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)


  1. I just did the maths on the price of that doob in the screenshot, and it’s by far the worst deal I’ve ever seen.

    1. I wonder how old the screenshot is. Just a year ago it looks like the exchange rate for one Bitcoin was about $5, now it has shot up to around $30.

      1. Fair point, I hadn’t considered that. That would put it just a little outside what I’d call a good deal, not accounting for dealer-maths.

  2. I still don’t see how this provides more than a modest increase in security to either party over transacting over breakfast at a Denny’s. Once the transaction has been made, the Bitcoins are traceable forever in each direction, if you bought or sold those Bitcoins through Mt. Gox, the government could drag your account information out of them. As the seller, you have to know that the bitcoins might be being watched, send them to any published account and the government could trace them back to you.

    1. Anonymizing a bitcoin transaction is entirely possible.  Granted, most users don’t bother to do it, but exchanging bitcoins can be just as untraceable as exchanging emails.  If you’re making a serious illegal business out of it, you’re probably familiar with such precautions.  Either that, or you don’t stay in business for long.

      1. It’s not as easy as you might think. All the transactions are public and traceable, unlike email. The best you can do if “dilute” the BCs using an 3rd party to aggregate the money and muddy the trail. Trying to launder Bitcoins is like laundering a shirt with a pen in the pocket, both cases leave everything they touch suspect. Piss off the government enough and they will pound on enough doors to trace it back to you.

  3. Has anyone ever considered that it is actually (shadow ) goverments selling the drugs. There is no way the drug market could exist without the co operation of law enforcement.

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