Blockchain technology, as we have learned, is slowly becoming one of the newest ways in which to facilitate trade and is being used as a distributed, transparent, autonomous system for exchanging value. This public registry works as a way to cryptographically link and record who owns and transacts certain assets. These assets can range from Bitcoins to certificates, contracts, and personal, identifiable information. These records are essentially replicated on every computer that uses the network. As revolutionary as this technology is, it is important to analyze what other ways it can be used. One exploration I want to focus on is how it has been used to in black market transactions.
One industry that has dealt with major problems of fraud and counterfeiting is the ticketing industry. Most recently in 2017, consumers in Europe experienced an instance of ticket fraud when trying to buy tickets to see famous recording artist Ed Sheeran. When users went to buy tickets on the popular website Viagogo, they found themselves purchasing from aggressive sellers who put counterfeit tickets up for sale on the site. When incorporating the use of software bots that buy a heavy amount of these tickets and resell them on secondary markets for higher prices, the repercussions of creating these counterfeit tickets became even worse. As a result of these fake tickets being sold, Ed Sheeran recalled around 10,000 tickets. Of course, not everyone is lucky enough to recuperate their loss.
Another situation in which blockchain technology has played a part in the black market is in the story of Ross Ulbricht and his online drug marketplace, Silk Road. As a grad student from Penn State, Ulbricht studied Materials Science and Engineering. During his studies, he came up with the idea to create an anonymous website where you could buy or sell anything. For Ulbricht, this primarily included illegal drugs, which he didn’t think should be illegal.
Initially, Ulbricht used a web browser called Tor to track his transactions as this browser allowed users to log into “another separate internet” untraceable by the government. It was when he started having trouble with finding good autonomous payment methods that Ulbricht encountered Bitcoin. With this technology, anyone in the world could use this intangible currency to buy and sell anything without leaving digital fingerprints behind. To implement his idea, he created a website called Silk Road.
Once Ross was able to get the website up and running, he had to figure out how he would get the drugs. He decided to grow the products, first starting with magic mushrooms, himself. He was so determined to run the business himself that he did all the work. After a few months and the incorporation of Bitcoin, a couple of other dealers surfaced selling other types of drugs and soon after, guns (you can check out the full story on Silk Road Story). After months of investigation, the FBI, DEA, Department of Homeland Security, IRS and local and state law enforcement managed to finally find Ross in San Francisco. He is now serving a life sentence without parole.
After analyzing these two examples, we can ask ourselves, how do we combat the use of this technology against the black markets? In the ticket industry, bots will most likely always be present in attempting to take tickets away from real fans, so the industry needs to make it harder for these professional, fraudulent companies to do so. Upon researching some possible solutions, I came across a few good ones. One resolution could be adding certain constraints within the purchase process. For instance, you could consider setting a ceiling on the resale price for tickets. Another resolution could be to sell tickets through an e-wallet containing a passport number. Since most people use their smartphones to store boarding passes and other types of tickets, this could be easy to implement.
As for catching criminals transacting in the black market, there has been a steady shift toward seeing cryptocurrency as a tool for prosecuting crimes. In the case of Silk Road, investigators were able to collect all of the images and text describing drug products to the Bitcoin transactions that appear in the blockchain when the deals closed. They were also able to tie this to the IP addresses of the computers used by the buyers or sellers using the website. Ulbricht was caught when he began hiring help to expand his operation. He mistakenly used the same pseudonym he had adopted years before to post announcements on illegal drug discussion forums. Because of this, the FBI could find his specific IP address and were able to catch him in the act of logging into Silk Road as an administrator.
Ultimately, although I feel that blockhain technology is complex to understand, I find it to be an extremely interesting are of study. As seen in the case of the ticket industry and black markets, it can be used for both good and bad. I personally am anxious to see how it gets incorporated and in the future.