Status of CryptoCurrency use on the Darknet Markets

The online drug and weapons bazaars commonly known as the "dark net markets" (DNM) have had a tough time of late. This year saw law enforcement agencies effectively shutting down some of the biggest sites on the market including Alphabay and Hansa.

Some of the other markets that were still in operation have either suffered from sustained DDoS attacks or the owners have decided to cut and run with an exit scam.

However, given the nature of the activity on the ToR network and the massive demand for easy access to drugs, a number of the DNMs have come back online. They have opened their books for business but they are facing another problem.

This is mainly to do with the traditional methods of cryptocurrency payments. Bitcoin has had a tough time with sky high fees which has made it slightly impractical for use with small amounts.

Moreover, although Bitcoin was once thought of as a really safe and secure payment method, the authorities have become quite skilled at tracing their use.

Uncomfirmed Transactions

Drug users are generally not the most patient when it comes to ordering their latest goods. Hence, given the time that it takes for transactions to clear on the network, users are getting really frustrated.

Currently the number of uncomfirmed transactions in the Bitcion memepool is about 57,340 yet was closer to 150,000 on the weekend. In the DNM subreddit, users were complaining that the Dream Market was almost unusable given the time that it was taking. There are also complaints that even with higher transaction fees ($10+), the transaction times were still unusual.

It is important, however, to take this in context of what was happening at the time with the numerous spam attacks that were hitting the Bitcoin network.

This is why a number of the DNMs have considered other cryptocurrencies for means of payments. For example, prior to being taken down by law enforcement, Alphabay had integrated payment methods in Zcash and Monero as well as Bitcoin.

Dream market is one of the veteran markets in the field and has been around since 2013 even before Alphabay. It is probably for this reason that it has been slow to adapt its methods of payments.

Markets Embrace Privacy Coins

Apart from the lower transaction fees and short times, there is another reason to diversify into coins such as Monero and Zcash, their privacy.

Both of these coins have protocols that allow for transactions to be sent without divulging any information of the transaction to the blockchain. This means that agencies that employ chain auditing techniques to trace illegality will have a harder time tracking them down.

Two DNMs that have adopted Monero XMR are the Aero market and Tochka. There are also markets such as Libertas which have chosen to only accept payments in Monero.

The Wild West of the Web

The darkweb often resembles the wild west of the lawless internet. Given this status, there are often many dangers that are hard to avoid.

One of those dangers for "onion" based websites are Dedicated Denial of Service (DDoS) attacks. On the clear web, these can be averted with a number of tools. However, on the darkweb, there are no such measures.

This means that most of these DNMs are easy targets for competing markets, hackers, activists and law enforcement agencies. As a result, they are often down for long periods of time. The deepdotweb, which tracks the uptime of the various DNMs shows that many of them appear to be back up an running (right).

The unreliability of the main DNMs of late has also driven the users to dedicated "vendor shops". These are essentially specialised onion sites where users can deal directly with the vendors in question.

Yet, there is nothing to stop a successful vendor shop from one day facing the same issues that plague the larger DNMs.

Peer-to-Peer Solutions

One of the more interesting alternatives that has recently benefitted from the uncertainty on the DNMs are P2P solutions such as Openbazaar.

Given that this is a distributed and decentralised network, there is no central point of failure that could impede commerce. Openbazaar uses a Kademlia-style P2P network which has been used for programs such as BitTorrent.

The goal of openbazaar is to allow anyone to open their own "shop" and sell goods with 0 third party fees. They currently support over 50 cryptocurrencies for payment on the network so the Bitcoin transaction headache is unlikely to impede its adoption.