Silk Road, Part 1: The United States vs. the Internet

Editor’s Note: Points readers have no doubt followed the story of Silk Road with some interest, given its role in establishing a new paradigm in drug distribution. Today guest blogger Depaulo Vincent Bariuan begins a two-part series on Silk Road by explaining the now-defunct website’s relationship to the cryptocurrency Bitcoin, suggesting that we look at Silk Road’s fate not only in terms of drug law but also as a key site in the government’s efforts to exert more control over life online. Vincent has a B.A. in Asian Studies from Florida State and an M.A. in Film Studies from Columbia, where his scholarship focused on new media. Since graduating, he’s worked in the video game industry.

On July 12, 2012, the Australian Federal Police raided the home of Melbourne resident Paul Leslie Howard. Tipped off by the 46.9 grams of MDMA and 14.5 grams of cocaine mailed to his residence over the course of 2 months, the police also recovered the following in the bust: marijuana, digital scales, clip seal bags, $2300 in cash, a money counter, and 35 stun guns disguised as mobile phones. But this wasn’t an ordinary drug bust – Howard wasn’t connected to any widespread drug syndicate. Most of his product was sent not from any nefarious location but from various households in the Netherlands. In fact, all of his drugs were acquired on the internet through a website called Silk Road. Taken down by the federal authorities this past October, Silk Road had become known as the internet’s one stop shop for any imaginable recreational drug.

Giving the people what they want.

Giving the people what they want.

Much of what people have learned about Silk Road since its takedown comes from the accounts journalists and bloggers have written about the website.

Eiley Ormsby, an Australian reporter, wrote a piece that described what it was like to use the service – in fact, her writings have served as the primary account of Silk Road in Paul Leslie Howard’s trial. Profiling a young urban professional who, according to Ormsby, is “not what most people envisage when they think of the habitual drug user,” the article outlines what it was like to browse Silk Road:

She flicks on her laptop and a professional-looking website displays pictures and descriptions of every drug imaginable. There’s cocaine, ecstasy, LSD, Afghan hash, Viagra, steroids and weight-loss supplements. She tells me she has favourite sellers from Europe and North America with whom she places orders and has the drugs sent directly to her apartment via the post.

The secret to Silk Road’s success stemmed from all the unique features of the internet that Silk Road took advantage of to remain decentralized, anonymous, and most of all a tight-lipped secret. First, in order to access Silk Road, one needed access to a program called “Tor.” Once an acronym for “The Onion Router,” Tor allows internet users to do two things: access the internet without leaving behind all the information that can serve as a digital breadcrumb trail back to your computer; and access parts of the internet Google and Yahoo can’t find, intentionally hidden websites that are commonly referred as being part of the “deep web” (or as Ormsby puts it, the “dark web”).

Once accessed, it became clear that the website itself didn’t sell anything – much like eBay, that was left to independent vendors who came hawking a variety of wares, anything from cannabis products and prescription medication to fake IDs and the Anarchist’s Cookbook. Vendors were rated and buyers left feedback for each vendor, serving as the site’s vetting process for whether dealers delivered good or bad product. Silk Road users weren’t supposed to worry about bodily threat from a deal gone wrong or bad experiences from an impure product – the seller’s feedback page gave them the information they needed to feel safe, all without leaving the house.

Source: bitcoinexaminer.org/14-awesome-bitcoin-startups/

Source: bitcoinexaminer.org/14-awesome-bitcoin-startups/

Instead of credit cards, Silk Road took a different currency: Bitcoins. First developed in 2009 by an unknown Japanese computer scientist, Bitcoin was created initially as a “stateless” currency. Its value is created not through fiat or by association with a precious metal, but through complex mathematical algorithms built into Bitcoin’s software, controlling the supply of total bitcoins available on the internet. A political statement as much as it is a monetary unit, hackers first started using the currency as a way to pay for quasi-legal services outside of government oversight, but other entities saw the utility of a currency that was separate from our current system of commerce, one that sidesteps the problem of recessions and capitalist crises.

Now, there are nearly 12 million bitcoins in circulation around the world, that were trading as of October 27, 2013 at 2:08 p.m. EST at $189.50 USD for every 1 bitcoin (the value fluctuates wildly day to day). Considering that in today’s hyper-connected world all transactions leave digital thumbprints that not only mark us by name and age but also by buying habits and browsing history, bitcoin’s anonymous nature (theoretically, bitcoin transactions are untraceable) has made it very popular with a disparate coalition of people who would prefer their governments excluded from their private transactions.

It’s clear to see why Silk Road was such a popular place for those seeking scheduled recreational drugs. Writers such as Ormsby claim that users were willing to deal with the higher price point of their purchases in favor of not having to encounter unfamiliar people in even more unfamiliar settings, all behind the safety of an anonymous internet site. When presented with the stereotype of “the drug deal,” recreational users opted for the path that felt less criminal and more like a legitimate business transaction. The website succeeded in hiding its presence so well that local and state authorities were not aware of Silk Road’s existence until Gawker ran an exclusive expose on the anonymous black market website in the summer of 2011.

Even though Silk Road only amounted to a very small fraction (.00001%) of the global drug trade, shutdown of Silk Road and other anonymous marketplaces became utmost importance for the DEA and some US senators by the following year. Local Austin, TX NBC affiliate KXAN ran a piece on Silk Road with a panic-fevered perspective, relying on the painful recollections of recovering addicts and hospital clinicians to discuss how Silk Road “sounds really good to an addict” and that such a thing could be “happening online at the fingertips of our children is a terrible thing.”

Chuck Schumer browsing Silk Road.

Chuck Schumer browsing Silk Road.

New York senator Charles Schumer blasted the website, claiming that Silk Road “represents the most brazen attempt to peddle drugs online that we have ever seen.” Schumer also took the time to blast another enemy, one that seems to have nothing to do at all with public safety. The Senator made comments about the bitcoin currency, claiming it enabled nothing but nefarious dealings. “It’s an online form of money laundering used to disguise the source of money,” he would go on to say, “and to disguise who’s both buying and selling.”

With the reality of the National Security Agency’s PRISM program just starting to settle in among the American public, we are coming to comprehend what “digital rights” for US citizens really look like, in terms of what we are allowed to do and not allowed to do on the internet.

As it stands, anonymizing software such as Tor and peer-to-peer currencies such as bitcoin are not illegal to use. But the United States is no stranger to enacting far-reaching laws under the guise of public safety. The “Marihuana Tax Act of 1937” made cannabis possession in the United States a punishable act, even though its consumption had been legal for most of the country’s history. Border-state panic about Mexican drug mules and establishment dismay at a newly “jazzy” youth culture commonly identified with marijuana use demanded new laws to control what they feared would lead to a society of criminals and degenerates. The Marihuana Tax Act of 1937 became law, in spite of the facts that the American Medical Association opposed it due to dubious evidence of marijuana’s illicit effects and that few physicians even knew that marijuana was a slang term for cannabis.

silk3n-1-webTo the dismay of net neutrality proponents, hackers, and libertarians everywhere, Silk Road was brought down by the FBI on October 2, 2013. The mysterious owner of the website – only known under the alias Dread Pirate Roberts – was revealed to be Ross Ulbricht. The 29-year-old physics student became known as the kingpin of an online drug empire which was once estimated to bring in over $1.2 billion in revenue.

Part 2 of this series next week will examine Ross Ulbricht, the man behind the Silk Road empire, and consider one of the most surprising facts about Silk Road: much like bitcoin, Silk Road constituted a political statement.

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6 thoughts on “Silk Road, Part 1: The United States vs. the Internet

  1. The most striking thing about the Silk Road is not that it is a new way to move contraband, but that it is the latest recycling of the effects of new technology on Prohibitions.

    When the first hot air balloons were launched, Thomas Jefferson mused that they would be used to smuggle French wines past British customs. From the time Alcohol Prohibition was instituted, law enforcement has struggled against the use of telephones to expedite illegal commerce. In the 1970s radio-controlled model airplanes were used to carry kilogram amounts of cocaine from Mexico into Texas. Soon thereafter, the Colombian Cartels were using submarines. On-line pharmacies have been the bane of Drug Warriors since the dawn of the Internet.

    In short, the Silk Road should not be seen as an exceptional phenomenon, but should be examined as part of a long-expanding technological conflict between Prohibitionists and marketeers.

  2. I never would have guessed the world drug trade is $12,000,000,000,000,000.00 (12 quadrillion dollars). If my arithmetic is right, that’s “$1.2 billion” divided by “.00001% of the global drug trade”. Maybe the percent is an annual figure and the $1.2 billion is over the full life of silk road. But even then, on average, everyone on earth would EACH be spending a million dollars a year on drugs.

    It seems somebody’s off by at least an order of 10,000. And if the error is divided in half for each article they still come in at 100 times too high for one and 100 times too low for the other. Go figure. LOL.

  3. Dave, I think the site brought in that much, not just the drug part. Silk Road wasn’t just a drug website. Still, the percentage seems a bit low.

  4. I think it is low, because if that did make up for the error, wouldn’t it be more accurate for the sentence to read:
    “The 29-year-old physics student became known as the kingpin of an online drug empire which was once estimated to bring in over $1.2 billion in [total product (non-drug and drug)] revenue, [of which the drug sales were .01% of that total revenue.]” ??
    Didn’t the one article say the drug sales were about $14 million? I guess that would be 1% of total sales. Hardly a “drug” empire.
    Yes, I agree with those who say silk road (and bitcoin) are strong political expressions. That’s when descriptive statistics go haywire. It depends on who’s talking.

  5. Pingback: Silk Road, Part Two: Ross Ulbricht vs. The World | Points: The Blog of the Alcohol and Drugs History Society

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