Due to its nature as a pseudonymous, private, non-sovereign crypto asset, Bitcoin’s first major use case was as a medium of exchange on dark web markets.
Silk Road, a well-known, now-defunct dark market where dealers could peddle everything from marijuana and fake passports to malware and asthma inhalers, spawned many early Bitcoin pioneers, acting as an on-ramp for individuals into the broader cryptocurrency industry.
Since authorities shut down the marketplace, however, many have assumed that BTC’s use in illicit activities has become a thing of the past. But, according to a recent report from blockchain analytics leader Chainalysis, this isn’t the case. In fact, the firm estimates that 2019 will be a record year for cryptocurrencies on the dark web.
Dark Webs to Transact $1B in Bitcoin This Year
The report states that if dark web activity remains consistent, Bitcoin will make up at least $1 billion worth of transactions this year. Year-to-date, dark web markets have processed $515.6 million worth of the cryptocurrency. For some comparison, 2017 saw Bitcoin account for $871.8 million in dark net transactions.
Per Chainalysis’ research, the most popular secret market that uses Bitcoin is Hydra, which is somewhat of a spiritual successor to The Silk Road. And on these sites, narcotics and stolen credit card information are the most popular types of goods sold.
If users aren’t inclined to use BTC, Chainalysis believes that Monero is another fan favorite. With Monero transactions begin predicated on obfuscation through Ring Signatures/CT technology, it is unclear how the firm managed to procure this data.
It is important to note that Bitcoin’s use in illegal transactions is on the decline from an overarching point of view. As Hannah Curtis, a senior product manager at Chainalysis, tells Bloomberg, less than 1% of all transactional volume is related to dark web transactions, compared to 7% in 2012.
This correlates with a chart posted by a Twitter analyst going by “CL”, which as seen below, shows that Bitcoin has become much more of an investment opportunity than a medium to transact value for contraband. In fact, as CL notes, search interest for “Bitcoin Silk Road” is so negligible that when charted against interest for “Bitcoin Investment”, the former doesn’t appear on the chart.
The first ever Bitcoin rally may have been driven by people that should not be named. However, today, almost all people who still search Bitcoin on google are for investment purposes. pic.twitter.com/sdnT0hSNy8
— CL (@CL207) June 30, 2019
Retail Crypto Use on The Rise
Bitcoin’s resurgence on dark web markets comes as cryptocurrencies have been finding growing use in retail applications. As reported by Blockonomi last week, gaming streaming site Twitch recently added back support for Bitcoin and Bitcoin Cash payments via BitPay after a three-month hiatus. In a similar string of news, at Consensus, a payments upstart known as Flexa unveiled Spedn.
A play on “HODL”, an industry inside joke, Spedn is a solution that allows users to spend Bitcoin, Ethereum, Gemini Dollars, and Bitcoin Cash in certain partner chains. These partners include Nordstrom, Gamestop, Crate & Barrel, Bed Bath & Beyond, Lowe’s, and Whole Foods. These companies join Avnet, AT&T, and Microsoft as big-name firms that actively accept Bitcoin payments.
While there aren’t any clear statistics on crypto’s use in retail transactions, more likely than not, Bitcoin is still mostly being used to transact value between exchanges, store wealth, hedge against financial risk and potential market collapses, and hide capital from governments, like China’s. But, the growth in the number of outlets for cryptocurrency use in our day-to-day is a positive sign nonetheless.