Skip to footer

Silk Road 101: How did the now-busted online black market work?

Federal authorities have shut down Silk Road, one of the largest websites for drug trafficking and other criminal activities. The site existed under layers of secrecy and used electronic currency.

|
Jim Urquhart/ Reuters/ File
Here is one Bitcoin, owned by an enthusiast. The recently dismantled Silk Road website required that all transactions be conducted in Bitcoins.

Silk Road, a notorious website for drug trafficking and other criminal activities, has been shut down after its alleged operator, Ross Ulbricht, was arrested Tuesday, the Federal Bureau of Investigation announced. Federal prosecutors have charged Mr. Ulbricht with a range of criminal violations, including narcotics trafficking, computer hacking, and money laundering.

How did this black market work, and how did it escape law enforcement for a time? Here are the basics about this so-called eBay of illegal drugs.

What was Silk Road?

Silk Road was an online marketplace that allowed buyers and sellers to conduct all their transactions anonymously. In addition to the cost of goods or services purchased, the site charged a small fee, akin to a shipping cost, to deliver the purchases. While the site’s interface looked benign, the vast majority of transactions involved narcotics, according to authorities. 

The site was started around June 18, 2011, according to authorities.

Who ran the site?

The site’s most recent operator, according to the FBI, was Mr. Ulbricht, who worked under the pseudonym “Dread Pirate Roberts,” or “DPR” for short. (Dread Pirate Roberts is a character in the film "The Princess Bride.")

Ulbricht, a graduate of the University of Texas at Dallas, moved to San Francisco in the fall of 2012 and was in transition from a career in physics to work as an investment adviser and entrepreneur, according to his LinkedIn page.

Ulbricht, who is in his late 20s, assumed control of Silk Road in early 2012, according to the criminal complaint.

So what exactly did DPR do on Silk Road?

In an interview with Forbes before Silk Road was shut down, DPR said that the site was a collaborative effort, but that he was in charge of all the “important Silk Road assets,” which included access to private forums and funds. 

Did DPR make a profit from the site?

Silk Road generated sales of roughly $183 million, according to the complaint, and with Ulbricht’s arrest, authorities seized slightly over 144,000 bitcoins. It is unclear how much of Silk Road’s revenue DPR might have used. 

How did users pay for items?

With Bitcoins: Users had to acquire this electronic currency before they could purchase anything on Silk Road. Transactions on Silk Road accounted for about 5 percent of all exchange transactions carried out with Bitcoins, according to Nicolas Christin, a cybersecurity researcher at Carnegie Mellon University in Pittsburgh. 

The Bitcoin currency is not tied to any government or bank, but rather is controlled through computer software, which means that the value of Bitcoins can fluctuate violently. After Silk Road was closed, the Bitcoin value dropped from more than $140 to $129 in one day.

How was the site accessed?

Silk Road was accessible only via a special computer network known as Tor. 

To use Tor, users download the Tor browser much as they would Chrome or Firefox. The Tor browser can make anonymous a user's Internet activity by masking his or her Internet protocol (IP) address, which contains information about a computer's location. 

Tor also has a "hidden services" feature that lets users publish a website anonymously by hiding the location of the website's servers. The URL for these Tor-based websites ends in ".onion." (The Tor browser's symbol is an onion.)

Silk Road's most recent URL was silkroadvb5piz3r.onion and could be found in online forums, according to the complaint.     

To log into Silk Road, users had to give a username, password, and the country where they were located. After logging in, users were then able to browse the site as they would any other online store. The vast majority of the goods for sale were illegal drugs, according to reports. 

How does Tor make online activity anonymous?  

Any Web browsing, including e-mail correspondence that is conducted through Tor, is wrapped in layers of encryption, making the information virtually impossible for an outside party to discern. Encryption works by jumbling data into a series of numbers that unscramble only when one has the correct "key" to "unlock" or reorder them. 

If Tor really works, what led the FBI to Ulbricht?

Ulbricht left a trail of comments on online forums that seemed suspicious to the FBI agent investigating Silk Road. According to court documents, Ulbricht did not properly disguise his identity in these forums, ultimately allowing the FBI to identify Ulbricht. 

Editor's note: This story was amended April 3, 2020, to correct three inaccuracies. 

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to Silk Road 101: How did the now-busted online black market work?
Read this article in
https://www.csmonitor.com/USA/USA-Update/2013/1003/Silk-Road-101-How-did-the-now-busted-online-black-market-work
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe