What can we learn from the fall of Silk Road?

  • Date 4th June 2015
  • Author Mark Clayton
What can we learn from the fall of Silk Road?

One of the biggest entrepreneurs of the second Internet boom, with an estimated $1.2 billion in sales and $80 million in commissions, went to prison this week – for life, without parole. His name is Ross Ulbricht and he may have just paved the way for the next shake-up in ecommerce.

Ulbricht, AKA Dread Pirate Roberts, was the mastermind behind the Silk Road marketplace, a prolific black market website with almost one million registered accounts. If you like buying illegal drugs or indeed read the news, you’ll have heard of it.

What goes on Tor, stays on Tor

Named after an historic trade route connecting western and eastern markets, Silk Road ran on the anonymous Tor network and combined with traceless bitcoin payments, it was the perfect haven for illegal trading. In fact, probably represents the greatest use of the bitcoin currency to date, albeit illicitly.

Modeled on the likes of Ebay or Amazon, Silk Road was a formidable selling platform. A far cry from the old model; a dodgy looking bloke in a parka jacket trying to push a bag of Ajax and ground-up light bulb in a pub toilet. It had a feedback system, product reviews, dispute centres, forums with detailed instructions for sellers to evade law enforcement and a trusted community. It represented safety and quality to its users. It had kudos. The type that takes years, even decades for regular shopping sites to achieve similar, and Silk Road did it in a matter of months. What’s more, apart from the odd post in a drug forum or YouTube upload, it had little or no promotion.

End of the road

It was perfect except for one flaw, Ulbricht himself. A good-looking 29 year old libertarian who lived in our very own Bondi for a short period. Whist actively running the site, he was surfing, exercising and ordering Acai smoothies from the local juice shop. You probably stood next to him in a queue, oblivious that he was kingpin of the world’s largest black market commerce. A sort of healthy eating Walter White, he was a hot target for the FBI – someone who could be held accountable.

When it comes to drug busts in the old fashioned, tangible world, you’d arrest people low down in the chain, at say street level, then work your way up towards the kingpin, cutting bargains with low level perps along the way. But Silk Road was drug dealing 2.0. It represented a new structure, a master at the top of the pile with no discernable chain apart from a scatter of dealers on the site. Dealers with usernames like Batman73. “Hey, PM me if you want to chat about The Dark Knight Rises, or y’know, you wanna buy some uncut heroin”, his profile might read.

They weren’t regular drug dealers. It was geek meets gangster, they had technical skills, programing ability, hiding away in digital shadows. The Steve Jobs of contraband sitting at the top, raking in millions from drugs, weapons, fake IDs and funding contract killings for troublemakers.

Lessons learnt

Ulbricht thought he was untouchable, he wasn’t. After two years’ investigation, Ulbricht was finally captured by the FBI. From an ecommerce point of view, this is where the story becomes most relevant. The dark web has learned from Ulbricht’s mistake; by assuming role of figurehead. Why have a kingpin? Why be accountable? The power would have best been in the hands of the users. Buyers and sellers working in harmony within an automated system. No middleman, no Ebay, no Amazon taking a cut. And these are systems now being rebuilt, springing up in place of Silk Road on the dark web, if not already.

Above ground on the regular Internet, Open Bazaar is due to launch this year, a decentralised marketplace empowering the traders. OB see themselves as a more utopic platform to cover all online trading – nothing illegal. Whether it can be successfully policed is another question, but perhaps this really is the future of ecommerce. No more middle men. And they learnt it all from a drug dealer.

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