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Cryptomarkets Are Gentrifying the Drug Trade, and That’s Probably a Good Thing

The internet is becoming a safer and more ethical marketplace for illicit substances. How will it affect the war on drugs?

by Alice Speri
Sep 5 2014, 7:40pm

Foto di r0bz/Flickr

Had Walter White sold his blue meth on Silk Road rather than through drug kingpins and criminal gangs, there wouldn't have been much to Breaking Bad, but he would have made plenty of money and probably avoided a violent death.

That, in a nutshell, is the argument made by proponents of the internet as a safer and more ethical marketplace for illicit substances.

But dealing and buying drugs online, abetted by cryptocurrencies like bitcoin, isn't just less sketchy: it also comes with a wider choice of products, better customer service, and, increasingly, assurances to please liberal or socially-conscious users, such as knowing that their opium is "fair-trade" and their cocaine "conflict-free."

It is, in other words, gentrifying the drug business at the expense of the middlemen and drug enforcement authorities profiting from the war on drugs. And that's a good thing, according to James Martin, a criminology professor at Australia's Macquarie University, who recently published a book on the cryptomarkets transforming the drug trade, Drugs on the Dark Net.

VICE News caught up with him to learn more about the gentrified drug trade.

VICE News: You spent a lot of time surfing the "dark net" for drug deals. What did you learn?
James Martin: There are four main research questions that I address in the book. The first is, what are these sites? Are they just sites for cyber crime, or are they something more than that? In answering that question, we found that, yes, they definitely were more than that — they were sites of community. There was a real sense of political engagement. There was a lot of awareness of the ideology of the war on drugs and very much a sense among the users of these sites that what they were doing was socially constructive, and that it was the state that had really produced the most harm by criminalizing drugs and by forcing drugs into the hands of violent drug dealers.

Another interesting thing is that there was this kind of interdependent sort of resilience between the sites as well: when one of the sites went down, you'd get an influx of users into other sites, and users were actually talking about them in terms of migration, saying things like, "There are heaps of refugees from Silk Road or Black Market Reloaded on our site." And there'd be debates going on about how "refugees are slowing things down" and, "No, we need to welcome these refugees here" — kind of mirroring these debates that you see in real life about whether we want an inclusive society or whatever.

What it's really like to be one of the Silk Road's biggest drug lords. Read more here.

How does this play into the rise of ethical drug marketing?
When you compare conventional illicit drugs distribution networks with online ones, the online ones present a less harmful alternative, because they cut out so many of the middlemen. That also results in cheaper prices and less product adulteration as well. The drugs go through fewer hands; you can have drug producers who will sell directly to their customers.

'The online market enables 'good' drug producers, or people who create the kind of drugs that people want to take.'

Did you watch Breaking Bad? Your Walter White type, his story would have gone so differently had he been able to — instead of meeting up with all the cartel members and getting involved in the really seedy side of the drug market — if he'd just been able to jump online and produce his meth at home. He would have made a fortune. It wouldn't have been as interesting a story, but he would have been able to sell directly to his customers. The online market enables "good" drug producers, or people who create the kind of drugs that people want to take. You can create a brand awareness and direct relationship with your customers that you can't with conventional drug distribution networks.

How does this affect law enforcement?
The research suggests that this is a nightmare for enforcement: on the one hand, the drugs are so difficult to come by, and in terms of getting prosecution it's not like a buy-bust operation where you've got an undercover cop pretending to be a drug consumer, you catch the drug seller, they've got the drugs on them, they've got the money on them, and you've got a really nice package that you can present in court. With the online drug stuff, you've got drugs in a different country, you've got financial transactions that are impossible to trace, there's not any record of transactions taking place, and the person that the drugs are being delivered to, there's no evidence necessarily that they ordered the drugs. They could just deny it.

Strategically, too, they have a problem because the war on drugs' rhetoric relies on creating and sustaining this stereotype of drug dealers as these sort of violent, homicidal maniacs that are out there to get your kids hooked. What the online trade shows is that these people are actually much more like normal online entrepreneurs, they've got a commitment to non-violence, they're much more attuned to the needs and sensitivities of their customers. They offer refunds for drugs that don't turn up, or for people who aren't satisfied with their levels of customer service. I mean, looking at these sites, it really strikes you just how mundane a lot of the conversation is, just about minor delays in shipping times and all this stuff that you wouldn't associate with the drug trade.

'They're sort of showing a way of how it can work and how it can be orderly and not cause harm in society.'

Silk Road may have actually made dealing drugs safer, but not everyone's buying that. Read more here.

Are these socially conscious users and sellers online the same people who are pushing for legalization across the board?
You never know the real identities of people. There's a very clear demarcation between people's online personality and people's real life personality, and there's a very strong commitment to maintaining anonymity. But I think it's very safe to say that users of cryptomarkets would very much like to see the war on drugs end and drug prohibition end. And that's what they're doing in a way: they're sort of showing a way of how it can work and how it can be orderly and not cause harm in society.

But while it eliminates some of the danger, it also cuts out an entire class of people who don't necessarily have the access or technical expertise to deal or make drug purchases online.
That's something that hasn't been looked at, but it's one of the issues with these sites. The war on drugs most heavily impacts poor people and racial minorities and marginalized groups. These are the kinds of groups that wouldn't necessarily have a big presence on cryptomarkets anyway, because to access a cryptomarket you need a bank account, you need a computer, you need a minimum amount of technical proficiency and expertise. You're really talking about more of a middle class kind of drug user than maybe a homeless person who's addicted to crack or heroin. So the kinds of groups that are already using these sites are very much the kinds of groups that are already kind of isolated from the worst effects of the war of drugs. And the people that are selling to these users are still going to be doing that the conventional way, because their customers aren't the ones who are likely to be using these sites.

So the cryptomarket is a bit of a hip, higher-end space?
It's a gentrified market.

'If you're trying to maintain a tough guy persona you're not going to say, 'Oh, by the way, no one was harmed in the making of this cocaine, and if you're not happy with the quality, we'll consider giving you a 30 percent discount on your next purchase.''

Are cryptomarkets changing the culture of drug dealing?
The technology changes the dynamics. If you are a normal drug dealer you need to maintain this kind of fearsome persona, you need to have a minimum level of deterrence built into you because your main enemy probably isn't the police, it's other drug dealers and rival criminal groups who know that they can rob you, they can kill you, and you're not going to be protected by society and you're not going to be protected by police. So you need to maintain this kind of tough man persona.

Whereas in the online space, you're not like that at all, so you can quite easily say, "Ok, we're gonna offer refunds, we're gonna talk about socially progressive and ethically sourced drugs." If you're trying to maintain a tough guy persona you're not going to say, "Oh, by the way, no one was harmed in the making of this cocaine, and if you're not happy with the quality, we'll consider giving you a 30 percent discount on your next purchase."

Global drug policy is still deadly and ineffective. Read more here.

Will cryptomarkets remain a niche in the drug trade, lacking the potential to supplant conventional drug-distribution networks?
It depends. We kind of think stereotypically that most drug users are kind of these down-and-out types, but that's not the case. The UN Office on Drugs and Crime estimates that 90 percent of illicit drug users are non-problematic: these are people that have jobs, people that you wouldn't recognize at all as drug users. I think when we look at the potential for transformation, we're at the stage now with cryptomarkets as we were with legitimate online retail back in the '90s, when we had big department stores saying, "People buying sunglasses or shoes online, that's never gonna take off, people are always gonna want to go into a store and buy this stuff." Look at those department stores now; they're out of business. There are strong reasons having to do with the technology that the online market is better for the consumers, and is better for the vendors. It's just going to get bigger and bigger.

What do you make of the criticism that the online drug trade might encourage people who would never seek drugs out on the street to develop dependency because they can easily access addictive substances from their computers?
I understand that, but I think there's a bit of a flawed logic there as well. If you talk to anyone who's using any of these sites, they aren't that easy to use, even if you're a tech savvy kid. First of all, you're never going to stumble upon these by accident. It's not like being at a party and someone offers you a joint, or you bump into a drug dealer who tries to sell you something. You can't access these sites without trying to, they're not easy to find. Or they are easy to find if you're looking for them, but you're not going to find them accidentally.

'I think that's the flawed logic at the heart of the war on drugs: they're saying, 'If we make this stuff so unappealing and so dangerous, then people aren't gonna take drugs anymore.' That's clearly not the case — that has failed.' 

The other point is, if you access one of these sites, you still need a bank account, you need to link that bank account with a bitcoin wallet, you need to buy bitcoins or some other type of cryptocurrency. None of those obstacles are insurmountable, but I think it's fair to say that if someone is prepared to go to those lengths, then it's likely they'd probably go to the same lengths to, say, find drugs in a nightclub. It's much easier to get drugs in a conventional way — though not necessarily the drugs you want, or good-quality drugs.

But is there a danger in the fact that we can now have a hip, socially conscious, fair-trade and conflict-free drug market? Does that make drugs more trendy and appealing?
I struggle to see that as a bad thing. If we can clean up the drug market and make it less violent and people are going to find it more appealing because it's less violent… I think that's the flawed logic at the heart of the war on drugs: they're saying, "If we make this stuff so unappealing and so dangerous, then people aren't gonna take drugs anymore." That's clearly not the case — that has failed. We have had 40 years of that, and we look at the drug trade now and it's bigger than it's ever been. Drugs are more easily accessible and stronger than they've ever been, and we have enriched generations of drug dealers and imprisoned generations of non-violent drug users. Turning the drug business into a nightmare as a deliberate government policy has failed miserably. This presents a different alternative; a less violent alternative, I think. On the whole, a better alternative.

Legal pot in the US is crippling Mexican cartels. Read more here.

But authorities seem to be going after these sites pretty aggressively. How hard is it for them?
It's very difficult. I think this is another point: the authorities have been losing the drug war since they started it, and the reason for that is that drugs are a huge business. We are talking hundreds of billions of dollars every year. When you've got that kind of demand, it doesn't matter what the authorities do, they're never going to be able to win that war. It's simple economics. So, they are already losing the conventional drug war.

'The fact that these sites don't scare people in the same way is, in the long-term, a very serious problem for an organization like the DEA.'

The digital drug war is so much harder to prosecute because, as I mentioned, just trying to gather evidence online is so difficult compared to conventional drug busts. Local police departments can't really do anything about it. They clearly don't have the resources, and big enforcement agencies like the FBI and the DEA know all about these sites but are really struggling. Even these huge law enforcement behemoths can't figure out the encryptions that these sites use. It took them two and a half years of investigation to take down one site, Silk Road, and even then, it looks like they got it through an undercover investigation, not by cracking the encryption. So the business model still works, the technology still works.

Do you think law enforcement will eventually only need to focus on the more unsavory aspects of the trade, leaving non-violent, online traders alone?
I think the stakes are really high for law enforcement. One of the big dangers for law enforcement is that these sites do present a less harmful alternative. They clearly don't frighten people the same way as these stereotypes of the pusher man — and it's not just a stereotypes. If we look at the Mexican drugs wars, for example, there are seriously scary people involved in the drug trade. The prohibition movement relies on these people, they rely on these very scary Mexican gangsters and cartels to frighten people into supporting their policies.

The fact that these sites don't scare people in the same way is, in the long-term, a very serious problem for an organization like the DEA, for example. Its entire premise is based on the prohibition of illicit drugs. If people suddenly legalized drugs, that organization would cease to exist — and that's careers gone, millions of dollars in funding gone. It's people working within these institutions who have a vested interest in maintaining prohibition.

'If you're a drug trafficker or a street gang, they're probably pretty bad because they've got the potential to put you out of business.'

Afghanistan's opium economy is doing better than ever. Read more here.

Is your sense that cryptomarkets are a positive development?
Whether the rise of these online markets is a good or a bad thing depends on who you are. If you're a drug vendor, they are excellent, because you can sell drugs directly to your customers and you can keep a high percentage of the profits for yourself. If you're a drug consumer, they're better, because you get a much wider range of drugs to choose from, and you also have a much higher chance of getting high-quality drugs online than you do through conventional sources.

If you're a drug trafficker or a street gang, they're probably pretty bad because they've got the potential to put you out of business the same way that conventional online retail has put retail stores out of business. And for law enforcement, it's a bit of a mixed picture: if law enforcement is interested in maintaining drug prohibition and drug arrests, then the rise of cryptomarkets is quite a negative development because it's going to make making those arrests and maintaining that prohibition that much harder. But if law enforcement is interested in public safety — which I'd argue should be their ultimate priority — then these sites present a much beneficial alternative, because they have the potential to reduce the systemic violence associated with illicit drugs.

Follow Alice Speri on Twitter: @alicesperi

Photo via Flickr

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War on Drugs
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James Martin
Drug Enforcement Administration
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Fair Trade
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