Cryptocurrency’s Link to the Dark Web

In many ways, cryptocurrency and the Dark Web are old friends. As soon as there is an easy way to move illegal goods, certain entrepreneurial minds start whirling! 

It’s important to keep in mind that black market deals and illegal trafficking were not an invention of digital currency, however. 

When Satoshi Nakamoto created Bitcoin, it was definitely a pseud-libertarian response to today’s financial problems and the corruption of traditional authoritative institutions. But the desire to create a decentralized digital currency is much more about the application of new technology and the creation of new beneficial markets.

So what is the dark web? And what does cryptocurrency have to do with it?

Like drug sales, the ransomers typically demand Bitcoin, but also other cryptocurrencies, like Monero. This is because apart from the obvious value of Bitcoin, it is difficult to track. 

It is also not the case that all black market deals are moving dangerous goods. Many are simply making exchanges of personal property. Black markets are just deals that are kept off the books. That is why cash and cryptocurrency are ideal -they are hard to track when the taxman comes a-knockin’. 

And more insidiously, cryptocurrency and cash can be difficult to track when you have stolen millions of dollars, or if you run a website that facilitates drug trafficking. 

The Silk Road

The Silk Road is the most infamous of dark markets, although it is certainly not the only one -there are literally countless dark markets! 

It was named after the original Silk Road, a trade route that connected the Eastern and Western worlds, which has its origins in the 2nd century. Not only were goods traded, but these trade routes also opened up new worlds. Therefore trade allowed the movement of not only silks and spices, but also philosophies and religious beliefs. 

So, Ross Ulbricht’s dark website, the Silk Road, is aptly named, because it is not just illegal trafficking that the dark web enables. The dark web and the abuse of cryptocurrencies remind us that we are still sharing ideas, and it is this libertarian ideal that caused Ulbricht’s hard fall from fame.

Ulbrich started out as an ambitious young computer engineer with an anti-government fervor. But by age 23, however, he was arrested. Presently he is serving two consecutive life sentences plus 40 years, with no chance of parole in a United States Penitentiary. His mother has since moved closer to the prison so she can have regular visits.  

OUCH! Think what you will of Ulbrich’s sentence and the justice of it. But the lesson to take away from this tale of woe is that those who facilitate trafficking can be punished just as severely (if not more so) than those moving illegal goods.

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Criminal Activity

One among Ulbrich’s many miss-steps was that the Silk Road offered an escrow service to the dark web’s users. The Silk Road would ensure that customers received their drugs and dealers received their BTC. 

This dark website ran on Tor, which is a program designed for keeping your browser and identity anonymous. It was originally designed by the US Navy and was later used to protect online identities. 

So with the combination of Tor web browsers, which hide the location of websites and the anonymity of cryptocurrency, Ulbricht was quite successful. To this day, many others continue to successfully move illegal goods and services on the dark web.

Unsurprisingly, since the Silk Road was shut down in 2013, the complexity of the dark web has only increased. As such, more and more resources and efforts are made towards tackling dark web activity.

Since Ulbrich was arrested, tracking dark web activity has only increased. In 2017, police took down two of the biggest successors to Silk Road, AlphaBay and Hansa market. According to a Bitcoin analysis from Chainalysis, AlphaBay and Hansa organized five times as much dark web trafficking as the Silk Road had at its peak.

Monero is the new Black

As Bitcoin’s value and popularity have increased, so its anonymity has diminished somewhat. One of the reasons is that in order for people who do not know one another, they often rely on exchanges to help them connect to other investors. 

This is not a necessarily bad thing, this is the easiest way to facilitate transactions, and to benefit from the security of escrow services. But with increasing KYC concerns and money laundering issues Bitcoin has become more interesting to federal investigations, as such, it has become more difficult to remain truly anonymous using Bitcoin. 

In fact, there have been many cases of forensic accounting investigations, ending in imprisonment and fines. Most nations consider cryptocurrencies part of your taxable income. So it has become a greater concern for individual investors to mind the laws of their bank accounts. 

In response to the diminishing privacy, Monero stepped in to provide an alternative. As a result, Monero has become more popular on the dark market. This is because it is designed to tackle these security issues. However, last year multiple malware attacks were made.These events inspired Monero to publicly speak out against the nefarious uses of their technology. It has also forced them to take a look at their practices and technologies.

cryptocurrency dark web

Dark Markets and Crypto

As much as some would like to believe it, cryptocurrencies were not specifically for illegal trafficking. Just as fiat was not invented for black market deals; it just happens that they both allow anonymity. Something that many people value, and with good reason. 

Anonymity is also not only for criminals! It helps many to protect their own assets from theft or to keep one’s location private so that you do not have psychopaths showing up at your door. And for the more libertarian-minded, it keeps the government out of your pockets.

But the sad fact is that rules exist because there are many that refuse to play by any at all. And the dark web is no different. When computer scientists get smarter, so to do criminals. And when criminals get smarter, so do law enforcement agencies. 

Europol’s Focus

Here are Europol’s main concerns of Dark Web abuses:

  • The dark web remains the key online enabler for trade in an extensive range of criminal products and services. Moreover, it remains a priority threat for law enforcement.
  • Recent coordinated law enforcement activities, combined with extensive Distributed Denial of Service (DDoS) attacks have generated distrust in The onion router (Tor) environment. While there is evidence administrators are now exploring alternatives, it seems the user-friendliness, existing market variety and customer-base on Tor makes a full migration to new platforms unlikely just yet.
  • There are increases in single-vendor shops and smaller fragmented markets on Tor, including those catering for specific languages. Some organized crime groups (OCGs) are also fragmenting their business over a range of online monikers and marketplaces. Therefore, they’re presenting further challenges for law enforcement. 
  • Encrypted communication applications enhance single-vendor trade on the dark web, helping direct users to services and enabling closed communications. Although there is no evidence of full business migration, there is a risk the group functions could become increasingly used to support illicit trade.

If you are interested, Europol offers a comprehensive report of their cybercrime findings which are summarized above.

Dark Markets

The fact remains that dark markets affect us all. And while the FBI and Europol chase after the endless criminal activity, it is the users that are truly affected.

Many dark markets are not your daily crypto-exchanges, but they can pose as them. Dark markets may set up malware, hold servers ransom, or aid in trafficking illegal drugs and arms. 

But they also use CoinHives so exploit digital mining and make off with people’s money, or intercept transactions. 

As this continues to happen law enforcement continues to get smarter and better prepared. The FBI claims that they have already been able to solve the location problem set in place by Tor. 

Moral of the Story

The list of arrests and raids keep on coming. In early 2019, American officials conducted an operation called SaboTor. This project aimed at the vendors selling drugs on the dark web. In just a few weeks, 61 arrests were made for trafficking heroin and methamphetamine.

All that being said, the dark web includes totally innocuous exchanges between completely normal people. 

However, due to the overwhelming increase in criminal activity on the dark web and the use of cryptocurrencies, currencies such as Monero and Bitcoin have become an increasing interest to law enforcement agencies around the world.  

We might not see the outright ban of cryptocurrencies. It would be quite a job to ban open source, free to all technology. Unfortunately, that does not mean that we will not see increased regulations and limitations as criminal misuse rises.

In order to protect your own data and assets, it is essential that you take cyber hygiene seriously. It’s better to be safe than sorry -that may be canned advice, but it is still good advice.

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