information on how to receive packages safely:
Use a different, unrelated address than the one where your item will be kept, such as a friend’s house or P.O. box. Once the item arrives, transport it discreetly to its final destination. Avoid abandoned buildings or any place where it would be suspicious to have mail delivered. Do not sign for your package. If you are expecting a package from us, do not answer the door for the postman, let him [deliver it] and then transport it as described above. Do not use your real name. This tactic doesn’t work in some places because deliveries won’t be made to names not registered with the address. If you think this is a problem, send yourself a test letter with the fake name and see if it arrives. If you follow these guidelines, your chances of being detected are minimal. In the event that you are detected, deny requesting the package. Anyone can send anyone else anything in the mail.
Initially the Silk Road also had a weapons trading area, but many users were uneasy about the influx of arms dealers and a new subsite, the Armory, was launched in February 2012. It was closed in August 2012 due to a lack of interest.
The Silk Road’s turnover reached US$22 million a year within its first year of operation, according to security researcher Nicolas Christin, who scraped the site’s data by deploying software agents under multiple user accounts that recorded customer activity via the public feedback system and showed how many transactions had taken place. He crunched that data in the middle of 2012 to calculate the market’s size.5 The site’s owners take a commission on each sale of around six per cent - or US$143,000 per month at current rates.
The Silk Road has a very busy forum area, too, with over 100,000 posts, 9,000 topics and 11,000 users in the bustling community pages. The conversations there weave around the site’s holy trinity: drugs, smuggling and cryptography. There was once even a post purportedly by a Canadian postal official who claimed to have become addicted to opiates following an accident, in which he gave instructions on how to avoid detection. It was, he said, his thanks to the site for enabling him to manage his pain and addiction, since he could not obtain his medicines any other way. It was either a fantastically subversive act or a cunning black-ops move. It read like both, just to complicate the matter.
The Silk Road is the most popular of the growing hidden network of drug dealers who use Tor, or The Onion Router network, an alternative web-like space that swarms with users in virtual tunnels beneath the everyday web. One drug-dealing site found there, the General Store, is even more bare-bones than the Silk Road, but still delivers the goods it offers: ketamine, DMT, MDMA. Another site, Black Market Reloaded6, operates on similar principles and offers the same drugs and services as the Silk Road, though it’s far less busy. The value of the service provided by the Silk Road is proportional to the numbers of people using it, and the site is quickly growing.
How does such a service as the Silk Road even continue to exist, when it is breaking the law in such a flagrant manner? In order for its customers to be completely untraceable, and therefore invulnerable to legal prosecution, the Silk Road is hosted on a hidden service, buried away on the Dark Web, far from the reach of Google. Sites on this network have randomly generated addresses, made up of a string of meaningless characters, and ending in
.onion rather than
.com. Its owner and its users - both the dealers and the customers - have complete anonymity. The location of the server that hosts the site is unknown, and unknowable. And, extraordinarily, the American Navy is, in some small and unintended way, partially responsible for this state of affairs.
The Silk Road is hosted on the Tor network, which allows users to browse access sites known as
hidden services anonymously, via a layered network of volunteer servers that encrypt traffic. As the
Torproject.org website describes it,
Tor is free software and an open network that helps you defend yourself against a form of network surveillance that threatens personal freedom and privacy, confidential business activities and relationships, and state security known as traffic analysis.
Information activist Andrew Lewman lives between the US and Iceland, and is the mouthpiece of the Tor organization. He laughs as he recalls conversations he has had at conferences in the last eighteen months since the Silk Road began to become populated.
People have come up to me and said: 7
Wow, thanks for the Silk Road! I’ve been like,
Woah! Assume we’re being recorded here! We don’t host Silk Road - it’s just an address. [Tor hidden services] are just an algorithm that provides an address.
The Tor software and network was created in 2001 by two computer science graduates at the Massachusetts Institute of Technology. They took a piece of undeployed software, which had been written by the American Navy in 1995 to enable simple, anonymous internet use, and released their own version of it online, with the Navy’s permission.
The Navy had this project called Onion Routing, and it’s still going today, explains Lewman.
Its goal is to defeat network traffic analysis, which is the ability to know who you are, who you’re talking to, and how much data you send and receive. If you think of envelope data from your postal system, that’s the basis of intelligence gathering. For whatever reason, the Navy wanted this technology - they started the project [in-house] but they didn’t have any intention of releasing it publicly, Lewman explains.
So Paul Syverson, a mathematician who’s still the core researcher for onion routing for the Navy, met grad student Roger Dingledine at a conference. Roger said, , said Lewman. The impossibility of having an anonymous network owned by the Navy was a comical catch-22.
Have you ever thought of putting this on the internet? At the time the Navy had no plans for deployment. But Paul said sure. So the first problem to solve was that if the Navy were to release this code online - to release it to the world - they had to give up their anonymity
You can’t have a Navy anonymity network, because no matter what individual soldier you are, your adversary will still know you are the navy and will still treat you as such, he said.
If an anonymizing service is used by just one specific category of people then it’s easy for observers to tell who they are. For example, if no one had white cars except the police, every time you saw a white car, you’d know it was the police. You wouldn’t know which individual policeman it was, but you’d know they were a policeman, and would be able to see where they were going, and how often. The more people who used the system the better - the crowd offers greater cover.
The original aim of the grad students, Roger Dingledine and Nick Mathewson, was to give users control over their data when they went online. This was during the first dotcom boom, and many companies were giving away services for free - or rather, in exchange for your data and your browsing habits, which they would then sell on to third parties. Information activists rejected that business model and wanted to offer an alternative, and so Dingledine and Mathewson created a variant on the Navy protocol, calling it Tor. The way Tor works is best described in simple terms. When you type a web address into a standard browser, such as Firefox or Internet Explorer, your connection to the internet originates from and returns to a unique address, known as your Internet Protocol, or IP, address. This information is included inside the packet of data that you send when you press enter. The request, or packet, is then sent via the quickest possible route to the address you have specified, and then the request is delivered in the same way, but in reverse. The request for the information, and the data you receive, is stored by your Internet Service Provider, or ISP, and can be observed at many points along the entire transaction. Your ISP assigns you an IP address, which is a string of digits separated by decimal points. The address may be temporary; in some places it changes every day, in others it is active until you lose power for more than eight hours. Your IP address is the way your information requests and responses route through the network, and it can be thought of as your digital home address.
When a British net user does a Google search, the ISP routes it to a Google server, for the sake of illustration, in the US. The traffic goes across the ocean to Google and it sends all your data back to your IP address. Google now knows where you are, because of where those addresses are assigned. There are geographic IP databases that will map your IP down to a street in many cases, or at least a neighbourhood - something not desired by people who want to buy and sell pounds of hashish online. Your ISP gets to see all of your traffic and everything you do across it, along with everyone else between you and your destination, which in this case is Google, which gets to see where you live in the world so it can target ads at you.
My IP address at home maps me down to my street, says Lewman.
They know exactly where I am and where I live, what street and they can probably guess what house would be mine. Once you download and install Tor, he explains, a browser window like any other opens, and you type in addresses. It then creates a virtual tunnel from point to point, and hides each piece of data inside a series of encrypted layers, like the rings of an onion.
What Tor does is build a tunnel which connects through three different relays in the world, so though you may physically be in the UK, your first connection may be to Hong Kong, your second may be to Argentina, your third will be in Japan. If you think of driving a car into a tunnel - in Tor you enter the tunnel in the UK, and then pop out in Japan. In order to watch what you’re doing on the net authorities would have to watch the entire internet, says Lewman.
The network and the software, which is distributed free at
Torproject.org, grew with the help of funding from Voice of America, a trusted global American news site. The service approached the Tor project in 2006 and said they had noticed that users from all over the world in repressive regimes were using the Tor software to connect to their web pages. They asked the Tor volunteers to form a company, in order to make the service and the network more widely available, which they did.
At the time we were still independent contractors with the EFF [the online freedom of speech group, the Electronic Freedom Foundation, set up by .alt newsgroup creator John Gilmore] and the American Department of Defence at the same time, which made for some strange meetings’ says Lewman.
Tor is not just used by those engaged in illicit activity. The vast majority of Tor users are simply people who want privacy when they go online, as the information gathered on us by search engines and social media grows daily. When researching sensitive or medical matters, some users don’t want Facebook or Google searches sending unsettlingly accurate adverts back at them. There were thirty-six million downloads of the software last year, though that does not necessarily translate to daily users, of which there are around one million. And in repressive regimes such as Iran, Tor users can access sites that are blocked by the government.
In Iran, between 60,000 and 100,000 people use Tor daily, for the most part [for] looking up innocuous stuff such as celebrity gossip - [but it is also used by] political activists looking to get their messages out of the tightly controlled netspace of the repressive regime. Iran’s citizenry have a long history of circumventing censorship, from back in the 1960s when shortwave was banned and they figured out a way to get around it. Then it was satellite TV, but you had to get the state broadcast; Iran jams other signals. People have got good at hiding their illegal dishes, or have made them portable so they can watch TV and take it down quickly, says Lewman. He continued,
Now the net is just another way. And as more people go online, and get their news online, and their life is online, the government of Iran is trying to block that to maintain their censorship regime, but the Iranians are well trained in circumventing that. The Tor software is smuggled into the country and distributed samizdat among users, by the so-called
Of course there is a sinister side to this libertarian technology. Dig a little deeper around this hidden, or Dark Web and you’ll find pages that would give even the most extreme libertarian pause for thought. The Quick Kill page offers to
remove the problem in your life - for a payment of US $10,000 up front and US $10,000 once the target is eliminated.
We are here to do business say the site’s owners, reassuring - or disappointing - prospective customers that they will not kill political figures. It’s probably a scam8, but it’s a disturbing one nonetheless. Hidden deeper in the layers of these
.onion sites are weapons dealers who tell customers looking to spend less than US$10,000 to look elsewhere. They draw the line at biological weapons.
Somebody showed me a forum run by the Italian mafia on Tor and they traffic weapons and drugs and tonnes of garbage and toxic waste on a BBS, says one anonymous interviewee.
It’s hidden from public net, but it’s out in the open. They don’t use any code words, and they have the same juvenile jokes you’d see on a usual bulletin board system.
Lewman is realistic about the fact that the network can be used by criminals, child pornographers, drug dealers and fraudsters.
Tor is just a technology. Silk Road and these other things would exist on something else if it wasn’t for Tor. I don’t know why they picked Tor and I don’t care. Our code is all open source, everything we do is open source, and is mirrored all over the world. So even if for whatever reason, let’s say the paedophile-terrorist-druglords and the four horsemen of the apocalypse take over Tor and that’s the majority usage, then the current Tor network could shut down, and just like a phoenix it will get born again. Then maybe we’ll have 10 or 1,200 Tor networks because everyone starts running their own.
Drugs, you might consider, are the least of the authorities’ worries when it comes to the hidden underbelly of the net. But not so: in June 2011 the US demonstrated that it is not content only to fight endless and expensive wars in real life, but that it now intends to take its pyrrhic battles online. That month, Democratic Senators Charles Schumer of New York and Joe Manchin of West Virginia wrote to Attorney General Eric Holder and DEA Administration head Michele Leonhart calling for the Silk Road to be shut down. Their startling lack of insight into how this part of the internet actually works might be forgivable in an uninterested or general web user. For legislators lobbying for its closure to fail to understand that the site is not findable, and even if it were found, could simply resurface elsewhere on the Dark Web, virtually guarantees that the network, and others like it, will exist, grow and gain strength for many years to come - for as long, in fact, as drugs are illegal. There really isn’t any way to shut down the Silk Road unless multiple governments synchronize a worldwide jam of the entire internet - as Egypt did for a few brief days in January 2011 during the Arab Spring revolution. It soon came back online when businesses started losing money.
All the war on drugs does is knock off the idiots on the corner because they sell it to undercover cops, Lewman says.
The big drug cartels can afford submarines and planes, and bribe entire police departments, which means the money is flowing somewhere. The DEA are going after the humans. He says the DEA’s interest was piqued by Senators Schumer and Manchin’s bluster.
In a long line of things that will kill America, Silk Road is the worst right now. That got a lot of attention and press but had the opposite effect to what they wanted. What people heard was that Silk Road has really good drugs! he says.
Silk Road’s owners are entirely anonymous. But the name of the current site administrator is an intriguing clue as to the way the service may be run. Though Dread Pirate Roberts was previously named
Silk Road in the market’s attached forum pages, and
Admin in the marketplace itself, he renamed himself in February 2012, delighting in posts for days beforehand in the appropriateness of the name he would soon reveal. It turned out he had chosen to call himself after a swashbuckling pirate character in the 1973 fantasy novel The Princess Bride by renowned American screenwriter William Goldman. In that work, the Dread Pirate Roberts is a persona assumed by many different characters, each of whom hands the mantle, name, responsibilities and ship to his chosen successor. It seems possible that the Silk Road site is run not by a single operator, but by a loosely tied conglomerate of individuals, each of whom successively takes the risk - and reaps the rewards - that running the site must entail. It’s impossible to say. Perhaps the name more simply nods at the popular respect for the outlaw-pirate hero figure who has thrived in a world where torrent downloads are far more respectable than shoplifting a DVD.
Appropriately enough, it was William Goldman who wrote the line
Follow the money, in the 1976 film All the President’s Men, a phrase that has become the battle-cry for investigative journalists looking for examples of official corruption.9 The architecture of bitcoin, the currency used on the Silk Road by dealers and users, and other services deployed by the site, mean the money cannot be simply followed. Transactions are almost anonymous, and communications are encrypted between the intended recipients, making eavesdropping impossible.
Proof that the site delivered was broadcast in the UK in February 2012 when researchers from BBC Radio Five Live ordered and received a sample of very high-purity DMT. The sample was tested by John Ramsey at St George’s, and he said it was indeed excellent quality. The story was broadcast and published on the BBC’s website. Andrew Lewman audibly facepalms as he relates the story over the telephone.
What better advert could they have given? Not only does this illegal site sell rare drugs, it sells very high-quality product. But you didn’t need to trust the BBC. The forums at the site offered crowdsourced proof of the best vendors and worst scammers. In June 2012, reviews for the best LSD vendor ran to eighty-one pages, with 50,000 views, heroin to twenty-two pages with 8,000 views. Cocaine vendors were reviewed in a 292-page behemoth with over 90,000 views, and MDMA ran in at 129 pages with over 60,000 views.
One vendor said dealing drugs on the site wasn’t without its moral problems.
The prospect of a twelve-year-old loaded to the gills on my MDMA is not a pleasant one. Enabling self-destructive/addictive behaviour is also upsetting to me. Dealing in real life [IRL] you can recognize abuse and let customers know you’re concerned, but online, there’s no way to tell.
He admitted, though, that vending on the site was financially much more lucrative than selling in real life:
IRL, you’re limited by your social circles, but here it’s only a question of supply, capital and hours in the day. Packaging straight-up sucks to do. It’s extremely monotonous and requires a good degree of concentration to avoid making any mistakes that might endanger the customer receiving. Sometimes during especially busy periods I spend 70, 80, 90 hours a week packaging, all of it extremely dull. Apart from the risk of being locked up for the next decade it’s definitely the worst part. Dealing in real life is much more pleasant.
Greater paranoia about the authorities is another downside:
Public drug markets [such as this] are a giant middle finger to many powerful interests and so the political motivation to shut them down and lock up the people participating is out of proportion to the actual volume of illicit trade taking place. Last summer I was thenumber one" (basically highest-volume) vendor on the site for a while, and the fear really crept up on me. I’d lie awake at night thinking about it, worrying I was going to have my door kicked down and be dragged away at any moment. I’m much more comfortable with it now, but if I had known from the start how much mental torment and stress were involved with vending, I probably wouldn’t have started."
However, there are upsides, he says:
I find the day-to-day grind of vending online worse than dealing IRL, but the human interaction online is often a lot more uplifting in some ways. Most people I sell to IRL are club kids/raver types so they’re more predisposed towards hedonism (which I of course have nothing against!) than using for more spiritual/emotional reasons, so the feedback is less touching, which is a definite negative for me. I get emails from Silk Road customers telling me how the drugs I sell have helped them with emotional or spiritual or sexual problems, people mending broken relationships, rekindling intimacy.
If predictions that sites such as the Silk Road will become more popular, or even commonplace seem far-fetched, think back just seventeen years. At that point, Amazon.com was a three-person startup launching from a garage; today, it’s the first place most people look to buy almost any object that can be delivered.
And exactly the same issues confront users of online drugs markets today as faced those who dared enter their credit card details on to a bookshop’s website in the 1990s. Will the vendor deliver? Can I trust this software with my money? The only difference is that Silk Road customers might find themselves wondering whether their purchase will result in a jail sentence.
The motivation for people to use the Silk Road is high, given the prevailing legal climate. Considering that the Royal Mail in the UK delivers 15.9 billion items a year to the UK’s 29 million addresses10 and that small envelopes and packages are seldom opened, much less X-rayed or sniffed by dogs, capture, prosecution and imprisonment look unlikely.
One vendor on the site even offers a fake package service for the super-cautious: he’ll deliver you an empty box or envelope for a small charge, just to get the postman used to delivering packages from overseas.
Packaging by many vendors on the site is said to be exceptionally ingenious, and the protocol on the forums and in feedback forms below purchases is never to discuss the details of these. What’s more, there are vendors in many countries so there’s no need to worry about international postal or customs issues: users in the US or UK or the Netherlands - or indeed, in dozens of countries worldwide - can buy drugs from dealers in their own countries, removing the danger of border staff targeting their packages.
Technically, while the Tor network is now small, meaning its pages load more slowly than those on normal websites, in coming years the power of cloud computing means that more relays carrying the service will be able to be set up cheaply. In November 2011 Amazon’s cloud servers started hosting Tor bridges. For three dollars a month, users click and support the project, with no knowledge of the technology required. And in late 2012, the Noisebridge group of online activists made supporting the Tor network as easy as clicking on a donate button at
Noisetor.net. Anonymity 2.0 - click here to buy now.
Most politicians speak as if they believe there is an
off button for the net that can be thrown without affecting business interests, too. But the dreams of early net pioneers, for better and for worse, are now coming true.
People are now connected to each other with no central hierarchy governing that process; information flows freely and respects no authority, and the network is indestructible.
As Roy Amara, a futurologist and Stanford computer engineer, and president of Institute for the Future, said:
We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
A new kind of currency is making official control of this area even harder. Bitcoin is an electronic cash system, produced using cryptography. It is a peer-to-peer currency, made by users, meaning that no central authority issues money or tracks transactions. For every legal bitcoin user, selling web design services or carrying out coding jobs for which they are paid in the currency, there are many more using bitcoins to buy drugs on the Silk Road. Bitcoin is today the preferred choice of hundreds of online drug dealers. You can buy bitcoins using cash or other currencies in hundreds of ways, with varying levels of anonymity. Using bitcoins can be, depending on how you use them, almost completely anonymous.
Originally, bitcoins were produced by
miners - a figurative term for computer owners who donated their processor time to the project and were rewarded with coins for their efforts. The currency, or rather, the system that creates the currency, was released to the web on 1 November 2008, as the world economic system teetered on the brink of systemic collapse. Anonymous software coder Satoshi Nakamoto issued the open source application, and included a sly reference to the latest banking bailout by Britain’s then-chancellor of the exchequer, Alistair Darling, buried in code for the so-called Genesis Block - the first coins ever
mined, in January 2009.11
The main reason no purely digital currency has ever gained traction is because data-as-cash has a central flaw. As the music industry has discovered in recent years, digital information is infinitely copyable. Digital money, until now, could be spent again and again. To prevent this, a central banker would be required, someone who would maintain a sales ledger. But who could be trusted with such a thing? Bitcoin solved that problem by turning to the crowd for the answer, distributing the record of transactions much like a
Torrents are shared downloads, so when a user fires up their bit-torrent client and downloads, say, a film using a torrent file from an illegal site such as the Pirate Bay, they actually download millions of chunks of the file from a swarm of users at once, rather than one file from one central server. The torrent software on the downloaders’ machines then assembles the pieces of data into a film or music file.
Nakamoto’s elegant solution to the double-spend dilemma12 was to create what he called a
block chain, a distributed, or shared ledger of all transfers of coins from one person to another. Crowdsourced, decentralized, massively distributed cryptographic cash had arrived.
Users, known as miners, donate processor time to maintain and update the block chain, which records all transactions between users, and in the process also
dig for new coins. Miners’ computers send evidence of those transactions to the network, racing each other to solve these irreversible cryptographic puzzles that contain several transactions. The first miner to crack these puzzles gets fifty new bitcoins as a reward, and those transactions are added to the blockchain. The puzzles are designed to become more complex over time as more miners come on board, which maintains production to one block every ten minutes, keeping the creation of new coins steady. The reward for successful mining also falls over time, from fifty to twenty-five coins per block, and drops sequentially by half every 210,000 blocks. In the year 2140, there will be no more bitcoins minted or mined - the software limits their production, meaning there will only ever be twenty-one million coins in existence, preventing inflation. They can, though, be divided to eight decimal places, with each sub-unit known as a satoshi, after the coder who invented them.
Bitcoin could almost be seen as performance art; it demonstrates in the most practical way what many people have never considered: that the system of money, of currency issuance, is illusory at best, deceptive at worst. As if to illustrate this, one truly psychedelic item was put up for sale on the Silk Road in July 2011, when a vendor named
Uglysurfer offered pound weights of American copper pennies for ฿10.43/lb. The face value of the pennies was US$14.60, but at the time, copper prices were such that the metal contained within a American penny was worth almost three cents. Uglysurfer was demonstrating that the
fiat system of money and fractional reserve banking, whereby banks can and do create money from thin air, was not to be trusted.
Under the best conditions, I could walk into a bank and provide US$25 dollars in paper Federal Reserve Notes, and walk out with a box of 95 per cent copper pennies with a metal value of approximately US$64 (in copper), he explained.
Not a bad deal! Of course not all of the pennies will be 95 per cent copper, but the portion of 95 per cent copper pennies in the box have the proportional gain, he told me.
I have to sort the copper pennies from the zinc pennies and I have designed a system to automate the sorting based on pattern recognition of metal composition. So I use technology to sort and reach a scale of efficiency that makes the process profitable. In my opinion, fiat currencies are doomed simply because of the deception involved. As the populace is educated (and it looks like that education is about to be painfully forced on the masses - look at Greece) it will be a force of nature - the destruction of the fiat model. Anonymity or the ability to act anonymously is a critical means to preserving individual freedom in the midst of tyrants. I am a true believer in financial privacy. My belief is today those that seek personal freedom become enemies of the state (as far as the state is concerned) and are in the eyes of the state criminals. Not unlike those who deal in drugs on Silk Road.
In 2009 Laszlo Hancyez, an American programmer, made the world’s first purchase using bitcoins.13 He sent the bitcoins to a British man who called in a credit card payment transatlantically. It was a pizza, and it cost ฿10,000 - a sum worth £75,000 in November 2012. Today, many thousands of bitcoins are circulating around Silk Road users, and around 12,000 per day are spent on the site, at a value in late 2012 of around £7.50 each.
Silk Road users value the currency for its supposed anonymity, although it is not entirely untrackable to the curious and competent, nor is it entirely safe. Live by the chip, die by the chip: in June 2011 a user named Allinvain claimed that 25,000 coins had been stolen from his computer. A week later, a hacker compromised security at MtGox, a Japanese firm which handles the vast majority of cash-to-coin exchange, and pretended to be selling off a vast chunk of the currency. As a consequence the price dropped to zero, allowing him to steal thousands of coins. The system was then flooded with speculators, forcing MtGox to limit withdrawals to US$1,000 worth of bitcoins a day to stem the flow and prop up the dollar-value of the currency.14
Network analysts Fergal Reid and Martin Harrigan of University College Dublin wrote a 2012 paper baldly titled
Bitcoin is Not Anonymous. In it they demonstrated what the high-tech coining community knew - that the blockchain recorded all transactions. Reid posted in a comment thread following the release of his paper,
You don’t get anonymity automatically from the system. A lot of people out there think you do.15
But the determined user can retain anonymity easily enough in the US at least, by entering a bank and paying cash into an exchanger’s account, for bitcoins are now traded just as dollars and euros are. (They now have a value that is decided by the market. The total bitcoin market capitalization stood at £72 million in November 2012 - with around 10 million coins valued by the secondary market at around £7.50 each.16) By this method, cash exits the real world, and from there can enter the miasmic smog of this market.
Bitcoin addresses are generated anonymously and instantly, and infinitely. You can launder bitcoins bought with pounds from your bank account and send it through 100, or 1,000, anonymous bitcoin accounts that you have generated and which you control in just a few hours, then use them to buy drugs. There is no trace, especially if you connect to the net with Tor.
And there are many services online where users can buy other digital currencies, and convert them into bitcoins. Liberty Gold is a virtual metal-backed currency from Costa Rica17, purchasable automatically from anonymous servers with Western Union cash payments, whereby participants swap the transaction number for invisible currencies which they can then swap into other currencies. You could for a short period in 2011 even buy bitcoin by SMS: users would buy a simcard from Poland, or Belgium, or one of a dozen other countries, charge it with cash, send a text and receive their coins to their handset.
Mixing services too, can tumble the coins in and out of thousands of other bitcoin transactions and accounts, making a dense web of mathematics even denser still. When most investigators can’t even understand the basics of encryption, the likelihood that they or a jury member will reach an understanding of bitcoin is minimal.
And when most small-scale drug transactions are small, under £100, who’s watching? The answer, so far, is that no one has been busted using evidence from the bitcoin blockchain18. Bitcoin addresses, where you receive and store coins, are randomly generated strings of letters and numbers, and there’s no ID check system - and you can create another in moments. If that’s not enough, the more paranoid users can use a service such as Bitcoin Fog, which matches deposits and transactions randomly, paying out the total you paid in in a series of different amounts. Then there are instawallets, temporary, one-time-use holding accounts where coins can be stored for a few seconds over an anonymized net connection and spat out elsewhere. Or there’s Coinapult, a jokey service allowing users to sling coins to each other across the ether. There are games such as SatoshiDice, a gambling game that allows micro-bets on random chance algorithms. Since the currency is divisible to eight decimal places, the thousands of tiny bets further complicate the block chain and disguise criminality.
There’s no denying that this is a minority sport, and that the process is arduous, and can sometimes fail completely. Online wallet services, where coins can be stored on the net, rather than on your computer’s hard drive, are often scams that can easily fleece users. The complexity of the system does not lend itself to the kind of impulse purchase made by some drug users. But that hasn’t stopped thousands of users of the Silk Road from embracing the technology. Networks grow and proliferate if they are populated, required and scalable. Bitcoin, Tor and the Silk Road fulfill all of these criteria.
Might this arcane and hidden world spawn new and different versions of itself?19 Those who believe this system is so complicated that it will never catch on might perhaps consider that within living memory, even configuring basic internet access took expert knowledge. Nowadays, we only actually notice our net connections exist when they drop.
Encryption is what makes this market possible, and what makes it so hard for lawmakers to attack. Encryption works by scrambling information and only allowing the holders of two sets of keys to decode that information. The public key is known to everybody and is published. The secret key is held only by the recipient. Alice wants to tell Bob some sensitive information - or indeed any information intended only for his eyes. So Alice uses Bob’s public key to encrypt the message to him. Bob uses her private key to unlock, or decrypt the information. No one else can read it.
It’s personal. It’s private. And it’s no one’s business but yours. You may be planning a political campaign, discussing your taxes, or having a secret romance. Or you may be communicating with a political dissident in a repressive country. Whatever it is, you don’t want your private electronic mail (email) or confidential documents read by anyone else. There’s nothing wrong with asserting your privacy. Privacy is as apple-pie as the Constitution. The only way to hold the line on privacy in the information age is strong cryptography.20
If governments or police wanted to read the messages between Silk Road users, they’d have to spend years in so-called
brute force attacks, where hundreds of millions of possible passwords are tried one after the other.21
In the UK, though, if you are investigated by police and use encryption, and refuse to give your passwords to investigators, you will be charged with a crime and jailed under the Regulation of Investigatory Powers Act (RIPA). No matter what your defence, no matter what crime you are under investigation for, even in the absence of any other evidence, if you maintain your right to private communications, you will be deemed a criminal and jailed.
IT website The Register reported in 2009 that the first person jailed under part III of the RIPA was
a schizophrenic science hobbyist with no criminal record. Found with a model rocket as he returned to London from Paris, he refused to give police the keys to his encrypted data, indeed, he refused to speak at all, and was jailed for thirteen months. Six months into his sentence the man, named only as JLF, was sectioned under the Mental Health Act and does not now know when he will be released.22
It’s highly likely that legislators will one day use the menace of online drug deals as a justification for intruding into people’s privacy. A happy consequence for the government of its targeting of this straw man folk devil will be unfettered access to all our private thoughts and conversations.
You can never be sure a conversation is private without encryption, Jon Callas, an American computer security expert who co-founded PGP Corp with Zimmermann, tells me. The German government broke Skype’s encryption models by releasing malware and viruses into the wild that can easily unscramble voice calls across the network, allowing it to eavesdrop at will, he tells me - across a Skype line.
In the old days, hundreds of years ago people could speak privately by going out and taking a walk around the green and talking among themselves and there was no way people could listen in, he told me.
Today [with long-distance communication so commonplace] there’s no good way to do that except by using technology. Encryption lets you have a private conversation with anyone else, and that’s needed by business and anyone that wants to talk in private.
The history of encryption is a fascinating tale of early net privacy campaigners facing down the government - and winning. From the 1970s onwards, encryption was considered military hardware and could not be exported from the US. In 1995 Phil Zimmermann had the source code for PGP printed in book form and sent to Germany from the US, since the export of literature was not banned. An engineer in Germany scanned the code, recompiled it and distributed it online. The export regimes were eventually liberalized, as the government had to accept that encryption was nothing more than maths.
These networks were not designed to respect orders, deadpans Callas.
Could governments roll back encryption advances in order to prevent online drug dealing, and halt secret communications?
I think the toothpaste is out of the tube, says Callas.
Cryptography, in some form, is used by people every day all the time. Whenever you buy something online, your purchase details and delivery details are all encrypted. There are reasons for that - there are gangs that want to steal your info and defraud people with it. The reality is that among the other problems society has, including the Mafia stealing from old ladies, the way to protect them is encryption. It is flat technologically impossible to manage encryption, he told me.
Callas is certain government will focus on the drugs issue in the upcoming debates around encryption and privacy.
Encryption is why the big NSA [National Security Agency] facility in Utah is being built. The NSA understands it is a new century and they need new technology for what they are doing, he said. The new NSA facility is a data-harvesting plant in the desert near Utah. It will cost two billion dollars to build, will measure a million square feet, and will be able to store 500 quintillion pages of information. It is Callas’ belief that this centre is being built for traffic analysis purposes23 - seeing who is talking to whom, how often and for how long - and to engineer password-breaking technologies. Though encryption is essentially uncrackable, passwords are generally trivial to break. Traffic analysis can also be used to gather valuable data on communications that have passed through Tor.
In just under two years, the Silk Road administrators have used technology and ingenuity, along with innovative crowdsourcing solutions to internal and external threats, to achieve what thousands of campaigners have toiled since the 1960s to achieve: the right for people to buy and sell natural and artificial chemicals that affect their consciousness in ways they choose without interference from the state. It is a paradigm shift that cannot easily be reversed.
The growth of Silk Road may have provoked the very public forced closure in 2012 of one of the net’s longest-standing online drugs markets. The Farmer’s Market, or TFM as it was known, was an accident, or more accurately, a bust, waiting to happen. The site operated for a number of years as an email-only service at
[email protected]. Later, it ran its business on the anonymizing Tor network but, foolishly, even there, used the Hushmail encrypted email service to serve its thousands of international customers rather than using its own encryption. The site sold mainstream psychedelics - MDMA, LSD, ketamine and high-potency marijuana and hashish, along with DMT, psilocybin mushrooms and mescaline. Its vendors were connoisseurs, and offered rare cannabis strains and seeds seldom available anywhere else. It was mainly a boutique online marijuana store and its descriptions showed the expertise of the obsessive.
TFM’s existence was an open secret in the online drug dealing and purchasing community - far too open. The only startling thing about the closure was that it took so long. The site was like a proto-Silk Road, but crucially, as court papers would reveal in 2012, it accepted payment methods that were traceable and insecure. Users could join the site with no invitation, and therefore with no background or reputation checks. With its drop-down menus and creaky lo-fi design and jagged fonts, it felt a rather rustic kind of place, an artisanal street market - if street markets had rickety oak barrels filled with pounds of free-flowing crystal ketamine and fragrant sprigs of marijuana rather than single-estate coffee beans and overpriced sourdough bread.
The bust came one year after mainstream media outlets became aware of the Silk Road’s existence; it was a showboating exercise to satisfy political pressure from the US to do something about the new internet drug menace - and maybe to scare off users from buying drugs online generally. The bust was hardly hi-tech, nor was it particularly ingenious, however much the police attempted to portray it that way. Undercover agents infiltrated the network posing as buyers, and simply made orders that revealed the network’s international links, names, bank account details of the recipients of funds, and addresses connected to the dealers.
Every criminal enterprise has a weak point, and one of TFM’s most fundamental errors was that it took payment via various insecure and far-from anonymous means, from PayPal to Western Union international transfers. They also accepted iGolder, a digital gold currency, and Pecunix, a similar currency, which stores its ingots in Swiss vaults but is incorporated in Panama, the Central American banking powerhouse that borders Colombia to the south and east.
The Pecunix payments were laundered through various PayPal accounts, and then sent through various accounts in Hungary, Western Union payments skipping across continents to become balances on-screen in iGolder and Pecunix accounts, and back, and forth until TFM’s dealers thought, mistakenly, that the money was crisply laundered. They were wrong. The transactions had been tracked through these systems; the paper trail was easy to follow. If they’d used bitcoin, the site’s operators would be free men today.
The indictment alleged that between January 2007 and October 2009, The Farmer’s Market processed 5,256 orders with a value of US$1.04 million. The site had over 3,000 customers in thirty-five countries, including buyers in every state of the USA. Forty-two-year-old Marc Willem, the lead defendant also known as
adamflowers, was arrested on 16 April 2012 in Lelystad, Netherlands. The day before, Michael Evron, an American citizen living in Buenos Aires, Argentina, was arrested as he attempted to leave Colombia. Six other dealers and accomplices were arrested at their homes throughout America. At the time of research, none of their 3,000 customers had been targeted. The indictment ran to sixty-six pages, and documented hundreds of drug deals that the group had administered. The network was huge, covering countries in Central, Latin and North America, Eastern and mainland Europe. The men were charged before the United States District Court for the Central District of California on charges of conspiracy to distribute controlled substances, conspiracy to launder money, distribution of LSD, aiding and abetting, continuing criminal enterprise and criminal forfeiture. When the news broke online, panicked chatter spread across dozens of sites.
Police called the group
sophisticated and said it used
advanced anonymizing online technology. This was not true; the group used proprietary encryption on a webmail service, Hushmail, which publicly stated it would cooperate with police if asked to do so. The
advanced anonymizing software was simply Tor, which, though it is indeed advanced, is something even the most technically illiterate web user can use easily24. Briane Grey of the DEA said the operation - named Adam Bomb -
should send a clear message to organizations that are using technology to conduct criminal activity that the DEA and our law enforcement partners will track them down and bring them to justice.25 The police’s intention was to give the impression they had infiltrated an elaborate and complex market; they had not - they had just sent a few emails and issued a few subpoenas to follow the money.
In the final analysis, TFM was low-hanging fruit for the police, and in grabbing it, they merely showed their hand early and revealed the weak points of any online peer-to-peer drug smuggling network - communications and payment. The slew of news stories also told anyone who was listening that it was possible to buy drugs online, and that it was the dealers, rather than the site’s 3,000 happy users that the police were targeting.
The Silk Road’s payment and communication systems remain essentially impenetrable.26 It’s here on the Silk Road that the early net evangelists’ vision of a world where information flows freely, where no central hierarchy rules, and where the network takes precedence over the individual has finally been realized. Whether you celebrate or lament the fact that drugs such as cocaine, heroin and LSD are now available online with just a little effort and very little likelihood of legal consequences, it is undeniable that we are at a turning point in legal history.
Through a decades-long process of chemical and technical innovation, drug users and producers have beaten the laws made by a political system whose only response to increased drug use is a harmful, expensive, counterproductive and ultimately failed strategy of criminalization.
Over the course of the century or so that drug laws have existed in any meaningful form, a clear pattern has emerged. As each law to prevent drug consumption is made, a means to circumvent it is sought, and found. Those means can be chemical, legal, social or technological. We stand today at a crossroads formed by those four elements, with the web making possible communication between distant strangers, facilitating the sharing of limitless quantities of information, and enabling the distribution of drugs anywhere in the world. Where do we go next?
Prohibition in the Digital Age
…Dealers who profit from the sale of banned drugs can have a clearer view of the problems of [drug] legalization than many other commentators. I conducted an in-depth interview with one of the most popular vendors of MDMA on the Silk Road, discussing the legalization of drugs across an encrypted email connection.
The biggest issue I have with legalization is quantifying the pros and cons, what information do you base your decision on? Which metric is most important? Is it addiction rates, acute risk, economic cost, family breakdown, crime rates? It’s easy to look at the gruesome prohibition-fueled civil war in Mexico, the private prison industry in the US, the gang-fighting over drugs that goes on in every city and draw the conclusion that legalization is the only humane and reasonable alternative, because all of those injustices are blatant and gruesome. It’s harder to weigh the less apparent consequences, the subtle personal issues that easy access to drugs brings, he said.
As a dealer/vendor I get to see a much closer view of these problems, both in myself and others, and frankly it often upsets me. Many times I’ve had to stop selling to clients because they developed serious addiction issues. I know people who use MDMA every week and suffer serious memory and cognitive problems because of it; people who can’t stop using coke despite not even enjoying it any more, people who have to pop Oxycodone just to make it through the day. Seeing it really wears me down. How many more people would there be like that if they could pop down to the convenience store and pick up an eight-ball of cocaine? Would they ultimately be better off if given access to whatever they wanted along with subsidized harm reduction and treatment programmes if needed? It’s not an easy question to answer at all. I used to think that people should ultimately have agency over their own bodies and what they put in them, that the world was overwhelmingly worse off with prohibition than without it. I still feel that way, but over the past few years my view has become much more conflicted.
In Europe, only Portugal has dared to experiment with radical moves towards decriminalization - of drugs far more harmful and addictive than the most popular recreational drugs whose effects many research chemicals and legal highs seek to emulate.
Silk Road began operating in January 2011; it was shut down a little under 3 years later, in October 2013 (half a year after Drugs 2.0 was published). –Editor↩
fish scale cocaine; >90% purity. Typically cocaine is
cut(adulterated) before being sold to the end-customers. –Editor↩
Ross William Ulbricht, a Texan man; arrested 2 October 2013, simultaneous with the shutdown of SR by the FBI. –Editor↩
Traveling the Silk Road: A Measurement Analysis of a Large Anonymous Online Marketplace, Carnegie Mellon INI/CyLab, July 2012 [Christin released a more accurate version in 2013,
Traveling the Silk Road: A measurement analysis of a large anonymous online marketplace. –Editor]↩
5onwnspjvuk7cwvk.onion; founded 9 June 2011, still operating as of 19 October 2013, albeit with difficulties. BMR is far from the only competitor to SR, especially post-SR-bust. –Editor↩
Probablyis an extreme understatement. There are no credible reports of these sites ever delivering on a hit, and it only takes one
$10,000 up frontto make the scam worthwhile. Even the operator of Silk Road, DPR/Ross Ulbricht, was apparently scammed not just once but twice by claims of hits. –Editor↩
As of 19 October 2013, there are now 11.828m bitcoins valued at a total of $2.11b. –Editor↩
This is true. All known Silk Road-related busts up to ~2014 have been based on evidence unrelated to analysis of the blockchain; blockchain analysis and AML reporting started accounting for the occasional arrest after that. –Editor↩
This assumes they actually used encryption. Available evidence indicates that well over half of SR’s users didn’t bother. –Editor↩
More importantly, Farmer’s Market spent only a short time operating as a hidden service; for most of its lifespan, it was clearnet. –Editor↩
US Attorney’s Office press release, 16 April 2012;
Creators and Operators of On-line Narcotics Marketplace on the TOR Network Arrested on First of Its Kind Federal Indictment Charging Drug Trafficking in 34 Countries and 50 States↩
It is currently impossible to do a full SR post-mortem but it seems clear that the Bitcoin blockchain was useless to the FBI/DEA investigation, as was breaking Tor or PGP; theories generally revolve around Ulbricht’s currently-inexplicable decision to make a payment to a federal agent from an Australian bank account, an intercepted shipment of IDs, discovering carelessly-exposed clues to his identity, and flipping a SR employee. –Editor↩