DOCSLIB.ORG

The Dark Web

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Dark Web THE DARK WEB FOR THE RATIONAL linkcabin The Dark Web For The Rational I dedicate this book to the late Heather Heyer, Barnaby Jack, Aaron Swartz and Jo Cox. 1 The Dark Web For The Rational ABOUT THE AUTHOR My first name is Jack. I am a security researcher who is interested in many subjects not only limited to IT security. I aim to make positive changes in the world for the vast amount of people and not a small pocket of people. This book was written while I was in university and also after I graduated. Website: https://itsjack.cc Twitter: https://twitter.com/linkcabin ABOUT THE COVER The cover was made by selecting all of the client side code from a popular ‘dark market’ forum and appending it into the image of the ‘Silk Road’ camel commonly associated with the famous ‘Silk Road dark market’ which was run by Ross Ulbricht. The code is appended by using a hex editor, which is then later viewed by an early version of MS paint which renders the appended client side code into a distorted form. This was then copied and stretched to produce the background of the cover, essentially providing a visual representation of the HTML/CSS/JS code from the ‘dark market’. The ‘Silk Road’ camel was then put on top of the distorted background. 2 The Dark Web For The Rational Contents The Birth ...................................................................................................................................................................... 7 MEDIA ............................................................................................................................................................................ 14 DARKNESS LIES EVERYWHERE ................................................................................................................................. 20 PRIVATE COMMUNITIES ........................................................................................................................................... 26 ON TERRORISM .......................................................................................................................................................... 36 THE IMPOSSIBLE PRODUCT ..................................................................................................................................... 44 IS FULL ANONYMITY REAL? ..................................................................................................................................... 49 THE DARK MARKET LOOP ....................................................................................................................................... 57 THE GREAT MIGRATION .......................................................................................................................................... 67 ACK ................................................................................................................................................................................. 72 3 The Dark Web For The Rational PREFACE The ‘dark web’ is a common phrase that’s used to describe parts of the internet that supposedly is mysterious, full of terrors, that are too dark to describe to the many. The most common stories on the ‘dark web’ are usually drugs, hacking, paedophilia, red rooms, hitmen and guns. For journalists, the dark corner of the internet is a fantastic opportunity for internet hits and for an interesting story to write up, but, it is not completely true. Many parts of this mysterious place are a misconception developed by many to sell products and also to sell stories, in reality, it’s sadly less sexy than most would think. The loose definition of ‘dark web’ or ‘deep web’ is a website that is not indexable by search engines, such as Google or Bing, most sites disallow access to some pages to be indexed, but very few allow no content to be indexed. Throughout this book I choose to put ‘dark web’ under quotations, I believe it is an incorrect term given to describe the network and therefore decide it needs to be highlighted as incorrect. I also wish to highlight through this book that I use ‘TOR’ as the way to display The Onion Router project, although many from the project use Tor, there is no real difference, I am simply more comfortable with TOR as I think it’s correct. It’s little, but I’m sure someone will take note of it, in conclusion the official way to write it, is Tor. The main reason for me describing this as a loose description is that it is also impossible for search engines like Google or Bing to correctly index some pages that are deemed in the ‘dark web’, as you require other technologies to access such a page, technologies like TOR. Many web resources on the ‘dark web’ are depict the ‘dark web’ as a hard to reach place that only a few know how to reach, making it an attractive story and something that many people will seem interested in knowing. It is in actual fact very easy to access some ‘dark web’ sites through software known as TOR, or more precisely, the TOR browser. TOR stands for The Onion Router, a project which was initially released in 2002. It is freely available to download and builds on top of the Firefox browser to allow you to access ‘onion’ sites. In 2015 on August, the term ‘dark web’ reached its peak in interest on Google, this looks to be mainly because of the release of the film ‘Deep Web’ which aims to tell of the story of Ross Ulbricht, the alleged owner of infamous drug site Silk Road. This story alone has produced a vast amount of interest towards the ‘dark web’, what it is and why people use it. I think the ‘dark web’ is misunderstood, it isn’t dark, and it isn’t even a web. It’s arguably a group of projects which initially attracted various users, who can be indeed paedophiles and drug salesman, but can also be spies and journalists. The ‘dark web’ can help in alleviating censorship in totalitarian regimes to every day citizens, it can also help paedophiles escape justice. There are many different variants to what the media broadly calls the ‘deep’ or ‘dark’ web. A better term could be ‘anon-web’, the aim for users of a network to be anonymous and untraceable, allowing freedom of speech to thrive. But as I discuss in later chapters, complete anonymity is something relatively questionable, so would be a 4 The Dark Web For The Rational slightly inaccurate term. This area of work is more political than technological, many projects around this area of work exist, but are depicted as ‘dark’ or ‘deep’ to produce the idea of being undesirable or unreachable. The argument that is currently in question is how far we can allow freedom of speech in technology, libertarians wish for anyone to be able to view any information they wish without intervention from other third parties. This is of course a fundamental belief in libertarianism and has been previously crushed with the internet, where censorship and manipulation is quite prevalent in various areas of the world. Many like the idea of freedom of speech when it is seen positively, removing censorship barriers from dictatorships, allowing communication through revolutions and allowing journalists to do their job safely and securely. The trouble that many have, is sadly, freedom of speech doesn’t just have positive points, there has to be an appetite of how much freedom you give people to ensure there is some level of order. This argument is why so much energy is put upon this subject, do we accept the consequences of having a much freer society where people do not need to worry about their opinion being ‘incorrect’ or a society where users must be analysed, tracked and searched to ensure that sections of society are kept safe in some manner. The issue of it being technological means many generations of users don’t understand the issue, much like the internet, which is still hardly understood by many in American or UK political parties. With this hurdle in place where technical points are missed, many do not look at the core question of the subject, which is freedom of speech. Instead, we refer to such a network as ‘dark’ or ‘deep’ a mysterious, warped place, where only the worst of society go to. The ‘dark web’ can also been seen in a similar light to what happened with cryptography in 1990’s, known as the ‘Crypto Wars’, where America produced restrictions on the access of strong cryptography. This ‘war’ was very much on intelligence agencies being able to decrypt any communication or data. This ‘war’ almost re-emerged in Britain when David Cameron decided to make a speech advocating backdoors in cryptography, this later came to no avail. The main reason why nothing further was done in regards to backdoors in cryptographic products was most likely because of fears of attack vectors on businesses being widened because of backdoors. The misunderstanding of the technical points by politicians means security in general, not just cryptography, is therefore sometimes attacked. An argument again exists in the ‘crypto wars’ which is similar to the ‘deep web’ on freedom of speech, and what various parts of the world think of it. The aim of writing this book is to identify really what is what many call the ‘deep’ or ‘dark’ web, why many people are wrong with many points that are made against the mysterious network and shed light on many intricate parts of such a system. This book obviously cannot be completely conclusive, there are various projects in regards to anonymous networks which all have different solutions. I want to be able to provide an overview of an increasingly important place on the internet
Load more

Recommended publications
  • The Current Economics of Cyber Attacks
    The Current Economics of Cyber Attacks Ron Winward Security Evangelist October 17, 2016 What Are We Talking About Historical Context Does Hacking Pay? Cyber Aack Marketplace Economics of Defenses: Reality Check 2 Once Upon a Time… 3 Story of the Automobile Ideal economic condions help fuel and grow this industry Be&er Roads Assembly Line Ideal Economic Condi9ons Growth 4 Cyber Attacks Reaching a Tipping Point More Resources More Targets More Mature Availability of low More high value, A level of maturity cost resources increasingly vulnerable that drives efficiency targets leads to more and ensures valuable informaon anonymity The economics of hacking have turned a corner! 5 Modern Economics of Cyber Attacks and Hacking 6 Do You Romanticize Hackers? 7 Reality of Today’s Hackers May look more like this . than like this 8 Today’s Adversary: Not always the Lone Wolf Structured organizaon with roles, focus Premeditated plan for targe9ng, exfiltraon, mone9zaon of data/assets Mul9-layered trading networks for distribu9on, Source: HPE: the business of hacking obfuscaon Why? Because increasingly, CRIME PAYS! 9 Or Does It? The average aacker earns approximately ¼ of the salary of an average IT employee The cost and 9me to plan aacks has decreased Be&er access to be&er tools makes aacks easier Remember: Nobody is trying to be “average” 10 Sophisticated Understanding of Value Mone9zable criminal enterprise Credit Cards Medical Records Intellectual Property Creden9als Vulnerabili9es Exploits 11 The Economics of Web Attacks Hacker steals US healthcare
    [Show full text]
  • The Internet and Drug Markets
    INSIGHTS EN ISSN THE INTERNET AND DRUG MARKETS 2314-9264 The internet and drug markets 21 The internet and drug markets EMCDDA project group Jane Mounteney, Alessandra Bo and Alberto Oteo 21 Legal notice This publication of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) is protected by copyright. The EMCDDA accepts no responsibility or liability for any consequences arising from the use of the data contained in this document. The contents of this publication do not necessarily reflect the official opinions of the EMCDDA’s partners, any EU Member State or any agency or institution of the European Union. Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). More information on the European Union is available on the internet (http://europa.eu). Luxembourg: Publications Office of the European Union, 2016 ISBN: 978-92-9168-841-8 doi:10.2810/324608 © European Monitoring Centre for Drugs and Drug Addiction, 2016 Reproduction is authorised provided the source is acknowledged. This publication should be referenced as: European Monitoring Centre for Drugs and Drug Addiction (2016), The internet and drug markets, EMCDDA Insights 21, Publications Office of the European Union, Luxembourg. References to chapters in this publication should include, where relevant, references to the authors of each chapter, together with a reference to the wider publication. For example: Mounteney, J., Oteo, A. and Griffiths, P.
    [Show full text]
  • Virtual Currencies and Terrorist Financing : Assessing the Risks And
    DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT FOR CITIZENS' RIGHTS AND CONSTITUTIONAL AFFAIRS COUNTER-TERRORISM Virtual currencies and terrorist financing: assessing the risks and evaluating responses STUDY Abstract This study, commissioned by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs at the request of the TERR Committee, explores the terrorist financing (TF) risks of virtual currencies (VCs), including cryptocurrencies such as Bitcoin. It describes the features of VCs that present TF risks, and reviews the open source literature on terrorist use of virtual currencies to understand the current state and likely future manifestation of the risk. It then reviews the regulatory and law enforcement response in the EU and beyond, assessing the effectiveness of measures taken to date. Finally, it provides recommendations for EU policymakers and other relevant stakeholders for ensuring the TF risks of VCs are adequately mitigated. PE 604.970 EN ABOUT THE PUBLICATION This research paper was requested by the European Parliament's Special Committee on Terrorism and was commissioned, overseen and published by the Policy Department for Citizens’ Rights and Constitutional Affairs. Policy Departments provide independent expertise, both in-house and externally, to support European Parliament committees and other parliamentary bodies in shaping legislation and exercising democratic scrutiny over EU external and internal policies. To contact the Policy Department for Citizens’ Rights and Constitutional Affairs or to subscribe to its newsletter please write to: [email protected] RESPONSIBLE RESEARCH ADMINISTRATOR Kristiina MILT Policy Department for Citizens' Rights and Constitutional Affairs European Parliament B-1047 Brussels E-mail: [email protected] AUTHORS Tom KEATINGE, Director of the Centre for Financial Crime and Security Studies, Royal United Services Institute (coordinator) David CARLISLE, Centre for Financial Crime and Security Studies, Royal United Services Institute, etc.
    [Show full text]
  • An Evolving Threat the Deep Web
    8 An Evolving Threat The Deep Web Learning Objectives distribute 1. Explain the differences between the deep web and darknets.or 2. Understand how the darknets are accessed. 3. Discuss the hidden wiki and how it is useful to criminals. 4. Understand the anonymity offered by the deep web. 5. Discuss the legal issues associated withpost, use of the deep web and the darknets. The action aimed to stop the sale, distribution and promotion of illegal and harmful items, including weapons and drugs, which were being sold on online ‘dark’ marketplaces. Operation Onymous, coordinated by Europol’s Europeancopy, Cybercrime Centre (EC3), the FBI, the U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and Eurojust, resulted in 17 arrests of vendors andnot administrators running these online marketplaces and more than 410 hidden services being taken down. In addition, bitcoins worth approximately USD 1 million, EUR 180,000 Do in cash, drugs, gold and silver were seized. —Europol, 20141 143 Copyright ©2018 by SAGE Publications, Inc. This work may not be reproduced or distributed in any form or by any means without express written permission of the publisher. 144 Cyberspace, Cybersecurity, and Cybercrime THINK ABOUT IT 8.1 Surface Web and Deep Web Google, Facebook, and any website you can What Would You Do? find via traditional search engines (Internet Explorer, Chrome, Firefox, etc.) are all located 1. The deep web offers users an anonym- on the surface web. It is likely that when you ity that the surface web cannot provide. use the Internet for research and/or social What would you do if you knew that purposes you are using the surface web.
    [Show full text]
  • Databreaches in Healthcare the Attractiveness of Leaked Healthcare Data for Cybercriminals 2 Whitepaper: Databreaches in Healthcare
    Databreaches in Healthcare The attractiveness of leaked healthcare data for cybercriminals 2 Whitepaper: Databreaches in healthcare Table of Contents Introduction.................................................................................................. 5 An international problem ............................................................................................................................ 6 The risk of digitization ................................................................................................................................ 6 The medical IoT ............................................................................................................................................ 7 Overview of the attack vector: What has Healthcare suffered in the past? ............................................ 8 What are the most common causes of health data compromise? ................................................................... 10 Hacking/IT incidents ................................................................................................................................. 10 Social Engineering......................................................................................................................................11 Examples ......................................................................................................................................................11 Why is the healthcare vertical such an attractive target?.......................................................................
    [Show full text]
  • Honeypots: Not for Winnie the Pooh But
    2018] 259 HONEYPOTS: NOT FOR WINNIE THE POOH BUT FOR WINNIE THE PEDO — LAW ENFORCEMENT’S LAWFUL USE OF TECHNOLOGY TO CATCH PERPETRATORS AND HELP VICTIMS OF CHILD EXPLOITATION ON THE DARK WEB Whitney J. Gregory* Cruelty, like every other vice, requires no motive outside itself—it only requires opportunity.1 INTRODUCTION Lawyers, doctors, teachers, politicians, and Hollywood stars—what do they all have in common? Smarts? Success? Wealth? Respect in their com- munities? Demonstrating the terrible divergence between appearance and re- ality, some members of these professions are also frequent customers and producers of child pornography. Contrary to what some may assume, child pornographers are not just antisocial, out-of-work, reclusive basement dwellers. They may be people you would least expect.2 Take, for instance, the teen heartthrob Mark Salling, who starred on Fox’s hit show Glee as handsome bad-boy Puck from 2009 to 2015. Twenty-fifteen was also the year Salling was arrested and charged * Antonin Scalia Law School at George Mason University, J.D. Candidate, May 2019; Articles Editor, George Mason Law Review, 2018–19. This Comment is dedicated to the memory of my grandfa- ther Guido A. Ianiero. 1 George Eliot, Janet’s Repentance, in SCENES OF CLERICAL LIFE 102, 146 (Harper & Bros. 1858). 2 Judges have described child pornography defendants as seemingly ordinary, even upstanding, men (and a few women). “The defendants’ professional careers [are] often highlighted, including Air Force Captain, physician, trust specialist, and teacher.” Melissa Hamilton, The Efficacy of Severe Child Pornography Sentencing: Empirical Validity or Political Rhetoric?, 22 STAN.
    [Show full text]
  • Measurement and Analysis of Cryptolocker Ransoms in Bitcoin
    Behind Closed Doors: Measurement and Analysis of CryptoLocker Ransoms in Bitcoin Kevin Liao, Ziming Zhao, Adam Doupe,´ and Gail-Joon Ahn Arizona State University fkevinliao, zmzhao, doupe, [email protected] Abstract—Bitcoin, a decentralized cryptographic currency that called bitcoins1, to other addresses by issuing transactions, has experienced proliferating popularity over the past few years, which are then broadcast to the public blockchain. is the common denominator in a wide variety of cybercrime. Since all confirmed transactions are visible to the public, the We perform a measurement analysis of CryptoLocker, a family of ransomware that encrypts a victim’s files until a ransom blockchain’s inherent transparency has proven to be ineffective is paid, within the Bitcoin ecosystem from September 5, 2013 in preserving the anonymity of its users (legitimate users through January 31, 2014. Using information collected from and cybercriminals alike). While Bitcoin addresses alone are online fora, such as reddit and BitcoinTalk, as an initial starting not explicitly tied to any real-world entities, a number of point, we generate a cluster of 968 Bitcoin addresses belonging recent research efforts have shown that monetary movements to CryptoLocker. We provide a lower bound for CryptoLocker’s economy in Bitcoin and identify 795 ransom payments totalling and address links can be traced throughout the blockchain 1,128.40 BTC ($310,472.38), but show that the proceeds could data structure [3]–[8]. Even though there have been many have been worth upwards of $1.1 million at peak valuation. By attempts to enhance user privacy with varying degrees of analyzing ransom payment timestamps both longitudinally across success (i.e.
    [Show full text]
  • DARK WEB INVESTIGATION GUIDE Contents 1
    DARK WEB INVESTIGATION GUIDE Contents 1. Introduction 3 2. Setting up Chrome for Dark Web Access 5 3. Setting up Virtual Machines for Dark Web Access 9 4. Starting Points for Tor Investigations 20 5. Technical Clues for De-Anonymizing Hidden Services 22 5.1 Censys.io SSL Certificates 23 5.2 Searching Shodan for Hidden Services 24 5.3 Checking an IP Address for Tor Usage 24 5.4 Additional Resources 25 6. Conclusion 26 2 Dark Web Investigation Guide 1 1. Introduction 3 Introduction 1 There is a lot of confusion about what the dark web is vs. the deep web. The dark web is part of the Internet that is not accessible through traditional means. It requires that you use a technology like Tor (The Onion Router) or I2P (Invisible Internet Project) in order to access websites, email or other services. The deep web is slightly different. The deep web is made of all the webpages or entire websites that have not been crawled by a search engine. This could be because they are hidden behind paywalls or require a username and password to access. We are going to be setting up access to the dark web with a focus on the Tor network. We are going to accomplish this in two different ways. The first way is to use the Tor Browser to get Google Chrome connected to the the Tor network. This is the less private and secure option, but it is the easiest to set up and use and is sufficient for accessing material on the dark web.
    [Show full text]
  • Introduction Points
    Introduction Points Ahmia.fi - Clearnet search engine for Tor Hidden Services (allows you to add new sites to its database) TORLINKS Directory for .onion sites, moderated. Core.onion - Simple onion bootstrapping Deepsearch - Another search engine. DuckDuckGo - A Hidden Service that searches the clearnet. TORCH - Tor Search Engine. Claims to index around 1.1 Million pages. Welcome, We've been expecting you! - Links to basic encryption guides. Onion Mail - SMTP/IMAP/POP3. ***@onionmail.in address. URSSMail - Anonymous and, most important, SECURE! Located in 3 different servers from across the globe. Hidden Wiki Mirror - Good mirror of the Hidden Wiki, in the case of downtime. Where's pedophilia? I WANT IT! Keep calm and see this. Enter at your own risk. Site with gore content is well below. Discover it! Financial Services Currencies, banks, money markets, clearing houses, exchangers. The Green Machine Forum type marketplace for CCs, Paypals, etc.... Some very good vendors here!!!! Paypal-Coins - Buy a paypal account and receive the balance in your bitcoin wallet. Acrimonious2 - Oldest escrowprovider in onionland. BitBond - 5% return per week on Bitcoin Bonds. OnionBC Anonymous Bitcoin eWallet, mixing service and Escrow system. Nice site with many features. The PaypalDome Live Paypal accounts with good balances - buy some, and fix your financial situation for awhile. EasyCoin - Bitcoin Wallet with free Bitcoin Mixer. WeBuyBitcoins - Sell your Bitcoins for Cash (USD), ACH, WU/MG, LR, PayPal and more. Cheap Euros - 20€ Counterfeit bills. Unbeatable prices!! OnionWallet - Anonymous Bitcoin Wallet and Bitcoin Laundry. BestPal BestPal is your Best Pal, if you need money fast. Sells stolen PP accounts.
    [Show full text]
  • Computer Science 161 Fall 2020 Weaver Misc Topics 2
    Computer Science 161 Fall 2020 Weaver Misc Topics 2 1 Pre Lecture Facepalm... From just a year ago! Computer Science 161 Fall 2020 Weaver Welcome to Hell Week.... Computer Science 161 Fall 2020 Weaver • Mental pressure of "Curl up in a ball with a rifle" vs "Pretend everything is normal" continues... • Highly likely Biden will be the winner: But we won't know for sure for another few days at least.... • Really a massive screwup: We should just have preliminary results announced on Friday at once for all states • Today is More Off Topic Stuff: • Nukes • Tor Hidden Services • Sidechannels 3 And Checking In With Everyone Again... How Are You on the Fauci Scale? Computer Science 161 Fall 2020 Weaver 4 The Interesting Problem: Limiting Use Computer Science 161 Fall 2020 Weaver • Who might use a nuke without authorization? • Our "allies" where we station our nukes • Original motivation: Nukes stored in Turkey and Greece • Someone who can capture a nuke • This is what sold the military on the need for the problem: We had nukes in Germany which would be overrun in case of a war with the USSR • Our own military • General Jack D Ripper scenario • The mandated solution: • Permissive Access Link (PAL) 5 Nuke Safety Features Computer Science 161 Fall 2020 Weaver • One-point safety – no nuclear yield from detonation of one explosive charge. • Strong link/weak link – • strong link provides electrical isolation; • weak link fails early under stress (heat, etc.) • Environmental sensors – detect flight trajectory. • Unique signal generator – digital signal used for coupling between stages. • Insulation of the detonators from electrical energy.
    [Show full text]
  • The Internet Organised Crime Threat Assessment (IOCTA) 2015
    The Internet Organised Crime Threat Assessment (IOCTA) 2015 2 THE INTERNET ORGANISED CRIME THREAT ASSESSMENT (IOCTA) 2015 THE INTERNET ORGANISED CRIME THREAT ASSESSMENT (IOCTA) 2015 3 TABLE OF FOREWORD 5 CONTENTS ABBREVIATIONS 6 EXECUTIVE SUMMARY 7 KEY FINDINGS 10 KEY RECOMMENDATIONS 12 SUGGESTED OPERATIONAL PRIORITIES 15 INTRODUCTION 16 MALWARE 18 ONLINE CHILD SEXUAL EXPLOITATION 29 PAYMENT FRAUD 33 SOCIAL ENGINEERING 37 DATA BREACHES AND NETWORK ATTACKS 40 ATTACKS ON CRITICAL INFRASTRUCTURE 44 CRIMINAL FINANCES ONLINE 46 CRIMINAL COMMUNICATIONS ONLINE 50 DARKNETS 52 BIG DATA, IOT AND THE CLOUD 54 THE GEOGRAPHICAL DISTRIBUTION OF CYBERCRIME 57 GENERAL OBSERVATIONS 62 APPENDICES 67 A1. THE ENCRYPTION DEBATE 67 A2. AN UPDATE ON CYBER LEGISLATION 70 A3. COMPUTER CRIME, FOLLOWED BY CYBERCRIME FOLLOWED BY …. ROBOT AND AI CRIME? 72 4 THE INTERNET ORGANISED CRIME THREAT ASSESSMENT (IOCTA) 2015 FOREWORD These include concrete actions under the three main mandated Threat Assessment (IOCTA), the annual presentation of the areas – child sexual exploitation, cyber attacks, and payment I am pleased to present the 2015 Internet Organised Crime fraud – such as targeting certain key services and products Centre (EC3). offered as part of the Crime-as-a-Service model, addressing the cybercrime threat landscape by Europol’s European Cybercrime growing phenomenon of live-streaming of on-demand abuse of children, or targeted actions with relevant private sector partners ofUsing cybercrime the 2014 for report the asperiod a baseline, under this consideration. assessment Itcovers offers the a cross-cutting crime enablers such as bulletproof hosting, illegal viewkey developments, predominantly changes from a lawand enforcement emerging threats perspective in the based field tradingagainst onlinesites on payment Darknets fraud.
    [Show full text]
  • Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed Through Cryptocurrencies? *
    Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies? * Sean Foley a, Jonathan R. Karlsen b, Tālis J. Putniņš b, c a University of Sydney b University of Technology Sydney c Stockholm School of Economics in Riga January, 2018 Abstract Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users and one-half of bitcoin transactions are associated with illegal activity. Around $72 billion of illegal activity per year involves bitcoin, which is close to the scale of the US and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the way black markets operate by enabling “black e-commerce”. JEL classification: G18, O31, O32, O33 Keywords: blockchain, bitcoin, detection controlled estimation, illegal trade * We thank an anonymous referee, Andrew Karolyi, Maureen O’Hara, Paolo Tasca, Michael Weber, as well as the conference/seminar participants of the RFS FinTech Workshop of Registered Reports, the Behavioral Finance and Capital Markets Conference, the UBS Equity Markets Conference, and the University of Technology Sydney. Jonathan Karlsen acknowledges financial support from the Capital Markets Co-operative Research Centre. Tālis Putniņš acknowledges financial support from the Australian Research Council (ARC) under grant number DE150101889. The Online Appendix that accompanies this paper can be found at goo.gl/GvsERL Send correspondence to Tālis Putniņš, UTS Business School, University of Technology Sydney, PO Box 123 Broadway, NSW 2007, Australia; telephone: +61 2 95143088.
    [Show full text]