Darknet Markets Face Headwinds After Year of Mixed Results

Hydra is one of the biggest darknet markets still in operation.("Hercules and the Hydra" image via Metropolitan Museum of Art)

Darknet Markets Face Headwinds After Year of Mixed Results

Darknet markets are having a rough 2020.

COVID-19 has wreaked havoc on all shipping-centric industries, drug sellers included. Criminologist Andréanne Bergeron estimates that only 21% of darknet market transactions resulted in on-time deliveries during the height of pandemic lockdowns in the spring.

But the virus only accounts for part of their pain. According to crypto tracing firm Chainalysis, darknet marketplaces are suffering their largest consolidation in at least five years.

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Only 38 marketplaces for drugs and other illegal goods and services were operational in October 2020, Chainalysis found in a Thursday report. That’s a 37% decline from the industry’s February peak.

Between exit scams, denial-of-service attacks, falling order numbers and “temporary” storefront closures, there are now fewer online places to buy drugs with bitcoin than at any point since November 2017.

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Chainalysis cautioned that surviving marketplaces are still making massive profits. With over $1.5 billion in revenue generated so far, darknet markets have already recorded a record-setting 2020.

Some darknet vendors tried to capitalize on this year’s uncertainty. In April, Elliptic, another blockchain intelligence firm, reported that “hundreds of listings” for discount N95 masks were popping up on darknet marketplaces. 

Other vendors also veered more overtly nefarious. Elliptic spotted a handful of listings for controversial COVID-19 treatment chloroquine and other purported virus “cures.”

Virtually no one bought hand sanitizer, PPE or COVID-19 cures from these anonymous drug marketplaces, however. CipherTrace followed such postings for a month and found no notable sales. 

But the pandemic may well have boosted marketplace revenue by prompting customers to buy their stash bulk. Chainalysis said “uncertainty” could have led to casual buyers to “stock up.”

Chainalysis said the marketplaces’ biggest problem going forward maybe an apparently stagnating customer base. Total transfers are down for the year: only 8.4 million, well off last year’s 12 million figure.

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