Delving Into Bitcoins And The Deep Web

Several days ago, the USD/BTC exchange rate soared to dizzying heights, reaching almost $250 for one unit of the virtual, decentralized currency. Then it crashed to $55. But since then, it has gone back up to $100.

I’d heard of them before, but I had assumed it was some sort of pyramid, and that the train had already passed. Pyramids are only good for those at the top. It’s the creators of currencies who get rich, not their users. In short, I was skeptical.

Still, as someone on a perpetual lookout for lazy and socially unproductive ways of making money, I knew I had to check it out.

And I discovered some rather interesting things.

First, Bitcoins can’t be just created out of thin air. Just like gold or other minerals, they have to be “mined” by solving complex cryptographic puzzles. In practice, some users pool their computing power for this task. There is a theoretical limit to the total amount of Bitcoins that can enter circulation: 21 million. So you can’t inflate it like you can with any fiat currency.

Second, they offer real advantages over conventional currencies. There are no banking or transfer charges, because you are your own bank. Your Bitcoins are held in an encrypted file on your hard drive, and can easily be transferred between your own accounts, or “wallets,” and other accounts. These transactions can be completely anonymous, because your wallet isn’t linked to your “true name” (paging Vernor Vinge).

This anonymity means that you can, in relative ease and safety, avail yourself of online black markets selling all kinds of cool shit of dubious legality.

For instance, on April 15th 2011 – since known as “Black Friday” in certain circles – the DoJ flunky Preet Bharara shut down the three biggest online poker companies operating in the US. In the ensuing panic, dozens of others left of their own accord, voluntarily restricting access to US players to avoid any legal ramifications. But a few continue to operate here. Perhaps the most interesting case is that of Seals with Clubs, a site where you gamble with Bitcoins. This is an example of an innovative and dynamic enterprise that has bypassed real life problems to create a product that people enjoy and that is likely to continue to grow, especially if governments start taking a harder line against online poker. (Incidentally, the games at Seals seem to be very soft, even at high stakes – or at least that is the impression I got from observing them for 15 minutes or so. Definitely something to look into if you get some portion of your income from poker).

But this is just the tip of the iceberg.

Investigating Bitcoins led me, of course, to the “deep web,” the Silk Road, and even weirder places. I will retrace the journey, should you wish to undertake it yourself.

(1) Download the Tor browser. It makes your online comings and goings untraceable (more or less) by bouncing it off multiple proxies. Or something like that. I don’t claim to understand it.

(2) Using it you can access the “deep web.” The deep web are sites that are not indexed by search engines. Its most interesting component are the black markets that sell stuff that is frequently illegal or semi-legal in the real world, e.g. guns, drugs, stolen information, etc.

The central information directory for this deep web is the “Hidden Wiki.” Its precise .onion address changes from time to time – as with many of the sites there – so I will not bother linking to it. The address as of the time you read this article can be found easily enough by Googling.

As you can see from the screenshot above it’s clear that it’s dodgy as fuck from the very start. And that’s good.

(3) In the list you’ll find a link to the Silk Road. The Silk Road is sometimes called “the worst kept secret on the Internet.”

The Silk Road is to the deep web what the Ragged Flagon is to Skyrim: A massive black market selling all sorts of drugs, “services”, and “lab supplies” (har-har). After undergoing an easy registration process, you open up to this page:

Once you get over the surreal nature of the products on offer, you’ll see that it’s quite civilized, really. The sellers have ratings (as on Amazon or Yelp) which is how they build up reputation. If you find you’ve been undersold your weed, you write a negative review. Enough negative reviews – and the dealer no longer has any customers, and goes out of business. You pay in Bitcoins, no questions asked, and you are delivered the products in envelopes that don’t bear you name – making the transaction much more secure than if you were to make it with a street dealer. The drugs are likely to be purer as well because the guys who traffic online have reputations to protect, and tend to approach it more professionally than street low-life’s anyway. Some even have refund policies if you are unhappy with your product.

In short, it is a truly inspiring and beautiful example of pure, unadulterated capitalism in action – one we should all strive to live up to.

It even has a code of ethics, of sort. Here are “a few words” from the Dread Pirate Roberts, the creator of the site:

You may be shocked to find listings here that are outlawed in your jurisdiction. That doesn’t mean Silk Road is lawless. In fact, we have a very strict code of conduct that, if given a chance, most people I think would agree with. Our basic rules are to treat others as you would wish to be treated, mind your own business, and don’t do anything to hurt or scam someone else. In the spirit of those rules, there are some things you will never see here, and if you do please report them. They include child pornography, stolen goods, assassinations and stolen personal information, just to name a few. We also hold our members to the highest standards of personal conduct and work tirelessly to prevent, root out and stop any scammers that may try to prey upon others.

(4) The Silk Road is really quite close to the surface comparing to some of the shadier sites that lurk on the deep web. Here are the main categories of “sleazy” services and products you can find there:

(a) Drugs. Drugs, drugs, drugs. It’s not just the Silk Road of course.

(b) Pornography. This of course means really hardcore stuff that is of questionable legality or child porn which is completely illegal. Obviously purveyors of the latter should all be rounded up and shot, but there is no obvious way to do this. Nobody ever pretended that the “deep web” is a pristine place. Just to clarify, while I saw some links to this stuff on the Hidden Wiki, I did not click on them of course.

(c) Stolen information. Hacked Paypal accounts, credit card details, personal identities, etc. I think how it works is that some “black hat” hackers specialize in stealing all this, and sell them on in these deep web markets to other criminals.

(d) Casinos. Anybody who plays anything other than poker in an online casino is an idiot. But, hey, it’s a free Internet.

(e) Hitmen. Yes, I actually did find a website purporting to offer contract killings from the Hidden Wiki. There was a veritable price menu for different marks: $20,000 is the standard price, while a policeman or journalist costs $50,000. If it’s an EU job it will be $5000 extra. The prices seem to be a bit low, and despite the deep web’s sleaziness,  I *really* doubt that you can find any hitmen for hire on the Internet. Not that I’d know but I would imagine it’s a much more “face to face” kind of business. So frankly, I suspect it’s a scam. Not that anyone should care I suppose, since if so, it couldn’t victimize a nicer bunch of people. Or maybe it’s a sting operation project run by the police. If so, kudos for creativity!

That said, I’m not 100% sure that’s it’s not what it purports to be. Which is why I’m not going to give any specific details.

(f) Weapons. One site accessible from the Hidden Wiki delivers a rich variety of Glocks with scrubbed off serial numbers for $1,500 each (a bit more or a bit less depending on the specific model). They seem to be legit. Highly illegal, of course.

So if you’re the DIY type of guy, you don’t even need the hitman.

Hope you found you found this account of my adventures in the deep web useful. It’s a fascinating world for sure. But there are important caveats.

First, the above is about the “dodgy” part of the deep web. The deep web is much vaster, as it refers simply to websites that aren’t accessible via conventional search engines. E.g., the academic resource JSTOR. The guns n’ drugs account for an infinitesimal part of the “deep web”, which is in turn several orders of magnitude larger than the “normal” web.

The “shady” part of the deep web that you access via the Hidden Wiki is actually fairly small, I think – maybe a few tens of billions of dollars, at most. Yes, the Silk Road is big, but the drug transactions there go into the hundreds of millions, not the hundreds of billions. I would imagine that scales are similar or less for the other categories. If a product is legal, there is no particular incentive to trade it on the deep web, where traffic is much lower than on the normal Internet. I mean I don’t think buying drugs or untraceable weapons at shady sites on the deep web is something most people do everyday. Right, guys? Right??

There there’s money laundering. But while it is easy to imagine that you can do all sorts of creative financial operations with Bitcoin on the deep web, it has to be borne in mind that shady rich people have access to far more established, conventional, and respectable ways of legalizing their ill-gotten gains: Caribbean islands. The deep web strikes me as the poor man’s offshore haven.

But what do I know? An hour’s worth of trolling the Hidden Wiki isn’t going to make me an expert on this stuff.

A much more interesting topic for discussion is: Whither Bitcoins?

There are widely divergent views on them. On the one side you have the Cathedral, the representatives of bourgeois sensibilities, who insist that it is nothing but electrons and government paper is much better. On the other side you have various anarchists, hacker elements, Anon types who insist that it is the future of as people begin to throw off the rusted shackles of the bankster regime / as governments become ever bigger and more repressive control freaks (the contradictions between these two views are rarely pointed out).

My own two cents is much more modest. The future value of Bitcoins as they are currently construed will essentially depend on demand for them as a means of convenient, anonymous online transactions: Period. Say that tomorrow all the world’s governments were to ban online poker. In that case, demand for Bitcoins will soar, and the creators of Seals & Clubs will become very, very rich (at least until they’re thrown into prison). Or take an alternate scenario – say that tomorrow, the US were to legalize all drug consumption, on the grounds that the “pursuit of happiness” really is an unalienable Constitutional right. (52% of Americans already support the legalization of marijuana). In that case, demand for Bitcoins will plummet. Another, not non-negligible probability scenario is that the US will outlaw Bitcoins for being an illegitimate alternate currency. It’s inherent features means that it will survive, at least in the deeps of the deep web, but its value will plummet as it becomes inaccessible to the general public and utterly devalued on legitimate markets.

It’s probably not a bad idea to get a few Bitcoins as a “shits and giggles” type of investment, but I would not at this point – $110 as of the time of writing – advise it as something to sink a lot of your money into. If you *really* want to make money off online currencies, here is another, perhaps more productive idea: “Can you create an online currency based on “mining” big prime numbers? More useful than useless crypto-analytic exercises that produce Bitcoins, and it can theoretically continue forever.“