Silk Road

Silk Road opened in early 2011 as a Tor hidden service: a marketplace you could only reach through the Tor network, with seller ratings, buyer reviews, and an escrow system, that sold mostly drugs and accepted only bitcoin. Its operator called himself Dread Pirate Roberts. A Gawker article in June 2011 titled "The Underground Website Where You Can Buy Any Drug Imaginable" brought it to a general audience. Senator Chuck Schumer held a press conference days later, and he and Senator Joe Manchin wrote to the Attorney General and the DEA demanding it be shut down. For a lot of people that article was the first time they had heard the word bitcoin, and the price roughly tripled in the week after it ran.

For the next two years Silk Road was the reason Bitcoin existed, as far as the press was concerned. That was not entirely unfair. In 2011 and 2012 the market was one of the few places where you could spend bitcoin on anything at all, and academic work looking back at those years has put a large share of early transaction activity near illegal markets. "It's only for buying drugs" was a reasonable description of a lot of what was visible at the time.

On 1 October 2013 FBI agents arrested Ross Ulbricht at a public library in San Francisco, with his laptop open and logged in as the site's administrator. The site was seized the next day. Prosecutors put its lifetime sales at about 9.5 million BTC and its commissions at around 600,000 BTC. The government took roughly 174,000 BTC from the servers and from Ulbricht's laptop and sold it in a series of US Marshals auctions in 2014 and 2015; the venture capitalist Tim Draper bought the first lot of about 30,000. Ulbricht was convicted in February 2015 and sentenced that May to two life terms plus forty years without parole. A successor, Silk Road 2.0, was seized in November 2014. Ulbricht was pardoned by the US president in January 2025, after eleven years in prison, on the argument that the sentence had been out of proportion to the crime.

The label did not survive the shutdown. Bitcoin's price rose past $1,000 for the first time within two months of the seizure, and usage kept growing after the main place to spend it on drugs was gone. Darknet markets still exist and still use cryptocurrency, but by the count of chain analysis firms, whose business is finding this activity, illicit use of all kinds was around 0.14 percent of on-chain volume in 2024. The privacy chapter has the numbers and the caveats.

What the case demonstrated instead is the property the label got backwards. Bitcoin's ledger is public and permanent, and it kept convicting people for a decade. Two of the federal agents on the investigation, Carl Force of the DEA and Shaun Bridges of the Secret Service, were caught stealing bitcoin from the site during the case because the coins could be followed; both went to prison in 2015. In 2012 someone had exploited a bug in Silk Road's withdrawal system and walked off with about 50,000 BTC; in November 2021, nine years later, investigators traced those coins to James Zhong's house in Georgia, where part of the stash was on a computer board hidden under blankets in a popcorn tin and the rest in a floor safe, and the seizure was worth $3.36 billion. The site that made Bitcoin famous as criminal money is the single best case study for why it is bad criminal money, which is the point the fungibility and address clustering entries make from the other direction.