Using Silk Road: game theory, economics, dope and anonymity

Gwern's "Using Silk Road" is a riveting, fantastically detailed account of the theory and practice of Silk Road, a Tor-anonymized drugs-and-other-stuff marketplace where transactions are generally conducted with BitCoins. Gwern explains in clear language how the service solves many of the collective action problems inherent to running illicit marketplaces without exposing the buyers and sellers to legal repercussions and simultaneously minimizing ripoffs from either side. It's a tale of remix-servers, escrows, economics, and rational risk calculus -- and dope.

But as any kidnapper knows, you can communicate your demands easily enough, but how do you drop off the victim and grab the suitcase of cash without being nabbed? This has been a severe security problem forever. And bitcoins go a long way towards resolving it. So the additional security from use of Bitcoin is nontrivial. As it happened, I already had some bitcoins. (Typically, one buys bitcoins on an exchange like Mt.Gox; the era of easy profitable "mining" passed long ago.) Tor was a little more tricky, but on my Debian system, it required simply following the official install guide: apt-get install the Tor and Polipo programs, stick in the proper config file, and then install the Torbutton. Alternately, one could use the Tor browser bundle which packages up the Tor daemon, proxy, and a web browser all configured to work together; I’ve never used it but I have heard it is convenient. (I also usually set my Tor installation to be a Tor server as well - this gives me both more anonymity, speeds up my connections since the first hop/connection is unnecessary, and helps the Tor network & community by donating bandwidth.)

Using Silk Road (via O'Reilly Radar)