Study: Darknet black market turnover up to $650,000 in bitcoins per day

Study: Darknet black market turnover up to $650,000 in bitcoins per day

A study by Kyle Soski and Nicholas Christine of Carnegie Mellon University examines the phenomenon of Darknet markets that have emerged in huge numbers since the closure of Silk Road.



The researchers conducted a  analysis of this "new form of commerce," collecting data from 16 black markets over more than two years (2020-2021).

According to Soski and Christine, over the past four years, black market have formed "a cohesive, dynamic ecosystem that continues to evolve to this day." These black markets use the cryptocurrency bitcoin as a means of payment, generating a significant portion of total bitcoin turnover.

The analysis notes that the trading volume of the black market was significantly underestimated before:
"In some four years since the original Silk Road site was created, total volumes have reached $650,000 daily (averaged over 30 days) and have generally held steady at $300-$500,000 per day, well above the figures previously reported."

By comparison, BitPay, the leading bitcoin payment operator, claims to have processed a total of $158.8 million (about $453,000 per day) last year. Bitcoin trading volume on all exchanges hovered between $2.75 million and $141 million per day in 2014.

The report claims that the markets ecosystem "has proven resilient in the long run to adverse events, such as shutdowns by authorities or fraudulent operators hiding with the money."

About 70% of all purchases were for products related to "easy" drugs such as marijuana, ecstasy and cocaine. However, the authors note, online marketplaces are serious competition for small street dealers rather than "stable criminal organizations that sell large quantities." Only about 2% of merchants managed to sell more than $100,000 worth of merchandise in two years. 18% of the sellers made between $1,000 and $10,000, and about 70% never managed to get past the $1,000 limit.

Soska and Christine end their analysis by suggesting that the authorities reconsider intervention policies against black market. The system's ability to recover makes current law enforcement efforts ineffective given the high demand for drugs from users. Under these circumstances, it is worth shifting the focus to reducing demand and closing the channels for supplying illicit substances into the country, they conclude.

In May of this year, the Australian Federal Police, working with Australian Customs and Border Protection and the U.S. Bureau of Homeland Security Investigations, conducted a six-month joint operation against illegal arms trafficking on DarkWeb. It resulted in the indictment of four Australian residents for attempted illegal weapons purchases, as well as 17 other arrests made in Europe and North America, and the confiscation of $80,000 worth of firearms, ballistic weapons, drugs and bitcoin virtual currency.

Silk Road website founder Ross Ulbricht, who spoke under the pseudonym Dread Pirate Roberts, was found guilty of seven counts, including money laundering, drug trafficking and hacking, and sentenced to life in prison in May 2015.

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