“Bitcoin? Yes, it is the money that is used on the darknet to buy drugs and weapons. You have certainly heard or perhaps even said this sentence. In 2019, bitcoin celebrated its 10th anniversary, the opportunity to return to the sulphurous reputation of cryptocurrencies too often mistakenly associated with illicit activities. If you are among those who still believe that bitcoin is the currency of the darknet, that it is used to finance drug trafficking and terrorism, this article is for you.
But what is Darknet?
To start, it seems important to devote a few lines to the darknet. By doing some research, I realized that few people really knew what darknet was and that he too suffered from a somewhat too harsh reputation. We must first understand that there are several darknet, we call darknet, a subspace of the internet in which we can communicate anonymously. The operation is relatively simple, instead of connecting directly to the service you want to consult, your connection goes through several intermediaries whose role is to hide the origin. Today, the most famous darknet is the Tor network, which was developed by the US military in the early 2000s. In 2018, it was estimated that only 3% the black markets of various illicit activities on this network against 97% of the bandwidth used to go to the open web to surf anonymously and escape surveillance.
The main users of the darknet are often large organizations of journalists like Wikileaks or reporters without borders. In this sense, the darknet is a tool allowing the whistleblower to express himself, the journalist to communicate in war territory, to protect their sources, etc. Jean-Phillipe Rennard, doctor of economics has also devoted a very interesting Ted entitled ” Darknet, the big misunderstanding? “.
Is bitcoin really used on Darknet?
“Bitcoin was the currency of Darknet before conquering the surface like the dollar was the currency of cowboys before gaining Wall Street.” [Haas Avocats]
Yes the bitcoin is actually used on the darknet, but make no mistake, it is like many other currencies. What is interesting is to look at the proportion of bitcoin in circulation that is used there. In early 2019, Chainalysis, a blockchain analysis company, published a file entitled “Crypto Crime Report” in which it devoted a section to the relationship between cryptocurrency and darknet.
Among the interesting information from the study, there was the share of bitcoins sent on darknets. General surprise, we note that since 2015, less than 1% of bitcoins in circulation are sent on the darknet. Moreover, the share of bitcoin sent to the darknet did not exceed 2% until 2012. On the other hand, if the proportion of bitcoin remains low, the amounts are significant, notably due to the rise in prices.
Please note, it is important to note that bitcoins sent over the darknet are not necessarily used to respond to illegal activities. As we saw earlier, darknet doesn’t have to mean fraud.
“The difficulty is anonymous crypto-assets” [Michelle Abraham, avocate d’affaires spécialiste sur la blockchain et les cryptomonnaies]
If bitcoin is not used that much on darknets, this is not the case for all cryptocurrencies. Bitcoin is the most well-known cryptocurrency, but there are many others, each with different roles and characteristics. Among them are, for example, Monero and Zcash, the main feature of which is anonymity. This kind of cryptocurrency is very difficult to trace and makes it an ideal exchange currency for illicit activities.
Why is it not a good idea to use bitcoin for illegal activities?
At first bitcoin was used on the Darknet by people interested in particular by its anonymity, its speed for transfers and the low transaction costs. Nevertheless, they quickly realized that bitcoin was far from the right solution to stay hidden and that, on the contrary, by using it it left an indelible trace of their passage.
Indeed, Bitcoin is an open blockchain, which means all of its transactions are visible and traceable. It is said that bitcoin is not anonymous, But pseudonym.
Today, as part of the fight against money laundering and the financing of terrorism, all (serious) companies operating in the world of cryptocurrencies, whether they have a role with the investment or the sale of cryptocurrencies are obliged to request a KYC (know your customers) to all of their customers. In this way, in the event of fraud, by escalating the transactions, it is relatively simple for the authorities to trace the identity of the fraudster.
Moreover, it is quite common to see complete organizations dismantled by the police thanks to the traceability of the bitcoin network. Last October, the American authorities managed to shut down the world’s largest child pornography site by monitoring bitcoin transactions.
“Thanks to sophisticated tracking of Bitcoin transactions, IRS-CI special agents were able to determine the location of the Darknet server, identify the administrator of the website and, ultimately, locate the physical location of the website server in South Korea, “said the head of the IRS-CI (Internal Revenue Service, Criminal Investigation).
To conclude, although bitcoin is actually used on Darknet, we realize that it is in low proportion, because its characteristics are not compatible with what is sought by their users. Bitcoin is far from an anonymous and untraceable currency contrary to what has been said for a long time. Conversely, others anonymous cryptocurrencies find their perfect place in this environment.