The arsenal of oppressive institutions has tremendously expanded over time. Countless barriers have been erected to stifle dissident voices. Corners of cities are jam-packed with CCTV cameras. Citizen populations are disarmed, while police are heavily militarised. Soldiers equipped with ever-more intricate military technologies are making soldiers more and more oblivious and desensitised to following even the most horrific orders. We have already reached an era where biometric data is relentlessly sampled, or even bought from companies in charge of testing genetic backgrounds. Those individuals perceived as threatening are heavily surveilled without their knowledge, through devices that are now absolutely necessary for everyday life.
But the shackles of the state have always been countered with intense lockpicking, even if only few could ever hope of cracking the intricate mechanisms. Resistance is as old as tyranny itself. It is not a coincidence that Hammurabi had to invoke the wrath of gods on any man who disobeyed the pronouncements of his code. The presence of a law entails the presence of a lawbreaker.
Enslaved by Romans to provide bloody entertainment, Spartacus started a revolution so massive it threatened for a moment the very existence of the Roman Empire. As the Berlin Wall became a barrier to freedom for half of Germany, the most courageous Berliners exploited all its possible flaws. East Germans crawled through sewers, dug out long tunnels, flew with hot air balloons, slid along aerial wires, and drove cars at full speed through the initially vulnerable fortifications.
Protesters in Hong Kong came out with umbrellas to block toxic gas thrown at them, and protesters in Thailand inflated huge rubber ducks to protect themselves from water cannons. Time and time again human ingenuity was displayed at its finest in opposing regimes. The most subversive breakthrough has had been the internet, and though it has been tamed over the years with regulation, the dextrous few of the cypherpunk movement weaponized it in yet one more area of resistance towards the government: the war on drugs.
Lurking deep within the utmost hidden part of the internet lie several websites allowing for trade in illicit goods. The website that led the torch for innovation on the Dark Net was Silk Road; until its suspected owner and creator Ross Ulbricht was arrested in 2013. In its heyday, it sold large quantities of drugs such as psychedelics, prescription drugs, opioids, ecstasy, dissociatives, and steroids, as well as books, erotica, jewellery, art, and cigarettes. Two hundred million dollars worth of sales over its short existence is undeniable proof that the marketplace solved a key economic issue for its users.
Economics of Silk Road
The regular drug trade is filled with threats and dangers. From an economic viewpoint, these can be seen as standard transaction costs. Competition between different rival gangs often becomes violent with market capture involving literal conquest. Significant costs are involved in the search for information. Finding consumers and providers for drugs is a high-risk and costly activity, as both parties to the contract are wary of such dangers as undercover police or ensuing violence. Drug addicts and dealers are not exactly trustworthy individuals.
Transparency in the market is also severely lacking. One can find it difficult to compare prices, as every single contact with a drug dealer involves risk, and so individual drug providers hold a negotiating advantage. Thus, bargaining is hurdled by safety concerns, and the cost of finding a different drug dealer to inquire about alternative price hikes up the prices paid by consumers. Additionally, no law enforcement can be relied on to make a contract binding. Enforcing contracts is thus an expensive and volatile endeavour, often available only to those involved in organised crime syndicates. Managerial costs for such groups are extremely high as one needs to keep control over a tight-knit gang, where a single defector can have widespread consequences, such as the imprisonment of many cartel members. Controlling the quality of provided goods is just as difficult.
Silk Road digitised the drug trade and achieved drastic reductions in transaction costs. As all exchanges were anonymized, competing cartels couldn’t assert their dominance over the territory and violently eliminate the competition. Additionally, there was a large reduction in search costs. Although some technical expertise was required to download Tor or find Silk Road overall, the ease of entering the market increased. One could buy drugs without ever leaving the comfort of one’s home and without encountering any potentially dangerous individuals. Offline interactions, which were the core issue driving most of the existent transaction costs, became redundant. With Silk Road, price comparison became quick and costless, with all the offered drugs sorted into categories with exact specifications.
The ever-present lack of trust was also reduced, by the implementation of a review system. Akin to what is seen in Yelp or Google Maps, a process for scoring each seller was created, allowing for the emergence of quality control, and providing valuable information to the customer about the reliability of the producer. Drug dealers who had defrauded users would end up with bad reviews that would warn other consumers. Valuable information would be shared about the quality of the drugs that were sold.
As a consequence of Dread Pirate Roberts’ work, a significant decrease in the presence of real-world violence was achieved. Research published by Aldridge and Decary Hetu shows that the Silk Road reduced opportunities for violent behaviours. The two researchers conclude that: “this new breed of drug dealer is also likely to be relatively free from the violence typically associated with traditional drug markets (…) the cryptomarket provides, reduces or eliminates the need – or even the ability – to resort to violence.” With the Silk Road, a modern-day anarchist no longer needed a Molotov Cocktail in his hands, only a laptop with a Tor browser and a crypto wallet.
