Today, many crypto users, libertarians, and dark web enthusiasts know the story of Silk Road and its infamous architect, Ross Ulbricht, who set the standard for countless darknet markets that have followed in its footsteps. This article explores some of the lesser-known markets that operated on Tor at the same time as Silk Road. It also provides some information about Silk Road itself that isn’t regularly covered by mainstream media articles, bloggers, or documentaries, including a recap of the first sizable vendor scam on a darknet market.
The Farmer’s Market
The Farmer’s Market is a little-known yet interesting footnote in the history of darknet markets. While it did not accept Bitcoin, its existence on the dark web predates Silk Road by about one year. For the first three years or so of Bitcoin’s existence, it was just a digital curiosity without a practical use case, and when it did establish a price, it was highly volatile. For these reasons – on top of the fact that BTC was difficult to obtain – it was not considered for use by The Farmer’s Market.
The market initially started on the clearweb in 2006 (known then as Adamflowers) through which independent suppliers could anonymously advertise different types of illegal drugs. The most common items advertised on the site included marijuana, LSD, MDMA, mescaline, fentanyl, and ketamine. Orders were all placed through an intermediary email address, hosted by the PGP-encrypted Hushmail service. The market admins acted as an escrow, taking a cut from each transaction, and forwarding the remaining proceeds to the independent vendors.
In addition to accepting standard money transfer services like PayPal and Western Union, The Farmer’s Market also accepted payments in the form of gold-backed digital currencies known as Pecunix and iGolder, which were potentially harder to trace (though not impossible). Through the course of its six or so years of operation, an estimated $2.5 million flowed through the market, which had attracted some 3,000 customers across 46 countries.
As with most other darknet markets that encountered any degree of success, undercover law enforcement started purchasing drugs from The Farmer’s Market (when it still had the Adamflowers name) as early as March 2009, before it had made its transition to Tor. In April 2012, an investigation headed by the US Drug Enforcement Administration (DEA) known as Operation Adam Bomb resulted in the arrest of 15 individuals thought to be associated with the market, shutting down its servers for good. Seven people pleaded guilty to drug trafficking and money laundering charges in 2014; the leader of the enterprise being a 45-year-old man Dutch man named Marc Peter Willems.
The Silk Road
Launched in February 2011, Silk Road was Bitcoin’s first real use case in that it used Bitcoin to solve a problem where traditional internet finance fails, which was acting as a currency for online drug deals. Ideas for a BTC-based online drug market had been proposed as early as June 2010 but were never put into practice until the launch of Silk Road. The market’s chief operator and admin, Ross Ulbricht, became interested in libertarian economic theory after obtaining his Master’s degree, writing in his personal diary that he wanted to create a market where “people could buy anything anonymously, with no trail whatsoever that could lead back to them.”
Providing a great deal of anonymity for its customers by combining Tor and Bitcoin in a way never seen before, Silk Road was once summarily described by a satisfied customer as “the victory of decentralized cipherpunk thinking over traditional methods of blocking trade,” and “a killer app for Bitcoin.”
Silk Road wasn’t just the first (crypto-accepting) darknet market; it was also the first online market to utilize the standard escrow system that is still employed across most markets today. In a Bitcointalk post, one of the market’s admins (possibly Ulbricht) outlined the escrow procedure which has been hardly altered in implementation by other markets over the last 11 years:
“So here’s how it works currently:
1. buyer places and order
2. funds held in escrow
3a. seller confirms shipment
3b. seller never responds, buyer’s funds are returned
4a. buyer confirms delivery and seller’s funds are released
4b. buyer claims that the order never came. Buyer and seller have a few days to come to a resolution. If no resolution is made, a silk road admin will review the case and make a judgement, which is usually to split the funds in escrow 50/50 (to date, only one order has come to this and is currently in the resolution process)
4c. buyer never responds, funds are released to seller” – Bitcointalk user silkroad, Mar. 13, 2011
Though extremely niche and unknown for the first four months of its existence, Silk Road was catapulted into fame through a Gawker article published on June 1st, 2011. Soon afterward, the site saw a huge influx of new users which it was unable to keep up with and was forced to become members-only while the site migrated to a better and more secure server. During this short-lived period, Silk Road memberships sold for as much as 2 BTC, which was still only around $60 at the time. The price of BTC proceeded to crash to around $2 by the end of the year, which made sales difficult, yet the community continued to flourish.
By July 2012, Silk Road’s membership had grown to around 20,000 active users, with about ¾ of all members being from the US and the rest scattered across the EU and UK. A year after that, the number of buyers had exploded to over 145,000. The market was shut down in October 2013 with the FBI’s arrest of Ulbricht in San Francisco. In its two and a half years of operation, close to 1.3 million transactions were made on the site, netting Ulbricht and other market administrations an estimated 614,305 BTC in commissions.
The Tony76 Incident
In the week of April 20th, 2012, an established vendor that went by the name tony76 managed to pull off Silk Road’s largest vendor scam up to that point. Many vendors lowered the prices of their items in celebration of “4/20,” as did tony76, who was already highly popular on the market. Beginning Apr. 17th, tony76 put heavy discounts on 22 items listed for sale and even opened delivery to international customers for the first time.
With over 500 sales under his belt at the time, tony76 had been awarded escrow bypass privileges, which were (and still are) known as “Finalize Early,” or “FE”. This meant he could collect payment up front from his customers before having to mail out any products, and that’s exactly what he did.
Instead of delivering the discounted orders, tony76 simply rounded up the payments, which were around 1400 BTC (worth approx. $30k at the time), and exited with the proceeds, scamming all his customers out of their funds. At first, tony76 tried to blame his customers for dishonestly reporting non-deliveries, but the evidence became clear after dozens of buyers all reported the same problem. The popularity of using escrow made a resurgence after the episode, although it was never made mandatory for other “trusted” vendors.
On Apr. 24, 2012, tony76 posted his last message to the Silk Road forum, maintaining his innocence even in the face of ever-mounting evidence to the contrary. He was not heard from again, yet prosecutors in the case against Ross Ulbricht claim tony76 was among the supposed targets to be assassinated for their actions against his market. Court documents reveal that on Apr. 8, 2013, Ulbricht allegedly sent a payment of around $500,000 in BTC to a hitman to kill tony76, convinced the former vendor was part of a larger group of scammers that had been ripping off the market over the last year.
On Apr. 15, 2013, Ulbricht allegedly received a response from the hitman, confirming that the “problem” had been “dealt with.” The true identity of tony76 has never been revealed, nor is it known if the murder of any individual connected to Silk Road occurred around the time of the supposed assassination. As none of the supposed “hits” ordered by Ulbricht were ever carried out, charges related to them were ultimately dropped in his sentencing.
By late 2011, listings for weapons had started to creep into Silk Road, despite there being no specific category for them on the market. Driven by a commitment to keeping products designed explicitly to cause harm off Silk Road, Ross Ulbricht launched a splinter market known as The Armory in February 2012. The site had five categories: Firearms, Accessories, Ammunition, Melee, and Non-Lethal. It was specifically dedicated to weaponry and expressly forbid listings related to poisons or contract killings.
Unlike Silk Road, The Armory encountered very little success as a marketplace. This was mainly due to its relative lack of listings and non-competitive pricing, which was often described by would-be customers as “outrageous.” Guns in the United States, where the majority of Silk Road customers resided, are legal and often relatively easy to purchase, which meant The Armory had a greater deal of regulated competitors than Silk Road.
Ultimately, the majority of darknet market-goers did not find the tradeoff of not having to provide ID and wait for a background check worth the substantial premium placed on many of The Armory’s listings. This was in addition to the fact that receiving a gun illegally through the postal system seemed much more inherently risky than drugs, which could be far easier to conceal. Listings on the market were also characterized as “just mostly scammers trying to score.” Thus, it is unlikely that more than a couple of legitimate transactions ever took place on The Armory.
At its peak, The Armory had about 400 listings and a minimum order of $1050 in BTC, but sales volume was never enough to make it a profitable endeavor. A forum post title “Closing the Armory” from Dread Pirate Roberts (Ulbricht’s admin handle) dated Aug. 2, 2012, summarized the reasons for his decision to shut down his unpopular spin-off market:
“As most of you have figured out, we are closing the armory. Your first question is probably ‘why?’. Well, it just wasn’t getting used enough. Spinning it off originally was done somewhat abruptly and while we supported it, it was a kind of ‘sink or swim’ experiment. The volume hasn’t even been enough to cover server costs and is actually waning at this point. I had high hopes for it, but if we are going to serve an anonymous weapons market, I think it will require more careful thought and planning.
The next question is probably ‘can we now sell guns on Silk Road?’. The answer there is most definitely NO. If we do support weapons sales once more, it will be on a separate site.” – Dread Pirate Roberts
There have been a series of markets that have popped up with the same name after the closure of The Armory, but they have all been scam operations riding off the original’s fame, attempting to lure uneducated buyers into making BTC deposits in exchange for nothing.
Black Market Reloaded
It didn’t take long after Silk Road began to demonstrate some success before competition started springing up, with four other darknet markets launching in late 2012 and early 2013. They went by the names of Sheep Marketplace, RAMP (Russian Anonymous Marketplace), BuyItNow, and Atlantis. Preceding the launch of these markets by over two years, and probably the most notorious of all Silk Road competitors, was Black Market Reloaded (BMR).
Opening in June 2011, just a few months after the launch of Silk Road, BMR was a no-holds-barred kind of darknet market that allowed the sale of just about anything imaginable. It put no restraint on what could be sold for Bitcoin in terms of product or services, which meant listed for purchase were credit card numbers, malware, weapons, poisons, and even explosives. The market also featured a subcategory for contract killings, but it was eventually removed after admins determined that it was 100% populated by scam listings.
BMR did not just specialize in listings that were deemed too unsavory for Silk Road — it also featured thousands of drug listings, providing some competition to Silk Road’s previous monopoly. By Apr. 2013, the market saw sales approaching $400,000 per month and had close to 7,000 listings in total, as compared to Silk Road’s 11,600 listings at the time. By early Dec. 2013, however, the market had voluntarily shut down; its admins stating that it could not handle the influx of new customers after the closure of Silk Road and Sheep Marketplace.
In Jan. 2014, a sting operation netted the arrest of a former BMR vendor who was using the market to sell lethal doses of a naturally-occurring poison known as abrin, which is 75 times more toxic than its more famous chemical relative, ricin. The vendor sold a dose of the poison to undercover law enforcement for $1,000 in BTC, caught when a camera recorded him delivering the material to a previously agreed-upon drop-off point.
The number of darknet market has exploded since the closure of Black Market Reloaded and perhaps more than 100 such operations have already come-and-gone. To date, no market has exceeded a lifespan of seven years, as they all predictably expire either voluntarily or by force. Regardless, new markets continue to pop up all the time, seeking to defy the odds by staying one step ahead of competition and law enforcement, with whom the industry remains in a never-ending chase cycle of cat-and-mouse.