Cryptocurrency Cartels: A Deep Dive into the Dark Web Drug Economy

The manufacture and sale of illegal drugs remain two of the oldest and highest-grossing illegal industries. Just like e-commerce has changed the way we conduct business and buy services, so has the Internet drastically impacted the twenty-first-century landscape of drug distribution. Drug sellers and buyers see the Dark Web as a lucrative safe haven. In the last decades, drug markets have started shifting to the digital world, and they can be mainly found on the Dark Web.

Almost a decade after the demise of the Silk Road, the world’s largest drug marketplace, the Dark Web is still the main avenue for trading in illicit drugs. Imagine online drug markets allowing you to order an ounce of marijuana or a kilo of cocaine with the same comfort as buying books on Amazon. This section will cover a variety of topics, including the following:

• Drug markets ecosystem.

• Drug markets' characteristics.

• What enables transactions between buyers and sellers.

• Ways of fighting Dark Web drug markets.

• The impact of the Dark Web on drug trafficking.

Drug distribution and sales are impacted by the shift from offline to online drug marketplaces. Drug dealers may now interact with clients via the Dark Web and deliver illicit drugs without having to physically meet them. 

In many cases, those involved in Dark Web drug trading can quickly adapt and adjust their strategies to decrease the chances of detection and prosecution. This new form of retail market poses a significant challenge to international law enforcement agencies and related legal structures within which these agencies operate. Administrators use e-commerce systems/methods on the majority of drug websites to encourage ethical business practices among suppliers and to let customers know which sellers are the most reliable. Specifically, these systems use conventional techniques such as:  

• Rank sellers.

• Stats on the number of profitable deals a vendor has completed are displayed.

• Demonstrate the shipment's quality.

• Give a score between one and five stars.

The figure below shows a review page from Silk Road, one of the biggest and most sophisticated online drug markets of all time.

Figure 1: Review page from Silk Road (accessed 25 November 2013)

The increasingly sophisticated, user-friendly, and impersonal global network of drug markets makes the illegal drug trade a dynamic area that is subject to fast changes with marketplaces appearing and disappearing regularly. These drug markets host hundreds or in some cases thousands, of individuals who sell drugs, commonly known as “vendors”. 

The Dark web offers significant anonymity for both the vendors and the buyers, who use digital currencies such as Bitcoin to process transactions. The first drug transaction on the Internet is believed that it took place during the 1970s. According to reports, it involved students who exchanged cannabis at the Massachusetts Institute of Technology (MIT) and Stanford University. Since that year, drugs have been sold digitally in both small and large volumes. 

In the late 1990s, discussion forums and groups, related to the manufacture and use of drugs, have also appeared online. One of the most widely known drug forums, called “The Hive”, was launched in 1997, with the purpose of sharing information related to practical drug synthesis. Participants in this forum ranged from self-declared organized crime chemists to pure theorists as well as forensic chemists. As the following figure shows, drug markets appear to be dominated by vendors from the U.S., Australia, and the United Kingdom.

Figure 2: Dominant drug vendors on the Dark Web

Developments in technology are transforming many sectors of modern life and this includes the way that illegal goods are traded. Illegal trade on the Dark Web drug markets is a demonstration of the increasingly complicated nature of the transnational organized crime. Dark Web markets, also known as crypto markets, offer a largely anonymous way of trading illicit services and goods. According to reports, drugs account for around two-thirds of Dark Web market activity. Literally, any type of drug is available to buyers within a few mouse clicks, including new psychoactive substances. This development poses a significant threat to the health and security of citizens around the world. 

All online platforms, including illegal ones, operate to make the exchange of goods and services more convenient. Therefore, platforms will expand and grow if they offer significant benefits to both sellers and buyers. The illegal drugs sold on Dark Web markets are predominantly cannabis, stimulants (cocaine, amphetamines), and ecstasy-type drugs. The drug trade has become increasingly profitable because of the global network of traffickers and dealers who are offering customers ease of availability, convenience, and level of choice. After discovering a drug market, the potential user must register on the website, usually with a referral link, after which they can browse listings. A further password may be required to conduct transactions. These practices better protect users against login credential compromise and facilitate a unique experience of freedom within a libertarian philosophical framework.

The most common drugs sold in drug markets are often those used recreationally or for "parties" (cannabis, ecstasy, MDMA, etc.). The contrasts between "online" and "offline" markets may be explained by the fact that purchases made on online drug markets often need some forethought, which may not be appropriate for everyday use by heroin addicts, for example. The chance of detection is also an essential factor when it comes to Dark Web drug markets. It is obvious that sellers and buyers will be keen to follow markets that have relatively low chances of identification. The combination of TOR, public key algorithms, and cryptocurrencies indeed make the chance of detection very low. There is not much evidence, but both drug buyers and sellers seem to be young, educated, entrepreneurial males from Western Europe or English-speaking countries.

Figure 3: Profile of drug markets vendors and buyers

Anonymization services, such as TOR, enable users to hide, meaning that they can browse the Internet without revealing their personal identification details. Additionally, some services allow websites to be anonymously hosted by hiding the servers’ location — a feature known as “hidden services”. 

Because of these characteristics, dark markets can sell illegal products in an open fashion, providing a highly anonymous comfort to their users. While anonymization services have largely been recognized for illegal, often criminal reasons, their original purpose was different. There are many permissible and legal purposes for which citizens may wish to use these hidden services, for example, news leaks, whistleblowing, anonymous browsing, and many others. In the last few years, there is a dramatic expansion in the distribution of various illegal drugs and sales are estimated to increase exponentially due to the expansion of evolving technologies and the wide use of mobile devices. Discussion forums and chat rooms enable sharing information on the safety of drugs, as well as optimal dosing use. These forums create a community of people in a non-judgmental environment where users feel comfortable with each other. Dark Web forums do not appear to have a specific list of staff members and their associated roles. However, forum administrators and moderators have a mark on their profile cover, making both staff roles easy to spot. 

Many Dark Web drug markets have started using a more advanced layer of security in order to offer more reliable transactions. This is known as an escrow service. In a simple escrow system, when a user buys an item, the fee is temporarily held by a third party. The fee is given to the seller only after the buyer has clarified and confirmed that they have received the product or service. More sophisticated escrow methods use multi-signature, or multi-sig, confirmation transactions. This implies that two out of the three parties involved—the buyer, the seller, and the market—must confirm the transaction, rather than merely the buyer confirming that the order was successful. While multi-sig escrow services may be available in the majority of drug marketplaces, they are not necessarily the best option.

Drugs acquired on black markets are typically delivered to customers via postal services (though occasionally not right to their front door). Customers frequently submit addresses other than their home address when providing shipping information, such as a neighbor's house, an empty house, a company location, or a post office box. This takes place to lessen the possibility of prosecution should the shipment be intercepted. Even if the authorities are successful in finding a package of illegal drugs, it might be challenging to gather enough evidence to bring charges.

Dark Web discussion forums offer detailed guidance on how to avoid the attention of postal services and law enforcement (Boffey, 2019). When using a drug market website, buyers are advised to use pseudonyms and unidentifiable forms of payment, e.g., cryptocurrencies, single-use credit cards, etc. Additionally, those who ship illegal substances are counseled to send goods in quantities that will result in the lightest penalties. If detected, the seller's sentence will probably be light and understate the gravity of the crimes committed.

Furthermore, several Dark Web drug sites pretend to be legitimate shops or some kind of marketplaces with the purpose of defrauding people. At any point, a centralized market escrow has the ability to close down and leave with the buyer's and vendors’ cryptocurrencies. This has occurred in multiple instances such as with the platforms “Evolution”, “Wall Street Market”, and “BlackBank”. In addition, some websites frequently reach a point of good reputation maturity when they have sold enough products and have amassed a sizable number of escrowed cryptocurrencies; many decide to quit with the money rather than competing at the higher-priced, bigger-volume matured product level.

Conclusion to drug markets on the Dark Web

Drug markets on the Dark Web offer consumer incentives and protection that are not available in regular street markets. The literature implies that the drug industry will continue expanding into virtual spaces since these incentives are mostly responsible for determining buyer motivation. Governmental agencies, civic society, academia, the commercial sector, regional police organizations, and international law enforcement must all keep researching internet drug markets. Law enforcement faces considerable difficulties in identifying, controlling, and closing down these markets. Future studies should concentrate on identifying the characteristics of these markets as well as offering advice on investigative tactics, situational drug prevention, and collaborations.