The Unintended Consequences Of The Shutdown Of Silk Road

from the yes,-it's-gone,-but-now-what dept

The closing down of Silk Road by the feds was almost certainly inevitable. In fact, especially in light of the details suggesting how sloppy Ross Ulbricht was at times, it’s somewhat amazing it lasted as long as it did. That said, in the past few days I’ve seen a couple of articles that are highlighting the unintended consequences of the closure. First up is Conor Friedersdorf over at The Atlantic, discussing how the closure of Silk Road almost certainly makes the world less safe. In some ways, this reminds me of similar discussions about targeting marketplaces vs. targeting users (such as Craigslist). While many people have a gut reaction that it makes sense to go after the marketplace/platform, the reality is that it’s the users that drive it, and those users will continue to do the same illegal acts as before, but most likely in a less safe manner.

Friedersdorf highlights how, assuming everything in the NY complaint is accurate, Silk Road functioned as a fairly safe and efficient market for buying what generally appeared to be high quality illegal drugs for personal use in a much safer and more trusted manner than going out on the street to do the same. And, on top of that, it appears that many of the sellers were from overseas where the drug trade might be even more dangerous:

On many thousands of occasions, drug dealers in foreign countries decided that, rather than using armed truck drivers, bribed customs agents, desperate drug mules, thuggish regional distributors, and street level drug dealers who used guns to defend their territory, they’d just mail drugs directly to their far away customers. Of course, folks at the beginning of the supply chain were still often violent drug cartels who one hates to see profit. But from the perspective of the many innocents who suffer from the black market supply chains involved in traditional drug sales, narcotics via mail order would seem to be a vast improvement.

The FBI summed up its case against The Silk Road by writing that “the site has sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites.” Insofar as it trafficked in violence-for-hire and hacked bank accounts, that was a bad thing — society has an interest in as much friction as possible in the market for hit men! But compared to the epidemic violence that has characterized the drug trade for the entirety of the War on Drugs, and that shows no signs of abating in the foreseeable future, a frictionless drug trade starts to seem like a relative utopia.

The “friction” is often dead teenagers on urban streets.

Of course you could make an argument that Friedersdorf’s argument is almost as much a condemnation of the overall War on Drugs as it is on Silk Road itself. In fact, you could argue that the “success” of Silk Road highlights how a legal and regulated market for such drugs would likely be quite efficient and safe. That’s not a “defense” of Silk Road or a suggestion that what Ulbricht did was morally correct. However, it’s just a statement of reality. The War on Drugs has a very large number of victims, and many of them are totally unrelated to drug addicts, but rather come with the infrastructure necessary to run a massive illegal business.

That brings us to the second article. Someone who worked for a competing online black market called Atlantis, which had closed just a few weeks earlier, has written up a fascinating post mortem of Silk Road, in which he (or she) notes that we’re about to see a lot of similar black markets now that the market leader has been cleared out by the feds.

As if there wasn’t enough suitors ready to rise to the challenge of being the next DPR, to make it easier there is already a functioning open-source project know as BitWasp which can simply be downloaded and installed on an onion web server and the next SilkRoad is (almost) ready to go. Below is a short description of the project from its facebook page where they make no secret of the fact the project aims to aid the development of future anonymous marketplaces flowing in the case of busts like just happened Silk Road.

“BitWasp Marketplace is a light weight, completely open source, anonymous bitcoin marketplace specifically built for use in conjunction with Tor or I2P via the hidden services such as .onion websites and eepsites (for I2P).

The goal of this project is to do the following:

1. Lower the barrier of entry and needed skill-set to operate a website like silkroad. This will increase the number of silkroad styled sites on the internet, and this increase will lead to a stronger pressure on governments to change their draconian drug law policies into something more practical and respecting of individual liberty.

Just like open source forum software revolutionized the ability for individuals to freely share ideas within niche communities, Bitwasp will revolutionize the ability for individuals to sell and buy materials and digital files within online communities.

2. Plans by the many, not by the few. This is essential because, as with nature, competition will select for the best, most secure, and most revolutionary marketplaces. Silkroad is great; but I suspect many minds working on many sites with various add-ons and extensions will lead to many better marketplaces in the long run.”

In other words, just like the court shutting down Napster over a decade ago resulted in a whole series of alternative file sharing networks, some that were much more underground and harder to stop, it seems likely that something similar is about to happen with black markets. In fact, the former Atlantis employee notes that the combination of Ulbricht’s carelessness and the fact that it took nearly two and a half years to track him down likely means that others will rush into the space, believing they can do it “right” to protect themselves.

The closing of Silk Road and the arrest of Ulbricht is an interesting story, no doubt, but it seems like just the very first chapter in the world of black markets.

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Companies: silk road

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Comments on “The Unintended Consequences Of The Shutdown Of Silk Road”

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60 Comments
fogbugzd (profile) says:

And, of course, we already have alternatives to the Silk Road popping up. The Sheep Marketplace got Bloomberg’s attention (http://www.bloomberg.com/news/2013-10-04/goodbye-silk-road-hello-sheep-marketplace.html) but there are a bunch of others.

My guess is that the new markets will be a lot harder to crack than the Silk Road. I am guessing that they will also be more fragmented with lots of smaller, specialized, and regional markets. The .onion domain makes it fairly easy to have a distributed marketplace. There are already several sites serving as directories to other sites.

pixelpusher220 (profile) says:

Re: Re:

Another result is that the Feds have lots of sites to now hold up and evidence that they need massively more powerful tools to stop them.

“There was 1 site before, now there are 20!!!!” Obviously the solution proposed will be more and deeper monitoring and tracking since the ‘problem’ has now gotten ‘worse’ by their definition, no?

Josh in CharlotteNC (profile) says:

Re: Re: Re:

Another result is that the Feds have lots of sites to now hold up and evidence that they need massively more powerful tools to stop them.

In addition to tools, they need funding. Massive funding, and resources, and people, and beauracracy.

When you are in government, you need to understand the “game” you’re playing. Winning does not involve solving a problem. If you solve a problem, you’ve put yourself out of a job. The object is to manage a problem, such that you can continue to manage it for years or decades.

JMT says:

Re: Re: Re:2 Re:

Of course that’s what Einstein meant and of course that’s the way people mean it when they quote him. I really don’t think anybody is claiming this is a clinical definition of insanity. It is exclusively used to describe somebody’s actions that you believe are stupid, dumb, and proven ineffective. Nobody’s expecting anybody to be committed for it…

John Fenderson (profile) says:

Re: Re: Re:3 Re:

It is exclusively used to describe somebody’s actions that you believe are stupid, dumb, and proven ineffective

However, it would be far more effective to call such behavior what it is, idiotic, rather than what it is not, insane. Just chalk this up to a pet peeve of mine. I cringe every time I see that quote, and (justifiably or not) I tend to give people less intellectual attention once they trot it out.

John Fenderson (profile) says:

Re: Re: Re:5 Re:

If they use it in an appropriate manner, then I’ll just cringe, but won’t discount what they’re saying. But the vast majority of the time the quote is not being used appropriately and the person using it is not actually saying anything of substance.

I did say this quote was a pet peeve of mine, so 100% rationality about it is beyond what I am capable of.

Anonymous Coward says:

Re: Re:

Indeed, I believe it was Portugal tried the ‘something different’ in their war on drugs over a decade ago. They legalized ALL drugs, not marijuana. Most of the money they were spending on catching and jailing drug dealers they started to spend on the same kinds of honest educational campaigns about smoking we teach our kids.

The result? Drug use jumped temporarily for a few years after it was finally legalized, but then it soon settled down again, I believe that there’s actually less use of most of those drugs today then when they were illegal.

That Anonymous Coward (profile) says:

Re: Re: Re:

There is a quick savings on the huge sums being spent to stop the unstopable.

There is income from taxing them, and magically prices fall removing people needing to steal to obtain it.

Real Education programs not just the Reefer Madness stupidity, about what happens.

Real treatment programs for people who want them, giving them help rather than morality speeches.

They will always claim it was a fluke this sort of idea worked elsewhere, but its worked more often than not.

fogbugzd (profile) says:

Re: Re: Re: Re:

The problem with taxing drugs is that most politicians want to treat it as a gravy train and tax at high amounts. $100 for an oz of cannabis, for example.

High taxes just create a black market, so you still have all the problems with dealers, violence and the costs of jailing people.

People would be willing to pay a modest, reasonable tax for the convenience and safety of the regular marketplace. But there isn’t a legislature anywhere that will be able to limit themselves to reasonable taxes on pot or any other drug. So the problem will continue, but maybe at a lesser scale.

Anonymous Coward says:

Re: Re: Re:2 Re:

California just legalized hemp plantations, not for smoking but for production of fibers and oil.

Quote:

The new industrial hemp legalization comes on the heels of U.S. Attorney General Eric Holder?s announcement that the federal government will not intervene in states that want to legalize and self-regulate cannabis. Officials and farmers alike are waiting on the U.S. Department of Justice to clarify whether Holder’s announcement regarding cannabis extends to the hemp industry in addition to the recreational and medical marijuana industries.

http://www.cannabisculture.com/content/2013/10/03/California-Legalizes-Industrial-Hemp-Farming

There are signs that the war or drugs is falling out of fashion.

Shaun Wilson (profile) says:

Re: Re: Re:

Actually drug laws were generally put in place in order to oppress minorities associated with them. You had crack to lock up the “Negro’s” who were getting uppity after no longer being slaves, “Marijuana” (a new name for the corner store drug Cannabis) to go after Mexican workers “stealing” whites jobs and psychedelics in general to lock up those damn unpatriotic, anti-war hippies.

Any other professed reason for the war on drugs for the majority of proponents is a (extremely thin) smokescreen.

Shaun Wilson (profile) says:

Re: Re: Re:3 Re:

Woops looks like I mixed up crack with regular cocaine, pity it US government wouldn’t do that (in the opposite direction), the sentences are still 18x higher for crack vs powder cocaine – and that’s an improvement from the previous 100x.

What I was thinking of was neuroscientist, Dr Carl Hart, who referenced a 1914 New York Times editorial “Negro Cocaine Fiends Are New Southern Menace” which represented some of the racist hysteria that led to drug prohibition early on. You should look into him for more (and accurate) information about drugs and drug policy.

Anonymous Coward says:

Re: Re: Re:

Laws do not PREVENT something, they act as a deterrent and, in some cases, a means of awarding a harmed party. Keeping this in mind, when you look at a Law you need to look at the activity that Law is attempting to act as a deterrent to and see if the overall effect is a net benefit to society. Speeding limits for example, while a slight inconvenience to drivers help prevent accidents and we as a society assume this is an acceptable trade off.

However when looking at the whole mess of laws associated with the War on Drugs, can you really say society is better off because of it? What has the War on Drugs actually achieved apart from a sizeable body count? Last I checked drugs were still prevalent. If a law fails to act as a deterrent, and comes with a nasty cost, perhaps we should find a new way to approach the problem (Or maybe re-evaluate if we even have a problem)?

out_of_the_blue says:

"somewhat amazing it lasted as long as it did" = CIA op.

In fact, you could argue that the “success” of Silk Road highlights how a legal and regulated market for such drugs would likely be quite efficient and safe. That’s not a “defense” of Silk Road or a suggestion that what Ulbricht did was morally correct. However, it’s just a statement of reality.

Actually, it IS arguing morality with utilitarian dodge: reality is you’re just too wimpy to advocate drug use, but from this piece you pretty clearly don’t disapprove of it.

BUT let’s go to the follow-on effects of legalizing drugs in today’s social milieu: the number of stoopid kids who ruin body and mind would then shoot up — and they’d demand public funded health care due to their moral failure. So the current suppression is also justified by utility, besides that just allowing people to be as stoopid as they wish is not at all satisfying to the producers who bear the costs.

And it’s anti-human to say: here, blow your mind out, I don’t care about you. That’s definitely not going to sustain civilization.

So don’t give up on morality, Moral-less Mike: it’s the only thing that separates (some of) us from savages.


This is another carefully-nuanced piece from Mike, in which he maximizes appeal to reality-escaping, game-playing fanboys while styming foes with veneer of “thoughtful” libertarian take on an old and severe moral problem. So I decided to play along with my stern moralist schtick, but point out the meta-context.

John Fenderson (profile) says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

reality is you’re just too wimpy to advocate drug use, but from this piece you pretty clearly don’t disapprove of it.

Ignoring the fact that this piece wasn’t about approving or disapproving of drug use at all, it’s also a fact that failing to condemn something does not in any way imply that one is in favor of that thing.

There’s a middle there that you’ve excluded.

Gwiz (profile) says:

Re: Re: "somewhat amazing it lasted as long as it did" = CIA op.

…it’s also a fact that failing to condemn something does not in any way imply that one is in favor of that thing.

Also the fact that being in favor of decriminalizing drug use does not equate to being in favor of drug use in general makes Blue’s statement even more silly.

Since I am of the belief that the money saved by not funding the “War on Drugs” would be much more than the money spent on rehabilitation and treatment, his argument about society having to foot the bill for all the drug users kind of falls flat, doesn’t it?

Gwiz (profile) says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

BUT let’s go to the follow-on effects of legalizing drugs in today’s social milieu: the number of stoopid kids who ruin body and mind would then shoot up — and they’d demand public funded health care due to their moral failure. So the current suppression is also justified by utility, besides that just allowing people to be as stoopid as they wish is not at all satisfying to the producers who bear the costs.

The amount of stupid in that paragraph is astounding. If you want “real” facts and not just Blue’s uneducated guesses on a subject he obviously knows very little about check out Glenn Greenwald’s white paper on the subject:

http://object.cato.org/sites/cato.org/files/pubs/pdf/greenwald_whitepaper.pdf

MrWilson says:

Re: Re: Re:

I disagree actually. I get the impression that OOTB is quite familiar with the real world consequences involved in the use of hard drugs. How do you expect him to entertain us in the comment section here if he doesn’t have a medium for communicating with the angry trees that write all his best irrational diatribes?

Anonymous Coward says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

“BUT let’s go to the follow-on effects of legalizing drugs in today’s social milieu: the number of stoopid kids who ruin body and mind would then shoot up”

This argument has already been beaten to death and reality disagrees with you.

Look up on the statistics of drug (ab)use and drug related crimes in Portugal and The Netherlands after they relaxed their drug laws, and you’ll see what I mean.

“and they’d demand public funded health care due to their moral failure.”

And so they do…and society lends them a hand. Because – besides being the “moral” thing to do, aid thy neighbour and all that – the alternative is to have these “kids” going around and killing people for their next dose of Cocaine.

The price of healing a drug addict is small when compared with the price of burying even one murder victim. Saves more lives than America’s anti-terrorism budget, and is only a fraction of it.

JackHerer (profile) says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

Whatever your view on the article I find 2 things that irk me with this comment.

First of all it talks of morality as if it is some set of hard and indisputable rules rather than a personal opinion. You might consider selling drugs “immoral” per se, i don’t.

Second is the age old for us or against us tone. There are not 2 positions on recreational/non medical drug use. You advocate it or you condemn it. I would never advocate this kind of drug use by anyone, but that doesn’t I condemn it.

Drug use is a complex social problem that should be debated based on facts and what is the most effective way prevent harm to society and its individual members, not based on standing on high horse and spouting moral “hyperbole”.

btr1701 says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

besides that just allowing people to be
as stoopid as they wish is not at all
satisfying to the producers who bear the costs

You might want to be careful advocating for government control of the stupid, given the incredible amount of stupidity you yourself frequently treat us to here in the comments section.

JMT says:

Re: "somewhat amazing it lasted as long as it did" = CIA op.

“…reality is you’re just too wimpy to advocate drug use, but from this piece you pretty clearly don’t disapprove of it.”

Once again you leapt to an assumption and miss how obviously wrong you are. Mike’s opinion of drugs make no difference at all to the article. If Mike had made a strong personal anti-drug statement it wouldn’t have changed a single thing said. The reality of the drug trade is not going to change because of one person’s moral position.

“…the number of stoopid kids who ruin body and mind would then shoot up…”

Imagine if the countless millions wasted fighting the unwinnable ‘War on Drugs’ was spent educating those kids in the risks of taking drugs. Combined with a removal of the appeal of doing something illegal, I’m pretty sure the number of kids who ruin body and mind would then shoot down, not up.

“…and they’d demand public funded health care due to their moral failure.”

There you go again imposing your morals on everyone else…

Anonymous Coward says:

The United States Government is NEVER going to admit that the War on Drugs is a tremendous failure that has left countless thousands dead.

It is their pet project, it is what keeps hundreds of government workers employed throwing teenagers and kids in jail. It’s what keeps money flowing into the pockets of the FBI. I don’t think the US Government could survive anymore without a war on drugs to piss it’s money away on. It wouldn’t know how to behave if it didn’t have a giant death machine to fund until the end of time.

The sad thing about all of this is how uneducated people still are about the nature of the drug trade and the service Silk Road provided. The ignorant masses on the internet still demonize it because “Drugs are bad, mmkay!” without even once considering what the userbase is now doing since it is gone (go read the arstechnica comments on this same writeup, it’s amazing how few people really care about saving people’s lives and instead care about delivering “Justice” to “cokeheads”). At best this has only left a big gap for another service to come in and envelop the userbase. At worst it’s going to land much of the userbase in jail or dead and somehow, as a society, we’ve convinced ourselves that this is for the best of all. Like we’ve somehow helped a problem that isn’t going away and is far greater than an online meeting place that was merely smacked down because of the idiocy of the completely-interchangeable founder.

It really only proves to me that the internet is okay with this because they’ve been taught since birth that the war on drugs is not a futile struggle in a battle that the authorities have been losing since Prohibition. Bringing guns into what is otherwise business dealings that have been happening since the beginning days of the opium trade doesn’t make the world a safer place.

Anonymous Coward says:

These markets exist because there is demand for them – in particular for drugs. I would bet that the majority of deals happening on silk road were drug related.

Then the drugs just bring along all sorts of other black trade because – hey – you’re already selling drugs so why not throw hit-man services and child pornography in there too? You’ll go to jail either way if you get caught…

A “simple” way to resolve the problem is to just go ahead and legalize (most?) drugs, and start treating drug addiction like the disease it is.

Disgusted (profile) says:

Legalize it!

What this government and Congress needs to do is step WAY back and compare this “War On Drugs” fiasco with the effect of Prohibition. There’s little effective difference between the drug cartels and Al Capone, except a little more violence. The answer is exactly the same – Legalize it. Collect taxes, regulate purity, AND STOP THIS BEDAMNED FARCE. We didn’t need it then and we don’t need it now. Has Congress learned NOTHING in 80 years? Apparently being able to stand on a soapbox and rail against drugs is more important than kid’s lives. You’re never going to stop the use of drugs by declaring it illegal. That only raises the profits for the cartels and ruins lives needlessly.

Anonymous Coward says:

as is the usual case, the law enforcement never consider anything other than their own narrow minded views and ideas. the probable main reason for this is that governments weren’t getting any tax, as the amounts weren’t recorded. the last thing to be considered would be the safety of the people who were conducting business using this method. it’s like the entertainment industries who use whatever excuse they can think of, not for any reason other than to get control. governments help so as to get tax payments, control of financial exchanges. the people, as usual, get sweet fuck all!!

Anonymous Coward says:

Insanity of Prohibition

Expecting prohibition to work is a sheer case of insanity economically. Every bust they make, every shipment they stop makes the drugs more valuable. And guess what making drugs more valuable does to dealers? It encourages them to bring in more to sell. The very process is self-defeating.

Personally I suspect unwillingness to admit being wrong is why it has kept on going. Look at how long it takes a country to apologize for some horrific act when they’re not utterly defeated. Usually when everyone involved is dead of old age. You could easily write a best selling book or a doctoral dissertation on the why they’re unwilling to admit being wrong in the face of horrible consequences from ignoring it.

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