The corruption of the Deep Web began not long after it was built. As early as 2006, a website that came to be known as The Farmer’s Market was selling everything from marijuana to ketamine. It built up a clientele in 50 states and 34 countries before a DEA-led team brought it down in April 2012. The Deep Web isn’t just a source for drugs: there is evidence that jihadists communicate through it and that botnets–massive networks of virus-infected computers employed by spammers–use it to hide from investigators. Even now, it’s the work of a minute or two to find weapons or child pornography on the Deep Web. In August, the FBI took down Freedom Hosting, a company specializing in Deep Web sites, alleging that it was “the largest facilitator of child porn on the planet.” Its owner, a 28-year-old named Eric Marques, is facing extradition from Ireland.
But Silk Road was different. For one thing, it was more discriminating: its terms of service forbade child pornography, stolen goods and counterfeit currency. For another, it didn’t use dollars; it used bitcoins.
When Bitcoin appeared in 2009 it was a radically new kind of currency. It was introduced as a kind of fiscal thought experiment by someone known only as Satoshi Nakamoto, whose true identity is still a mystery. Bitcoin is both a payment system and a currency that is purely digital–it has no physical form. A bitcoin’s worth is determined by supply and demand and is valuable only insofar as individuals and companies have agreed to trade it.
Bitcoins belong to an era in which trust in banks and government has been compromised. Users can transfer them from one digital wallet to another without banks brokering the transaction or imposing fees. The currency is completely decentralized–its architecture owes a lot to Napster’s successor, BitTorrent–and is based on sophisticated cryptography. Bitcoin is essentially cash for the Internet, virtually anonymous and extremely difficult to counterfeit. The Farmer’s Market was vulnerable because it left financial tracks in the real world. Silk Road didn’t.
Like Tor, Bitcoin has entirely legitimate reasons for existing. As far as anyone can tell, it’s primarily used for legal purposes–scores of businesses accept bitcoins now, including Howard Johnson, the dating website OKCupid and at least one New York City bar. But Bitcoin’s digital slipperiness, when force-multiplied by the anonymity of the Deep Web, creates a potential platform for criminal transactions unlike anything the real or virtual world has ever seen. That potential was realized by the Dread Pirate Roberts.
JOHN GALT 2.0
Ross Ulbricht grew up in Texas, an Eagle Scout who went on to study physics at the University of Texas in Dallas. He was a fan of fellow Texan and libertarian Ron Paul; both studied the Austrian school of economics and the work of its father, Ludwig von Mises, who believed in unrestricted markets. Ulbricht earned a master’s in materials science and engineering at Pennsylvania State University. Acquaintances describe him as bright and straitlaced. “He wasn’t the center of conversation or the center of anything,” says a friend who claims to have briefly dated him last year. “He kind of set himself in the background.”
By the time he graduated, Ulbricht had become interested in the idea of the Internet as a venue for perfecting free markets. His greatest enemy–according to his LinkedIn profile–was the government. “The most widespread and systemic use of force is amongst institutions and governments, so this is my current point of effort,” he wrote. “The best way to change a government is to change the minds of the governed, however. To that end, I am creating an economic simulation to give people a firsthand experience of what it would be like to live in a world without the systemic use of force.”
After graduating from Penn State in 2009, Ulbricht went to Sydney, Australia, to visit his sister. It was there, allegedly, that he began working on what would become Silk Road and transforming himself into the Dread Pirate Roberts. By then, drug dealers were already active on the Deep Web, but their businesses tended to fail for two reasons: the money changing hands was traceable, and it was difficult to build trust with clients. Roberts would solve both of those problems. The double layer of anonymity created by Tor and Bitcoin made the money virtually untraceable. To establish trust, Roberts looked to two temples of legitimate commerce for his ideas: Amazon and eBay.
He was a quick study. Users of Silk Road describe a sophisticated, full-featured experience complete with buyer and seller reviews and customer forums. “When deciding whether or not to go with a vendor, I read the feedback on their page and also ratings from a few months ago,” says one Silk Road client, who declined to be identified. “I also go to the forums and read the seller’s review thread, and depending on the substance, I’ll go to an ‘avenger’s’ thread, where people from the Silk Road community post lab results for individual products.” When transactions did go south, there was a dispute-resolution system. “Honestly it was like a candy store,” says the user.
Products simply arrived by regular mail. “It generally looks like junk mail or information about moving here, or traveling there, or consultation stuff,” the user explains. “Usually, when opening the package, you still won’t know there are drugs in it unless you’re looking for them.” Silk Road’s community had its own subculture, which skewed toward political outliers. “One memorable thread asked whether we were there for the drugs or the ‘revolution,'” recalls the same user. “A lot of people answered ‘came for the drugs, stayed for the revolution.'” Dread Pirate Roberts, or simply DPR, was hailed by Silk Road customers as an antiestablishment hero.