While living in San Francisco in 2017, I became fascinated after learning the story of Ross Ulbricht, the alleged founder of the dark clandestine website hosted on the Dark Web where anyone could trade anything–drugs, hacking software, forged passports, counterfeit cash, poisons under perceived-anonymity of Bitcoin and the onion-routing protocol web browser, Tor.
It all started in 2011 when a 26-year-old theoretical physicist turned his attention from his online bookstore to a greater vision, inspired by libertarian philosophy and the cryptocurrency Bitcoin, to creating the ultimate free market: The Silk Road. Named after the network of trade routes which connected the East and West, The Silk Road was central to the economic, cultural, political, and religious interactions between these regions from the 2nd century BCE to the 18th century.
Ulbricht completed the development of the dark web marketplace which had similar features to Amazon.com but a much wider offering of products and services, making transacting for everything from drugs to hackers-for-hire easier than ever before.
Happening simultaneously, an unknown cryptography expert who used the alias Satoshi Nakamoto developed the worlds first currency and payment network not controlled by a national government: Bitcoin. Originally known only among the internet privacy and cryptography communities, Bitcoin quickly emerged in 2011 as the currency of choice for drug dealers and buyers transacting on The Silk Road.
The Rise of Bitcoin and Fall of Silk Road
Thanks to the successful integration of Bitcoin into the marketplace and the anonymity provided by the TOR onion routing protocol, The Silk Road rapidly grew to a $1.2 billion empire. It wasn’t long before the media and US Federal Government caught wind of the new website where anyone from teenagers and weed dealers to terrorists and black hat hackers could buy and sell contraband under a veil of anonymity. The result was an epic two-year manhunt for the sites mastermind who was going under the pseudonym Dread Pirate Roberts (DPR).
On May 29, 2015, Ross Ulbricht was sentenced to double life imprisonment plus forty years, without the possibility of parole for his role as the mastermind behind The Silk Road. While the US Government might have succeeded in closing down the marketplace, they failed to foresee that new marketplaces would quickly be built to fill the void.
After the government learned of the digital currency used in transactions on The Silk Road, it wasn’t long before they began funding the development of methods and technology that could connect transactions to identities and unveil the cloak of anonymity that Bitcoin provided. As a result, hundreds of dark web vendors have been arrested and the dark web marketplaces have realized Bitcoin isn’t as secure as they once thought. To survive, marketplaces would need an even more private, decentralized cryptocurrency.
Enter Monero, an open-source cryptocurrency originally created by Nicholas van Saberhagen in April of 2014, with a focus on fungibility, privacy, and decentralization. Unlike Bitcoin, Monero uses an obfuscated public ledger which allows anyone to broadcast and send transaction but no outside observer to distinguish between the source, amount, or destination by obfuscation.
A recently published report from Chainalysis shows that Bitcoin transactions on the dark web grew from $250 million in 2012 to $872 million in 2018, surpassing $1 billion in 2019. The report also notes that illicit transactions account for less than 1% of transactions, down six percent since 2012. That said, the United Nations estimates that the amount of money laundered globally in one year is 2 to 5 percent of global GDP–between $1.6 trillion and $4 trillion.
In September of 2020, the IRS offered a bounty of $625,000 to anyone who could break Monero and Lightning according to CoinTelegraph.
Dark Web Marketplaces Shift To Monero
After another dark web marketplace, Empire Market, was shut down in what is believed to have been an exit scam on August 26th, 2020, it wasn’t long before White House Market took over the marketshare. Unlike Empire Market, White House Market uses Monero as the digital currency.
Since Empire Market went offline and vendors and buyers moved over to White House Market and began learning how to transact with Monero, the trade volume, market cap, and value has soared:
It’s my prediction that Monero will continue to grow in transaction volume and value as a result of the flow of dark web transactions. Bitcoin is needed to purchase Monero on most exchanges, and while the US Government has forced several cryptocurrency exchanges to delist Monero, the currency has not only survived but thrived. One of the latest updates to Monero allows users to exchange Bitcoin for Monero instantly, without having to transact through a cryptocurrency exchange. That means Monero can continue to be used independent of any exchange through users own digital wallets.
As of writing this article, Monero appears to be the biggest winner of all the privacy coins and the biggest competitor to Bitcoin based on the core principals that Bitcoin was built upon.