In Reality Bitcoin is Barely Used At All for Illegal Drugs

You may have heard about Silk Road perhaps, maybe Silk Road 2.0, and possibly even Evolution or the hundreds of other dark web sites supporting illicit activity such as illegal drugs, weapons trade, and money laundering.

You've also likely heard that bitcoin is used to purchase many of these items and either you or someone you know has the misconception that this is bitcoins primary purpose. If you don't then just Google it since you must not watch or read any mainstream media. 

The mainstream media have created a dual persona of bitcoin where it's dead and only good for buying drugs. How it does both at the same time is one of those things they haven't explained yet and never will since like most of the content in these articles, its baseless.

Unstoppable Epidemic of Doom?

This stems from the millions that actually are spent on buying illegal drugs using bitcoin, that number is 180 million USD annually. That's allot of money and sounds like a major epidemic so why isn't there swift immediate action being brought down on this activity? According to the mainstream media you might think that bitcoin is keeping the illegal drug market alive globally  all by itself. 

Remember now, these claims are brought to you by the same people who brought the infamous:

Bitcoin is dead!

Of course the 1st time it wasn't true didn't stopped them, over the years they've made this exact declaration over 100 times.

First of all, there have been crackdowns on the activity, Silk Road being the most prominent example and really the only one that began causing any serious trouble. If another rises up to that degree rest assured they'll smack it down. Nominal personal use and low volume sellers are likely not going to be the target of the FBI's top investigative team anymore than they plan to use the latest and greatest spy satellite to local where the local  community college students are smoking marijuana off campus.

Government agencies monitoring this activity don't exist to tell you how to live your life or what life decisions to make. When people start getting hurt and lives affected in a seriously negative way, then they get involved as was the case with Silk Road.

To be rather brutally honest, it's just not a big enough problem for them to give a shit. They have bigger fish to fry.

The Numbers

Here are the facts.

Bitcoin activity in the illicit drug and "dark web" market constitutes less than 1/2 of 1 percent. It is less than 0.04 % ...

According to the United Nations Word Drug report narcotics purchased illegally generates a revenue of 435 billion dollars (USD). 435 billion dollars of which bitcoin is used for 180 million of. This equates to less than 0.04% and bitcoin is not 100% responsible for all 180 million of illegal activity on the deep web. Drugs on the DW also do not equate to 100% of the deep web activity.

We plugged 100% in anyway and it results in less than one half of one percent.

This means bitcoin is barely used at all. Just about as close to 0 as you can really get and still register as a statistic. If we chart that it looks like this:

Bitcoin Illicit Drug Revenue Market Share

It barely even registers on the graph and if we tried to compare it to the legal pharmaceutical industry it would even show up. 

The pharmaceutical industry generates more than an estimated 1 trillion dollars USD annually which completely dwarfs the illegal drug industry and while there may be some general overlap with fraudulent prescriptions for direct personal use (lying to a doctor to obtain a prescription), much of the revenues are generated when the drug is obtained legally or legally from another country and shipped to the country controlling the substance, the re-sold at a later time and date with a marked up price. The illegal drug industry works just like any other business, there are middlemen, suppliers, shipments, dealers, consumers, competition, and even customer service. 

Whereas the dealer/consumer relationship may be somewhat similiar to other businesses, the upper level management and distribution generally can't really resolved disputes in a court of law which leads to violence and other antics that ends up threatening the safety of the involved countries residents and that, for instance in the United States, when they predominately get involved.  

This is not to say lower ranking members of the industries aren't causalities of violence and/or prosecution as well, this happens all the time as well, however during the course of specific targeted investigations they are more used as assets or inadvertently get trampled during the course or the process of accomplishing the objective. This is not always limited to the offenders in the industry either as we saw with Silk Road, where the agents on the case themselves were entangled in wrong-doing as well. 

The percentage of Bitcoin use overall doesn't even remotely come close to anything resembling the "majority" of use either. 180 million, of which bitcoin is not 100% responsible for, equates to about 20% of the overall bitcoin transactions that were pushing 1 billion in 2015. We'll assume about 18% for bitcoin without the actual numbers broken down specifically and that's likely being very generous (to those making accusations against the digital asset).

2015 Bitcoin Transaction in Millions

That number certainly isn't attractive by any means but also note that is not all drug related, that covers all illicit activity on the deep web. In comparison that's about 0.00018 % of the world economy compared to the overall 1.32% the pharmaceutical industry shares. The pharmaceutical industry isn't exactly squeaky clean themselves but they are considered "legally" operating. The illegal drug market share of the global annual GDP is around 1/2% (0.58%) and that's pretty significant in its own.

The point being that bitcoin is hardly the problem here. There's not enough bitcoin in existence to even become a serious problem. If every single bitcoin in existence on earth was used to purchase illegal drugs this year it would only equate to a mere 2.3% of the problem. That is obviously a problem, but far from a serious one in the grand scheme of things.

The question that comes to mind is why did they go after Silk Road if it was such an insignificant part of the problem? That's because it was easy to do so. Drugs sold on the street that across borders or manufacture in less than apparent facilities and distribution methods generally don't have an audit trail attached to them. Bitcoin did.

That is speculation and opinion of course since there's no way to know really specifically why they targeted Silk Road even if you believe anything they say on the topic. 

The Deep Dark Network of Things

Bitcoin may not be the direct culprit and regardless of its existence illegal drugs will continue to be sold and other illegal and disturbing things are going to happen. However, you cannot sugarcoat the truth nor can you deny bitcoin received some economical viability in its early days, but that's certainly not the case now and its certainly never been the illegal drug markets core issue.

Where one may not care if someone buys marijuana on the deep web (in some cases in the US this wouldn't even be illegal), there are things present on the dark net that to some, or arguably most, would be horrific, disturbing, and overall disgusting.

Its a place you can find the utter worst of the human race and see just how evil people can actually be. Although the worst of the worst is in another layer of the deep web that's even deeper and not apparent in a TOR browser much like the surface web is blind to most of the deep webs content.

Bitcoin is responsible for funding some of the worst of these evils and that cannot be ignored or denounced but so is everything else like cash, PayPal, credit cards, and just about any other form of payment, asset, and service in existence today. It doesn't matter if bitcoin exists or not, it will not make a difference and certainly won't stop this activity from happening. It's going to happen anyway.

Besides, bitcoin may make some things a little easier for criminals but they also make some many things much harder. What they also do is provide evidence that would otherwise not be available and in that sense, bitcoin can actually help law enforcement tremendously.

It's not impossible for anyone to find out who a TOR user is. It's expensive, but not difficult, and to law enforcement like the NSA or FBI it's likely not even considered an issue. TOR by its own design inadvertently makes it much easier to collect data from a user than the surface web, especially when the surface web client is on an ultra-fast connection. 

Regardless, and before any conspiracy theories metastasize, there's one conclusion that can be arrived at with undeniable certainty. Bitcoin's contribution to the global illegal drug market is relatively non-existent. 

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Report by dinbits

Image source: dinbits staff

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