Why Silk Road basically sells insurance and financial products, not drugs

The world's biggest online drug marketplace is more like the world's biggest service company

Forbes reporter Andy Greenberg secured the interview of the year this week, with Dread Pirate Roberts, the pseudonymous owner/CEO/"center of trust" of Silk Road, "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 interview is an insight into the political motivations behind the site, as well as the levels of paranoia you need to have to run a multimillion dollar drug empire online.

But for this blog, perhaps the most insightful quote didn't come from Roberts (who takes his pseudonym from cult 80s film The Princess Bride) at all. Instead, it's this take:

“Silk Road doesn’t really sell drugs. It sells insurance and financial products,” says Carnegie Mellon computer engineering professor Nicolas Christin. “It doesn’t really matter whether you’re selling T-shirts or cocaine. The business model is to commoditize security.”

Silk Road is a marketplace; it's far closer to the eBay of drugs than the Amazon of them. And so its main purpose is merely connecting buyers and sellers.

But even more than with eBay, there are major trust issues involved in doing so. No-one wants to actually share any information which could be used to track them down (although the buyer has to give the seller at least somewhere to post too), and if you do get scammed, you've got even less chance of using the law to get your money back, on account of what you buy being really illegal.

Some of the Silk Road's services specifically get around this problem: so, for example, the site offers escrow services to buyers, which only release their cash to the seller once they get the goods. And, famously, all purchases are made using Bitcoin, the anonymous peer-to-peer currency which increased in value by almost 20 times over the first few months of this year.

That brought its own problems, which Silk Road also helps alleviate. Dealers can price their goods in dollars, even as they get paid in Bitcoin, and Silk Road will ensure that the fluctuations don't hit them too hard. In effect, the company is running a small FX trading division, although with only one currency pair being traded, they won't make much money from it.

But as competition in the sector grows – a rival site, Atlantis, has launched and is running direct campaigns against Silk Road – the lawlessness may start being something which no amount of innovation can solve. Already, there are murmurs that an outage at Silk Road was engineered by the newcomer. Roberts estimates the value of Silk Road at "10 figures, maybe 11"; he's got a fight ahead to keep it to himself.

Drugs! Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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“Trembling, shaking / Oh, my heart is aching”: the EU out campaign song will give you chills

But not in a good way.

You know the story. Some old guys with vague dreams of empire want Britain to leave the European Union. They’ve been kicking up such a big fuss over the past few years that the government is letting the public decide.

And what is it that sways a largely politically indifferent electorate? Strikes hope in their hearts for a mildly less bureaucratic yet dangerously human rights-free future? An anthem, of course!

Originally by Carly You’re so Vain Simon, this is the song the Leave.EU campaign (Nigel Farage’s chosen group) has chosen. It is performed by the singer Antonia Suñer, for whom freedom from the technofederalists couldn’t come any suñer.

Here are the lyrics, of which your mole has done a close reading. But essentially it’s just nature imagery with fascist undertones and some heartburn.

"Let the river run

"Let all the dreamers

"Wake the nation.

"Come, the new Jerusalem."

Don’t use a river metaphor in anything political, unless you actively want to evoke Enoch Powell. Also, Jerusalem? That’s a bit... strong, isn’t it? Heavy connotations of being a little bit too Englandy.

"Silver cities rise,

"The morning lights,

"The streets that meet them,

"And sirens call them on

"With a song."

Sirens and streets. Doesn’t sound like a wholly un-authoritarian view of the UK’s EU-free future to me.

"It’s asking for the taking,

"Trembling, shaking,

"Oh, my heart is aching."

A reference to the elderly nature of many of the UK’s eurosceptics, perhaps?

"We’re coming to the edge,

"Running on the water,

"Coming through the fog,

"Your sons and daughters."

I feel like this is something to do with the hosepipe ban.

"We the great and small,

"Stand on a star,

"And blaze a trail of desire,

"Through the dark’ning dawn."

Everyone will have to speak this kind of English in the new Jerusalem, m'lady, oft with shorten’d words which will leave you feeling cringéd.

"It’s asking for the taking.

"Come run with me now,

"The sky is the colour of blue,

"You’ve never even seen,

"In the eyes of your lover."

I think this means: no one has ever loved anyone with the same colour eyes as the EU flag.

I'm a mole, innit.