An interesting development in cryptocurrency-based darknet markets bewildered the industry last year when imprisoned Silk Road founder Ross Ulbricht sold his first NFT for $6.2 Million to fund his release. Silk Road was one of the first and biggest darknet marketplaces to have surfaced last decade before Ulbricht was arrested in 2013. Even as Silk Road might have ceased operations, a plethora of similar marketplaces have since surfaced on the darknet to cater to numerous, mostly illegal, needs worldwide.
In fact, a recent report by Chainalysis has found that darknet revenue shot up to $2.1 billion in 2021, a substantial raise from the $1.7 billion that was bagged in 2020. More interestingly, this is after a number of marketplaces went bust during this time, signaling that consolidation and competition in the sector are on a rise.
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According to Chainlaysis, the bulk of this revenue, $1.8 billion to be precise, was generated through drug-focused marketplaces, while some $300 million were raked in by fraud shops that sell anything from stolen logins, credit cards, exploit kits to even fake Covid-19 vaccine certificates. However, five fraud shops and 13 drug-focused markets also stopped operations during this time.
‘High’er Profits & Lower Users
The report further found that contrary to the revenue, the number of drug-related transactions and active users has also fallen drastically in the previous few years. For instance, transactions fell from 11.7 million in 2016 to just 3.7 million this year, while active users shrunk from almost 1.7 million to 1.2 million, even as drug market revenue growth averaged 35.7 percent per year during this time.
This is possibly due to the maturity of the crypto drug market, as the average payment size between 2016 and 2021 has leaped from $160 to $493 worth of cryptocurrency, the report noted. It added that sellers had possibly elevated their customer base from drug users to suppliers, ‘or that some users who once bought small quantities are now buying much more.’
Moreover, buyers are now directly contacting the sellers without the marketplace acting as an intermediary, with sales of this manner also amounting to $122 million in 2021, which is almost 5% of the total darknet revenue.
Monopolizing the Darknet
Regardless, the consolidation of this sector is also evident from the “fierce and dirty” competition that has emerged between the remaining marketplaces. The report noted that ‘data leaks, DDoS attacks, and doxxes are common occurrences in the space’ which is explanatory for why marketplaces have been on a decline.
“These competitive threats, alongside other barriers to entry like finding a hosting provider and retaining vendors, have made opening and operating a darknet market too difficult for many would-be administrators.”
Unsurprisingly though, the most infamous privacy coin Monero has continued to remain at the helm of these operations, according to Chainalysis. It found that the number of markets supporting it grew from 45% in 2020 to 67% the next year. What’s more, Bitcoin still dominated the darknet market space, however, with support from 93% of all markets, the report added.