In today’s Exponential Investor…
- The Silk Road
- $1.08 billion booty
- You’re not too late
Want to buy an AK-47? Not an ornamental one, but a fully functioning one?
Perhaps some hand grenades?
What about some class-A narcotics? Cocaine? Heroin? Pure MDMA?
Maybe you want someone killed? Contract killers to go with your drugs and guns?
Okay, maybe these things aren’t high on your 2020 Christmas list…
Or maybe they are going by how much fun 2020 has been.
Imagine all of these “goodies” in one easy-to-find online ecommerce website. Think of it like the “Amazon of illegal goods”.
Sounds fanciful doesn’t it? Sounds like the screenplay of a Hollywood thriller. Well, it’s not.
These were the sorts of things you could have bought if you were so inclined, from the deep web online marketplace, the Silk Road.
The Underground Website
In the early days of bitcoin before the mainstream caught wind of it all, the Silk Road was a thriving marketplace selling all of these things. You wouldn’t find it on the normal, “surface” internet though.
You had to use a Tor relay or browser to find your way into the deep web. Then you had to find the most recent and up-to-date “hidden service” (commonly known as “onion”) address the Silk Road was accessible from. This alone wasn’t something that was particularly easy to do – but it was doable.
Of course, browsing all these things was perfectly legal. No crime to look at a marketplace selling illegal goods. To buy them, sell them, transport them on the other hand… well, that’s another story.
Nonetheless, this deep web illegal good marketplace in its early days used a primary currency for people to buy and sell their goods with. A currency that people didn’t really know about, but was used in abundance on the ecommerce site.
That currency was bitcoin. Due to the emerging nature of bitcoin, it was the perfect currency for users to buy goods without leaving personal information around for the authorities to track.
The story of the Silk Road is long, complex, and one of the most fascinating stories you’ll ever read. From its creation to its peak, to its downfall and the arrest of its elusive founder, Ross Ulbricht, the Silk Road saga… well, you couldn’t have written a more interesting story if you tried.
In the case of the Silk Road, facts are far more enthralling than fiction. And one of the best pieces to read about it is actually the piece that many trace back as the first real public awareness not of this illegal marketplace, but of bitcoin.
That piece is titled, “Underground website lets you buy any drug imaginable”. It was written by Adrien Chen for Wired at the time, back in 2011. I won’t provide a link as it’s behind a paywall. But worth trying to find a non-paywall copy if you can.
The piece by Chen, while revealing this crazy marketplace, actually ended up being far more significant for the awareness of bitcoin. Suddenly this narrative (that continues to this day) around “only drug and gun runners use bitcoin” came to light.
Quickly bitcoin became the currency of choice for criminals. Many ignorant to the world of bitcoin and cryptocurrency still believe this.
Nonetheless, from Chen’s article bitcoin began to hit the radar of more mainstream publications, news outlets and less underground internet users.
It was the spark that kickstarted one of the earlier and biggest bitcoin price bull runs.
The real reason behind this week’s move
Silk Road was doing such a roaring business that it was making and storing tens of thousands of bitcoin. At the time this amounted to millions… not so much today.
Silk Road was eventually shut down by the authorities. Its founders and those involved arrested and prosecuted. Bitcoin that Silk Road had been storing, holding, seized and eventually sold by the US Marshals.
However, there was still around 70,000 bitcoin that had never been accounted for. It’s not that they were missing, the authorities knew exactly where they were thanks to the transparency of the blockchain.
It’s just they didn’t know who controlled those bitcoin and they didn’t know how to find them.
Well, that’s all just changed. According to several reports, around 70,000 bitcoin were hacked from the Silk Road not long before the site was seized and shut down. This week, the feds managed to find out who controlled those bitcoin, and somehow managed to seize around 70,000 bitcoin linked to the operation of the Silk Road.
In today’s values, that’s around $1.08 billion in bitcoin that are now owned by the US authorities.
It’s unlikely the US will keep them. In fact, usually when they seize bitcoin they auction them off and pocket the revenues. I expect they’ll do the same with these 70,000-odd bitcoin they now have.
I believe this was one of the factors which has pushed bitcoin back into the public awareness over the last week and also seen bitcoin’s price rise steadily to almost $16,000 at the time of writing.
Those 70,000 bitcoin had long been assumed to be out of action and out of circulation. Now they’re coming back to market. And my take is the likely buyers of those bitcoin will be major, massive institutions looking to get bitcoin into their treasury management.
For the last couple of years, I’ve been trying to explain to people that bitcoin flips the traditional investment model on its head.
In the “traditional” investment world, the first action goes to those big institutions, the fund managers, the sophisticated and high-net worth individuals, the venture capital funds, the elites of the investing world.
Not in crypto.
In crypto most of those organisations and institutions have been shut out because of their “old world” processes and red tape. But that is changing, fast. Now there are publicly listed companies that now hold tens of millions of dollars’ worth of bitcoin on their balance sheets.
Major payment processors – the likes of Square and PayPal in the US – allow crypto transactions now. A few years ago PayPal was closing the accounts of those transacting in bitcoin.
Things change. They change fast. And the masses still haven’t yet stepped into this world. They will. Soon enough a bank will end up allowing crypto purchases, trades, sells and crypto accounts – that’s the direction things are heading, that’s how I expect it to play out.
When those events come, I’m also expecting bitcoin and other major crypto start to hold their own as universal, global currencies of the people and of the internet. At that point, my view is that you’ll want to have them as a part of your investments, part of your portfolio, part of your wealth strategy.
You might not completely understand it all yet, but you should. Ignorance to it has already been costly. It’s not too late. Time is still on your side (just) to get to know it and get involved in it.
Editor, Exponential Investor