Silk Road, the now-shuttered underground website where people could buy and sell illegal goods, was often referred to as the "eBay for drugs," implying that end users were the ones buying the drugs in small amounts.
But Silk Road also facilitated dealer-to-dealer transactions, according to an unpublished but thorough study by two researchers at the University of Manchester and University of Lausanne. The volume of these dealer-level sales may have been large enough to reduce drug violence on the street and raise the quality of products.
Silk Road was doing more than $89 million in annual sales, according to the researchers, who coincidentally crawled all the listings on the site about two weeks before it was shut down by the FBI. Of that revenue, between 31 percent and 45 percent was generated from listings aimed at dealer-level buyers. That means kilos worth of marijuana and amounts of MDMA that translated to between 500 and 50,000 doses.
The fact that Silk Road was doing so much traffic at the dealer-to-dealer level suggests it had a "paradigm shifting" effect on the drug trade, the paper says. The site had an escrow feature that confirmed delivery before issuing payment, which cut down on disputes over money. Its feedback system also promoted good behavior. On the street, dealers compete for turf and customers with violence. But on the internet, the skills needed are different.
SILK ROAD WAS DOING AT LEAST 31 PERCENT OF SALES TO DEALERS, THE PAPER SAYS
"The virtual location and anonymity that the cryptomarket provides reduces or eliminates the need – or even the ability – to resort to violence," write the researchers, Judith Aldridge and David Decary-Hetu. "In the drugs cryptomarket era, having good customer service and writing skills, having a good reputation via ‘feedback’ as a vendor or buyer – may be more important than muscles and face-to-face connections."
The drugs sold on Silk Road were also disproportionately skewed toward recreational drugs like marijuana and psychedlics rather than hard addictive drugs like crack, meth, and heroin. This may be because of the preferences of the initial user base, but it also may have filtered down to buyers at the street level. Once dealers started buying stock online, they may have shifted their inventory to reflect what was for sale on Silk Road.
Aldridge and Decary-Hetu acknowledge the limitations when analyzing the digital black market. Not all listings are public, for example, so they assume their estimates are lower than the actual numbers for total revenue and dealer-to-dealer sales. The Silk Road user base may also be different from the street selling crowd and more like the white, middle class traders in the 2010 study "Dorm Room Dealers," who are less inclined to violence. Despite all the caveats, and the fact that Silk Road was still tiny compared to the world drug trade, they believe Silk Road was a huge innovation for the drug trade.
By Adrianne Jeffries 7 Hours Ago
Aldridge, Judith and Décary-Hétu, David, Not an 'Ebay for Drugs': The Cryptomarket 'Silk Road' as a Paradigm Shifting Criminal Innovation (May 13, 2014). Available at SSRN: http://ssrn.com/abstract=2436643 or http://dx.doi.org/10.2139/ssrnattached
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