An entrepreneur as professionally careful as the Dread Pirate Roberts doesn’t trust instant messaging services. Forget phones or Skype. At one point during our eight-month pre-interview courtship, I offer to meet him at an undisclosed location outside the United States. “Meeting in person is out of the question,” he says. “I don’t meet in person even with my closest advisors.” When I ask for his name and nationality, he’s so spooked that he refuses to answer any other questions and we lose contact for a month.
All my communications with Roberts are routed exclusively through the messaging system and forums of the website he owns and manages, the Silk Road. Accessing the site requires running the anonymity software Tor, which encrypts web traffic and triple-bounces it among thousands of computers around the world. Like a long, blindfolded ride in the back of some guerrilla leader’s van, Tor is designed to prevent me—and anyone else—from tracking the location of Silk Road’s servers or the Dread Pirate Roberts himself. “The highest levels of government are hunting me,” says Roberts. “I can’t take any chances.”
If Roberts is paranoid, it’s because very powerful people really are out to get him. In the last two-and-a-half years, Silk Road has grown into the web’s busiest bazaar for heroin, methamphetamines, crack, cocaine, LSD, ecstasy and enough strains of marijuana to put an Amsterdam coffee shop to shame.
The Drug Enforcement Agency won’t comment on whether it’s investigating Silk Road but wrote in a statement that it’s aware of the site and is “very proactive in keeping abreast” of the digital underground’s “ever-evolving technological advancements”. Senator Chuck Schumer has demanded Silk Road be shut down and called it “the most brazen attempt to peddle drugs online that we have ever seen… by light-years”.
Anyone can download and run Tor, exchange some dollars or euros for the digital currency Bitcoin and go shopping on Silk Road for drugs that are vacuum-sealed and discreetly mailed via the US Postal Service, right under the federal government’s nose. By the measure of Carnegie Mellon researcher Nicolas Christin, Roberts’s eBay-like service was grossing $1.2 million a month in the first half of 2012. Since then, the site has doubled its product listings, and revenue now hits an annual run rate of $30 million to $45 million by Forbes’s estimate. One analysis of the Tor network performed by a student at Dublin’s Trinity College found that Silk Road received around 60,000 visits a day, mostly users seeking to buy or sell drugs, along with other illicit items, including unregulated cigarettes and forged documents.
Silk Road takes a commission on all of its sales, starting at 10 percent and scaling down for larger transactions. Given that those commissions are collected in Bitcoins, which have appreciated close to 200-fold against the dollar since Silk Road launched in 2011, the Dread Pirate Roberts and any other stakeholders in Silk Road have likely amassed millions in profits.
Despite the giant DEA crosshairs painted on his back and growing signs that the feds are probing the so-called “dark web” that Silk Road and other black market sites inhabit, Roberts spoke with Forbes in his first ever extended public interview for a reason: As with physical drug dealing, a turf war has emerged. Competitors, namely a newly launched site called Atlantis with a real marketing budget and a CEO with far less regard for his privacy, are stealing Roberts’s spotlight.
“Up until now, I’ve done my best to keep Silk Road as low profile as possible… letting people discover [it] through word of mouth,” Roberts says. “At the same time, Silk Road has been around two-and-a-half years. We’ve withstood a lot, and it’s not like our enemies are unaware any longer.”
Roberts also has a political agenda: He sees himself not just as an enabler of street-corner pushers but also as a radical libertarian revolutionary carving out an anarchic digital space beyond the reach of the taxation and regulatory powers of the state—Julian Assange with a hypodermic needle. “We can’t stay silent forever. We have an important message, and the time is ripe for the world to hear it,” says Roberts. “What we’re doing isn’t about scoring drugs or ‘sticking it to the man’. It’s about standing up for our rights as human beings and refusing to submit when we’ve done no wrong.”
“Silk Road is a vehicle for that message,” he writes to me from somewhere in the internet’s encrypted void. “All else is secondary.”
While Roberts waxes philosophical, his competitors are finding motivation enough in grabbing some of Silk Road’s lucrative drug trade. On June 26, a video ad for Atlantis appeared on YouTube telling the story of “Charlie”, a friendly-looking cartoon hipster. Charlie, according to text that popped up around the video’s frame as jingly music played, is a “stoner” who moves to a new city for work and can’t find any marijuana. That is, until he discovers Atlantis’s “virtual black market”, orders some pot and gets “high as a damn kite”.
YouTube removed the video within days for violating its terms of service but not before it had received close to 100,000 views and pulled the new Bitcoin-based black market into the public internet’s awareness. Atlantis’s ad took a direct shot at Silk Road, calling itself “the world’s best anonymous online drug marketplace”.
In comments now deleted from an ask-me-anything session on the social news site Reddit, Atlantis’s chief executive, who goes by the name “Vladimir”, listed advantages over Silk Road like less downtime and smaller fees for sellers. “The road has more users,” he wrote, “but our site is better (to put it bluntly).”
The battle for the web’s drug corner is on.
The Dread Pirate Roberts isn’t shy about naming Silk Road’s active ingredient: The cryptographic digital currency known as Bitcoin. “We’ve won the state’s war on drugs because of Bitcoin,” he writes.
Bitcoin, which came into widespread use around the same time as Silk Road’s creation, isn’t exactly the financial privacy panacea some believe it to be—its transactions can be traced using the same mechanisms that prevent fraud and counterfeiting within the Bitcoin economy. But unlike with dollars, euros or yen, the integrity of the nearly $1 billion worth of Bitcoins floating around the internet is maintained by the distributed computing power of thousands of users who run the crypto currency’s software, not by any bank or government. That means careful users never have to tie their accounts to their real world identity. As a result, Bitcoin-funded services deep within the dark web, masked by anonymity tools like Tor, claim to offer everything from cyber attacks to weapons and explosives to stolen credit cards.
Mix up your coins in one of many available laundering services—Silk Road runs one automatically for all transactions on the site—and it becomes very difficult to follow the money. Even the FBI, according to one of the bureau’s leaked internal reports, worries that Bitcoin’s complexity and lack of a central authority “present distinct challenges” for tracking criminal funds. The result is a currency as convenient as PayPal and theoretically as anonymous as cash.
“We’re talking about the potential for a monumental shift in the power structure of the world,” Roberts writes. “The people now can control the flow and distribution of information and the flow of money. Sector by sector the state is being cut out of the equation and power is being returned to the individual.”
Of course, Roberts’s lofty words on individual liberties provide a convenient veneer to justify his profitable business selling illegal, dangerous and addictive substances. But Roberts argues that if his users want heroin and crack, they should have the freedom to buy it and deal with the consequences. Unlike other Bitcoin-based underground sites, Silk Road bans all but what Roberts defines as victimless contraband. He won’t permit the sale of child pornography, stolen goods or weapons, though the latter is a gray area. The site has experimented with selling guns and may yet reintroduce them, Roberts says.
Aside from the thorny ethics of the Bitcoin underground economy, the currency’s wild fluctuations present a more practical problem. Silk Road allows the site’s dealers to peg their Bitcoin prices to the dollar, so that a typical gram of heroin on the site costs around $200 regardless of whether Bitcoins are worth 50 cents apiece, as in early 2011, or $266, at their precrash peak in April 2013. (They’re around $100 today.) The site also offers a currency hedging system that protects dealers against swings in Bitcoin’s value while their drugs are in transit.
Bitcoin did more than enable the modern online black market, Roberts says. It also brought him and Silk Road together.
Roberts isn’t actually the site’s founder; he credits Silk Road’s creation to another, even more secretive entrepreneur, who may have used the “Dread Pirate Roberts” nom de guerre before it was assumed by the person I interviewed. The current Roberts discovered the site shortly after its creation in early 2011. Around that time, he says, he found a security flaw in the “wallet” software that stored Silk Road’s funds. The bug could have allowed a hacker to identify the site’s hardware and steal its Bitcoins. Instead of exploiting the weakness, he helped the site’s founder fix it, gained his trust and became an active partner in the business. Eventually, the current Roberts says, he bought out Silk Road’s creator and assumed full control. “It was his idea to pass the torch, in fact,” says Roberts. “He was well compensated.”
In February 2012, a post appeared on Silk Road’s forums proclaiming that the site’s administrator would henceforth be known as the Dread Pirate Roberts, a name taken from the dashing, masked protagonist in the fantasy film The Princess Bride—tellingly, a persona that is passed down in the film from one generation of pirate to another. He soon began to live up to his colourful alter ego, posting lofty manifestos about Silk Road’s libertarian political ideals and love letters to his faithful users and vendors. Commenters on the site describe Roberts as a “hero”, a “job creator”, “our own Che Guevara” and a “name [that] will live [on] among the greatest men and women in history as a soldier of justice and freedom”.
When I ask Roberts how he defines his role at Silk Road—CEO? Owner?—he tells me that he considers himself “a centre of trust” between the site’s buyers and sellers, a tricky task given that all parties want to remain anonymous. Silk Road has slowly demonstrated to users that it isn’t a typical counterfeit-drug scam site or a law enforcement trap. It’s made wise use of the trust mechanisms companies like eBay and Airbnb have popularised, including seller ratings and an escrow that releases payment to sellers only after customers receive their merchandise.
“Silk Road doesn’t really sell drugs. It sells insurance and financial products,” says Carnegie Mellon economics professor Nicolas Christin. “It doesn’t really matter whether you’re selling T-shirts or cocaine. The business model is to commoditise security.”
With millions flowing into Silk Road, the “vast majority” of which Roberts says is reinvested back in its booming black market, the Dread Pirate brushes off questions about his wealth and lifestyle. He says he carefully limits his spending to keep a low profile but admitted in one forum post to partaking in a few “first-world pleasures”. The only such pleasure he would describe to me is smoking “a bowl of sticky indica buds at the end of a long day”.
“As far as my monetary net worth is concerned, the future value of Silk Road as an organisation dwarfs its and my liquid assets.… I wouldn’t sell out for less than 10 figures, maybe 11,” he writes with a dash of vainglory. “At some point, you’re going to have to put Dread Pirate Roberts on that list you all keep over at Forbes. ;)”
it’s a rule as timeless as black markets: Where illegal money goes, violence follows. In a digital market that violence is virtual, but it’s as financially real as torching your competitor’s warehouse.
In late April, Silk Road went offline for nearly a week, straining under a sustained cyberattack that left its sensitive data untouched but overwhelmed its servers. The attack, according to Roberts, was the most sophisticated in Silk Road’s history, taking advantage of previously unknown vulnerabilities in Tor.
The sabotage occurred within weeks of rival site Atlantis’ launch. Commenters on the Reddit forum devoted to Silk Road suggested that Roberts’ customers and vendors switch to Atlantis during the downtime, leading to gossip that the newcomer had engineered the attack.
“Rumours, nothing more than that,” says Atlantis’ CEO Vladimir when I interview him in an encrypted chat room. (Like Roberts, Vlad doesn’t share much about himself, other than a background in software development, some experience as a small-time pot dealer and a love of psychedelics.) “I have suspicions [about whether] an attack ever took place. It’s far more likely they were having infrastructure issues.”
Roberts, for his part, won’t comment on the April attack’s source. He tells me he’s happy to see competition in the Web drug market, even as Atlantis boasted in June that it surpassed $500,000 in cumulative transactions. Roberts points out that another site, Black Market Reloaded, has long copied Silk Road’s model—even offering a wider variety of merchandise, including illegal firearms—while still attracting only a small fraction of Roberts’ customers. “I like having them nipping at my heels,” Roberts tells me. “Keeps me motivated.”
In a comment on “copycats” posted to Silk Road’s forums a few days after Atlantis released its video ad, however, Roberts seemed to fire back. “If you take someone’s invention, tweak one little thing and then go around telling everyone that you are ‘better’, you get zero respect from me,” he wrote. Though the rest of the message focussed on the difference between Bitcoin and a newer crypto-currency called Litecoin, users interpreted the comment as a thinly veiled dig at Atlantis.
Meanwhile, Silk Road has also been adopting some of Atlantis’ marketing tactics: In addition to Roberts’ first real interview, he’s created a new public site that serves as an online guide to accessing Silk Road, bringing his business, at least tentatively, outside Tor’s obscured network.
Competition aside, Roberts has chosen a risky time to raise his profile, as law enforcement tightens its net. Dealers in South Carolina and Australia have been arrested after allegedly selling on Silk Road, although both may have also been dealing in the physical world. In May, the proprietors of a Bitcoin-like digital currency system called Liberty Reserve were indicted and accused of helping to launder $6 billion. That same month, the biggest Bitcoin currency exchange, Tokyo’s Mt Gox, announced it would require identification for anyone seeking to trade in real world currencies. Then, last month, the FBI exploited a vulnerability in Tor to capture the alleged administrator of a child pornography site in Ireland. And, perhaps most threatening to Roberts, the NSA has been revealed to have fed intelligence to the DEA and other law enforcement agencies.
All of that gives Roberts good reason to distrust any means of communication and payment that could possibly be cracked by law enforcement. In 2012, the operators of a Silk Road-like site known as the Farmer’s Market were identified and indicted in a DEA operation called “Adam Bomb”. Though they had used Tor to hide their domain, they had communicated with one another using the encrypted email service Hushmail, a service known to co-operate with law enforcement, and had accepted payments through PayPal instead of Bitcoin. Just days after Atlantis’ Vladimir insisted that he and his “chief operating officer” communicate with me using an encrypted IM program called Cryptocat, a bug in the program was revealed that could have allowed all of our communications to be read.
Despite his caution, Roberts’ personal security remains an open question. But the potential lifetime in prison he might face if identified hasn’t slowed down his growing illegal empire. “We are like a little seed in a big jungle that has just broken the surface of the forest floor,” he wrote in one speech posted to the site’s forums last year. “It’s a big scary jungle with lots of dangerous creatures, each honed by evolution to survive in the hostile environment known as human society. But the environment is rapidly changing, and the jungle has never seen a species quite like the Silk Road.”
(This article is excerpted from the latest Forbes India 04 October, 2013 issue which is now available at news stands and book stores. You can buy our tablet version from Magzter.com)