Going Local on a Global Platform

• Author: Judith Aldridge,Rasmus Munksgaard,Jakob Demant,David Décary-Hétu
• DOI: 10.1177/1057567718769719
• Published date: 01 September 2018
• Date: 01 September 2018
• Subject Matter: Articles

Article

Going Local on a Global Platform:

A Critical Analysis of the

Transformative Potential of

Cryptomarkets for Organized

Illicit Drug Crime

Jakob Demant

1

, Rasmus Munksgaard

2

, David De

´cary-He

´tu

3

,

and Judith Aldridge

4

Abstract

Objective: There is broad agreement in the literature on the transformative potential of drug

cryptomarkets that allow sourcing on a global market and consequently the circumvention of

existing supply chains between producer and end user. We examine whether the transformative

potential of drug cryptomarkets has been realized in two ways: Are cryptomarket drug sellers found

in production and transit countries? and Do we see the increased use of shipping across interna-

tional borders over time? Method: Using data collected by the DATACRYPTO software tool

between 2013 and 2016, we characterize cryptomarket buyer behavior through the product

reviews (i.e., sales transactions) posted on 15 cryptomarkets. Findings: Cryptomarket drug sellers

are predominantly based in countries of Europe, North America, and Oceania. For both cannabis

resin and cocaine sold on cryptomarkets, we find that known production and transit countries are

not the primary sources of supplied drugs but rather key countries of consumption. In the case of

3,4-methylenedioxymethamphetamine, we observe that the Netherlands, a known production

country, is the largest supplier. We further observe tendencies over time toward increased loca-

lization of cryptomarkets with regard to product destinations. Discussion: Though cryptomarkets

offer a potentially global platform for drug distribution, they do not tend to be used as such. We

explain our results with reference to buyers’ preferences regarding safety, risk, and convenience,

alongside structural limitations for cryptomarket use such as bitcoin availability.

Keywords

drugs and crime, crime in complex organizations

1

Department of Sociology, University of Copenhagen, Copenhagen, Denmark

2

School of Criminology, The University of Montreal, Montreal, QC, Canada

3

University of Montreal, Montreal, Canada

4

School of Law, The University of Manchester, Oxford, Manchester, UK

Corresponding Author:

Jakob Demant, Department of Sociology, University of Copenhagen, Buld. 16, Copenhagen 1353, Denmark.

Email: jd@soc.ku.dk

International CriminalJustice Review

2018, Vol. 28(3) 255-274

ª2018 Georgia State University

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DOI: 10.1177/1057567718769719

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Cryptomarkets as Disruptive Innovation

The structure of international and domestic illicit drug smuggling has changed little in recent

decades, as products move from producers to intermediaries and eventually to retail drug dealers

who meet their customers face to face. Technological developments like mobile phones and pagers

have facilitated a shift at the retail level, with many dealers now operating in closed markets in

which they transact only with trusted, known, or vouched-for customers (Coomber & Moyle, 2014;

Kerr, Small, & Wood, 2005; May & Hough, 2004). With the advent of drug cryptomarkets over the

past 6 years, we are now witnessing a transformative drug market innovation (Aldridge & De´cary-

He´tu, 2014). Also known as Darknet markets or anonymous online markets (Christin, 2013; Soska &

Christin, 2015), cryptomarkets have started to attract the attention of media, drug regulators, and

drug market participants. These markets offer drug dealers a new distribution channel that has been

characterized as anonymous open markets (Aldridge & De´cary-He´tu, 2016), enabling drug sellers to

transact with customers across larger geographical areas than they could previously.

Cryptomarkets are hosted on the hidden or darknet, a subsection of the Internet where all

communications are encrypted and anonymized, thereby protecting both the infrastructure hosting

the marketplaces and identity of their users. Cryptomarkets are visually and organizationally similar

to online marketplaces such as Amazon and eBay that bring together multiple sellers in one location

(Barratt, 2012; Christin, 2013). Vendors pay a bond upon signing up and a commission on each sale

(Christin, 2013; Van Hout & Bingham, 2014). Marketplace administrators earn commission and in

turn provide escrow payment protection and dispute resolution services, in addition to the techno-

logical infrastructure (Martin, 2014a, 2014b; but see Moeller, Munksgaard, & Demant, 2017, for

exceptions). Payments are made using virtual currencies, most commonly bitcoin (Nakamoto,

2008), which provide some anonymity (Ban croft & Reid, 2016; Bo¨hme, Chr istin, Edelman, &

Moore, 2015; Europol, 2016). Products are shipped through postal systems.

The original cryptomarket, Silk Road, specialized primarily in the sale of drugs (Christin, 2013).

The range of products and services offered on cryptomarkets has diversified in recent years. While

the sales on cryptomarkets remain dominated by drugs (Soska & Christin, 2015, p. 42), listings for

financial fraud, hacking, and identity fraud now make up just over 4 in 10 listings offered for sale.

Recent estimates suggest that cryptomarkets generate drug sales of over US$14.2 million per month,

a 3-fold increase from estimates in 2013 (Kruithof et al., 2016).

Cryptomarkets are international platforms. Indeed, when examining the geographic aspects of

cryptomarket supply, Van Buskirk, Naicker, Roxburgh, Bruno, and Burns (2016) found vendors

located in many countries, including some in which drug production takes place. It is therefore

possible that cryptomarkets might provide drug sellers located in these producer countries with

access to a worldwide retail market for their products, potentially changing the existing structure of

drug markets and shortening supply chains.

Generally, drugs increase in value the further they are from their source (Boivin, 2014). The

prime reason for this is the risk associated with trafficking and distribution. Risk thus acts as a “tax”

on the product value, as every handler within the chain must be paid for taking his or her risk (Reuter

& Kleiman, 1986). Because drugs increase in value the further they are from their production source,

cryptomarkets could shorten the distance between drug users and drug producers by cutting out

superfluous middle-market actors involved in the trafficking of illicit substances. The international

reach of cryptomarkets has led Martin (2014b, p. 364) to ask whether illicit drugs could now “simply

be posted directly from producers to consumers (both domestically and internationally), [with both

being able to] find each other literally at the click of a button.” The fact that products increase in

value as they travel from producer to consumer further encourages such a transformation because of

the profitability of transactions with fewer middle men (Reuter & Caulkins, 1998, p. 594).

256 International Criminal Justice Review 28(3)