3 Oct 2013

All our money is gone’ – Silk Road closure hits bitcoin

Silk Road was the Amazon or eBay of the “dark web”. Now former buyers claim they have lost thousands in bitcoins after it was shut down, the virtual currency’s value has tumbled.

There are many ways to get hold of illegal drugs, weapons or fake IDs. But most involve dark alleys and high risk.

Launched in 2011, Silk Road became the premium service for customers who wanted to stay in the shadows while they browsed and then made purchases from the comfort of their own home. Some buyers were interested in the heroin and hit-man hiring the site offered; others used it to get prescription-only drugs, like Ritalin or Dexamfetamine, or to source some good quality marijuana.

The site has now been shut down, the founder “Dread Pirate Roberts” arrested and suspected of, among other things, soliciting a murder for hire against a user who was threatening to release other users’ identities.

After the FBI seizure the value of the digital currency, bitcoin, tumbled by around 20 per cent before climbing back slowly. The exchange went from $125 to $90, before rising to $115 on the Bitstamp exchange. By mid afternoon on Thursday, this had dropped again slightly to $111.80.

Many former Silk Road users are not happy. Apart from losing access to an illicit marketplace, some reported concerns that their data may have be compromised and about losing their bitcoins. A whole community on Reddit was dedicated to Silk Road, r/SilkRoad, and the FBI seizure has prompted many heated discussions on the site.

Honestly I think the year or so I spent selling on SR (Silk Road) was one of the most satisfying things I’ve ever done Silk Road seller

“Ok, so what can we spend our buttcoins [sic] on then?!” wrote Throwaway_Derps.

“All our money is gone,” Jayman62 wrote. “I just loaded mine 10 minutes before they seized it. Im f***ing screwed. It wasn’t all my moey and its very dangerous people I now owe large sums too. Im a dead man. [sic]”

Bitcoin bust?

Silk Road was considered one of the first major sites to use the anonymous digital currency, bitcoin. In 2012, it was found to represent between 4.5 per cent and 9 per cent of all bitcoin transactions.

Bitcoins now buy a range of purchases, even a pint of beer. But it was the only currency accepted on Silk Road. One user told Channel 4 News the only reason she and her friends bought bitcoins in the first place was to access Silk Road. She had never heard of it until coming to the end of an MA, and heard that students were using Ritalin to help them study.

“I did some Googling, and there were instructions readily available on the ‘normal’ internet about accessing a Tor browser,” she said. “I bought some bitcoins – which again, is really easy to do – logged on, and you just typed in whatever drug you want.”

Without the distraction of the Silk Road, I believe that bitcoin will become more acceptable as an alternative currency Michael Parsons

Buyers transferred bitcoins to Silk Road, messaged a seller, and the money was “frozen”. When the package arrived, the buyer confirmed the delivery, and the seller picked up the fee.

In its lengthy and detailed complaint, the FBI estimated that the site had generated sales of over 9.5m bitcoins, and collected commissions totalling over 600,000 bitcoins, “roughly equivalent today to approximately $1.2bn in sales and approximately $80m in commissions.” The US government now has $3.6m of bitcoins after the seizure.

But despite the falling market value, some analysts think that the Silk Road closure will actually benefit the digital currency. “Without the distraction of the Silk Road, I believe that bitcoin will become more acceptable as an alternative currency to both governments and the ‘yet to be convinced public’,” Michael Parsons, finance consultant and bitcoin advisor, told Channel 4 News.

Read more: A lesson from Silk Road – nothing dies online

Code of conduct

Aside from losing money, some former Silk Road users argued that the site was the safest way to access drugs. “People are going to buy illegal drugs no matter what,” wrote slimd1995. “If someone’s buying coke I’d much rather it be done on Silk Road where you can verify purity, not on the streets where it’s nearly impossible to find it pure.”

Among sellers, there appeared to be a strict code of ethics, that appeared to come from the top. Founder Ross William Ulbricht, who went by the code name “Dread Pirate Roberts” saw himself as a digital libertarian. The Silk Road sellers’ guide stated: “Do not list anything who’s [sic] purpose is to harm or defraud, such as stolen items or info, stolen credit cards, counterfeit currency, personal info, assassinations, and weapons of any kind. Do not list anything related to paedophilia.”

Just one month ago, a former Silk Road seller started a Reddit forum offering to answer any questions about the site.

“Honestly I think the year or so I spent selling on SR (Silk Road) was one of the most satisfying things I’ve ever done,” he wrote.

“There’s a reason why I’d never sell H or Meth or even cocaine, I didn’t want to be part of somebody’s problem,” he added.

“I thought I was helping someone ruin their life I wouldn’t be able to live with myself. I never sold anything I would personally consider harmful.”

On staying discreet, he wrote: “It’s safe if you do it right. Packaging is extremely important, as is discretion. Possibly the hardest thing was controlling my spending habits so that people didn’t immediately start to question how I suddenly had massive amounts of money.”

After news of Silk Road’s closure broke, Reddit users quickly flocked to his forum with many checking that he had not been traced. He has not yet replied, but one wrote: “Looks like you pulled out at the right time.”