Black Market Drug Site 'Silk Road' Booming: $22 Million In Annual Sales

Eugen Leitl eugen at
Wed Aug 8 03:31:31 PDT 2012

Black Market Drug Site 'Silk Road' Booming: $22 Million In Annual Sales

In the year since Senator Joe Manchin called for the baudaciousb drug-selling
website Silk Road to be bshut down immediately,b the worldbs most
high-profile underground pharmacy hasnbt just survived. With $22 million in
annual sales and around double the commission for the sitebs owners compared
with just six months ago, its black market business is booming.

In a research paper (PDF here) released earlier this month, Carnegie Mellon
computer security professor Nicolas Christin has taken a crack at measuring
the sales activity on Silk Roadbs underground online marketplace, which runs
as a bhidden serviceb on the Tor network and uses tough-to-trace digital
Bitcoins as currency, two measures that have helped to obscure its sellers,
buyers and operators from law enforcement.

His findings: the sitebs number of sellers, who offer everything from cocaine
to ecstasy, has jumped from around 300 in February to more than 550. Its
total sales now add up to around $1.9 million a month. And its operators
generate more than $6,000 a day in commissions for themselves, compared with
around $2,500 in February.

Christin cautions that his study only looks at a six month period of Silk
Roadbs sales, and that a big part of the sitebs measured success comes from
appreciation in the highly volatile Bitcoin currency Silk Road trades in,
which has itself increased close to 70% in value over the course of
Christinbs study. But even accounting for changes in that crypto currency,
the sitebs numbers point to very real growth. bItbs very bursty and spikey,
but overall the numbers are moving up,b says Christin. bItbs a stable
marketplace, and overall itbs growing steadily.b

Silk Road's revenue over time. (Click to enlarge.)

To dig up Silk Roadbs sales numbers, Christin ran a program that crawled the
site and scraped its content, including sales and pricing information, about
once a day for a six month period. He used the feedback reviews posted to
sellersb pages to count sales and calculated the site operatorsb revenue
based first on their 6.23% commission, and then later using the tiered model
with higher commissions that the site switched to in the middle of the period
he studied. The results, with both commission models, are shown at right.

What surprised Christin most was the high level of customer satisfaction:
97.8% of customers gave sellers positive reviews, despite the fact that Silk
Roadbs use of Torbs IP-masking abilities and Bitcoin makes it nearly
impossible for anyone who uses the site to identify anyone else. bOn a site
like Silk Road, whereb&most of the goods sold are illicit, one would expect a
certain amount of deception to occur. Indeed, a buyer choosing, for instance,
to purchase heroin from an anonymous seller would have very little recourse
if the goods promised are not delivered,b Christin writes. bSurprisingly,
though, most transactions on Silk Road seem to generate excellent feedback
from buyers.b

Silk Road's number of sellers over time. (Click to enlarge.)

Christin was also struck by the fact that Silk Road has managed to grow
steadily even with its complete lack of advertising. Despite requiring
visitors to run special software and know a long and impossible-to-remember
URL that doesnbt show up in Google results, it now generates roughly as much
revenue, comparing with numbers from another recent study, as illegal online
pharmacies that drum up sales with spam emails and black hat search engine
tricks. The site hasnbt had much of a public profile lately, either: After
some early notoriety from a Gawker story on the site last year and some
political attention to the sitebs criminal activities from Senator Chuck
Schumer and others, itbs mostly slipped off the media radar, says Christin

bIf you imagine them selling paperclips and buttons, theybre a stable
business thatbs growing without advertising or being in the news, just by
word of mouth,b says Christin. bThat was the surprising thing: How normal the
whole thing seems.b

The fact that it doesnbt sell paperclips and buttons, however, but rather
psilocybin and benzedrine, means that law enforcement likely still has Silk
Road in its sights. The business takes significant precautions: Tor masks
both the location of its servers and of its users by ricocheting Internet
traffic through proxies, and Bitcoin makes its payments difficult to trace by
avoiding traditional banks or payment companies. But users on the site have
worried in forum conversations recently that its operators may have been
infiltrated by law enforcement, and that several of its high-profile sellers
have disappeared.

Eight operators of another anonymous drug-sales site, the Farmerbs Market,
were indicted in April, possibly after the encrypted email service Hushmail
decrypted their communications and gave them to police.

According to the Farmerbs Market indictment, however, that site sold around
$1 million worth of illegal drugs between January of 2007 and October of
2009. With Silk Road generating close to twice that amount in a mere month,
its operation has reduced its recently-busted competitor to a street-corner
hustler by comparison.

Read Christinbs full paper on Silk Road here:

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