The Use Of Cryptocurrencies On The Dark Web

Introduction to cryptocurrencies

An anonymous digital currency has been a concept since at least 2008. The domain "bitcoin.org" was registered on August 18, 2008. A paper named "Bitcoin: A Peer-to-Peer Electronic Cash System" was later that year, on October 31, posted to a cryptography email list. The paper explored different ways to use a peer-to-peer network to construct a system for electronic transactions without depending on a central authority. It was written by a person using the supposed pseudonym Satoshi Nakamoto. The Bitcoin (BTC) technology was created on January 3rd, 2009, with Nakamoto "mining" the first bitcoins.

One of the most lasting mysteries of Bitcoin is the real identity of its founder. Numerous people have asserted their identity as Satoshi Nakamoto over the years. Bitcoin’s founder remains unknown to this day, and little is known about him. It is believed that his last email communication was in April 2011. Nakamoto was ranked as the 15th richest person in the world as of November 2021, according to estimates, with a net worth of 73 billion US dollars. His crypto holdings are approximately between 750,000 to 1.1 million BTC. The figure below shows some of the cryptocurrencies’ basic features. 

Figure 1: Cryptocurrencies’ basic features

A cryptocurrency (crypto) is a type of digital or virtual currency that uses cryptographic techniques to protect it. Due to its decentralized design, it is extremely difficult to counterfeit or double-spend. Advanced Blockchain Technology, the foundation of cryptocurrencies, is a mechanism for storing data that is nearly impossible to alter, hack, or manipulate. The figure below shows how Blockchain works.

Figure 2: How Blockchain works

The core idea behind cryptocurrencies was to create a secure, fast, reliable, and anonymous way to transfer currency from one person to another. Since Bitcoin’s release in 2009, its value has skyrocketed, and recently, it has been labeled by its users as the new “digital gold”. As of today, Bitcoin’s market cap exceeds 100 billion US dollars, and millions of people worldwide trade this currency daily. Rival cryptocurrencies started to appear in 2011, with the introduction of Litecoin, Namecoin, and Swiftcoin.

Nowadays, there are thousands of cryptocurrencies in existence, with the most popular being Bitcoin and Ethereum. The figure below shows the number of cryptocurrencies globally from 2013 to October 2021.

Figure 3: Cryptocurrencies’ growth over the years

Use of Cryptocurrencies on the Dark Web

Of all of Bitcoin’s uses, e.g., as a currency, a payment method, a commodity, a technology, and a market hedge, probably its most notorious use is as a facilitator of online illegal transactions. In Bitcoin’s early years, the currency quickly emerged as the primary payment method of choice for illicit activities, including human trafficking and child pornography. Throughout the years, Bitcoin has allowed anonymous Dark Web transactions on eBay-like markets, avoiding the use of conventional currencies and thus the easy intervention of law enforcement.

Specifically, one of the first Dark Web drug markets, the “Silk Road”, relied heavily on Bitcoin. Thanks to Bitcoin’s unregulated and borderless payment system, Silk Road became a key player on the Dark Web. The founder of Silk Road, Ross Ulbricht, had successfully created a platform where it was easy for someone to buy all kinds of products from the comfort of his/her home. The anonymity offered by Bitcoin made Silk Road highly attractive to both the sellers and the buyers. Bitcoin’s anonymity, along with the cryptographic mechanisms of TOR, has led to an explosion of crime facilitated via the Internet

In 2013, after months of investigating the Silk Road community, the FBI eventually managed to take down Silk Road and arrest Ulbricht in the San Francisco Library (US). The FBI agents took Ulbricht’s laptop and collected all damning evidence. After the arrest of Ulbricht, more than $1 billion worth of Bitcoins were seized and kept in a secret place. Since that incident, critics have brought up the illicit use of Bitcoin on the Dark Web as an argument against the push for widespread acceptance. The figure below shows what the Silk Road website looked like after its seizure by the FBI.

Figure 4: Silk Road’s Seizure by the FBI

Conclusion to Cryptocurrencies

Without a doubt, cryptocurrencies have brought many benefits (i.e., privacy and anonymity) and have the potential to enable financial and social growth in many societies, including developing countries. However, protecting privacy advocates should not come at the expense of empowering human traffickers, child abusers, and drug lords. 

Therein lies the challenge for law enforcement and regulators: to devise approaches that walk the fine line of safeguarding liberal principles in an age of information control and, at the same time, identifying and eradicating the most heinous crimes on the Dark Web. For this reason, tackling crypto-related crimes requires cooperation between the government, law enforcement, the private sector, civil society, and academia.