Analysis of Silk Road’s Historical Impact on Bitcoin

[Adam Back]

Great article, good to see bitcoin is at this stage less influenced by news
flow and transaction volume of silk road like activities.  (Silk Road while
interesting to proponents of agoric defacto legal reform by weakening
enforceability of drug laws, which it seems was DPR/Ulbricht was a proponent
of, the strong short-term success might have been hazardous to bitcoin
itself.  And I think doesnt really rely on bitcoin anyway as there are in
many countries cash pre-paid credit-cards and similar types of systems.)

Its a curious effect that part of bitcoins bootstrap to non-toy price, may
have been accelerated by silk road itself historically.  I suppose its not a
unique situation that criminal privacy or non-criminal but privacy sensitive
business areas (eg online porn) are innovators in adopting new technolgy
with some media reputation for privacy.

I am not sure bitcoin is particularly anonymous given the fact exchange
interactions are covered by AML/KYC and all payments publicly logged in the
clear for anyone to see, and that mixing attempts have been shown to be weak
and of questionable effectiveness by statisticians and data analysts
(complete with pretty graphs), and that most clients have no automated coin
control or sub-wallet feature.  There maybe more conventional higher
anonymity systems like perhaps pre-paid credit cards, phone cards and such
things which can actualy be bought for paper cash, and sometimes deposited
electronically (I'm sure criminals and money laundering experts have a
better understanding of which systems provide anonymity, those were just off
the top of head non-bitcoin, non-cash, payment anonymity examples.  An
envelope of cash in the mail probably works too though I think that is
technical illegal to do even with nominal amounts in some countries).  I'm
quite sure the criminal options at all levels of scale for payment remote
and local involve many more options than bitcoin.  At the higher end it
blends with and solicits and obtains likely knowing service from established
but greedy market players.  You can see the odd dataset, eg HSBC being
caught laundering $880m of drug cartel and even dirtier money.


At least to say its clearly quite dangerous to rely strongly on bitcoin
anonymity for non-technical people, or even technical people without serious
operational attention and careful tool analysis and selection.


A few trivia items from the Silk Road story that seem ambiguous - they
opened a package coming from canada to him with fake ids.  Seemingly he
wanted fake ids for some reason relating to operating the servers (more on
that next).  But why did they open his package?  Bad luck random spot check? 
Or (more plausible) he bought the fake ids from an ongoing fake-id sting
operation in Canada?  Or alternatively evidence of parallel constructon
disguising NSA Tor backtrace?

About why did he even think he needed fake ids.  Surely you only need a
physical fake id if you are renting servers in person.  But why would you do
that - physical servers you interact with physically are a needless risk no
- if backtraced to IP by Tor attack, the physical connection is made?  (Why
not rent cloud servers?  If renting cloud servers why not pay with prepaid
credit cards bought for cash (or bitcoin)?  If need to send fake ID to rent
cloud servers, surely its lower risk to photoshop them than accept physical
delivery of illegal forged ID to your own address, from a criminal or sting
fake-id service with a copy of your photo!  I dont really get it.

Adam

On Mon, Oct 07, 2013 at 11:37:56AM +0200, Eugen Leitl wrote:
>
>http://thegenesisblock.com/analysis-silk-roads-historical-impact-bitcoin/
>
>Analysis of Silk Road’s Historical Impact on Bitcoin