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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The footie is back. Three weeks in and what have we learned so far?

Barcleys, boots and big names... the Prem is back.

Another season, another reason for making whoopee cushions and giving them to Spurs fans to cheer them up during the long winter afternoons ahead. What have we learned so far?

Big names are vital. Just ask the manager of the Man United shop. The arrival of Schneiderlin and Schweinsteiger has done wonders for the sale of repro tops and they’ve run out of letters. Benedict Cumberbatch, please join Carlisle United. They’re desperate for some extra income.

Beards are still in. The whole Prem is bristling with them, the skinniest, weediest player convinced he’s Andrea Pirlo. Even my young friend and neighbour Ed Miliband has grown a beard, according to his holiday snaps. Sign him.

Boots Not always had my best specs on, but here and abroad I detect a new form of bootee creeping in – slightly higher on the ankle, not heavy-plated as in the old days but very light, probably made from the bums of newborn babies.

Barclays Still driving me mad. Now it’s screaming from the perimeter boards that it’s “Championing the true Spirit of the Game”. What the hell does that mean? Thank God this is its last season as proud sponsor of the Prem.

Pitches Some groundsmen have clearly been on the weeds. How else can you explain the Stoke pitch suddenly having concentric circles, while Southampton and Portsmouth have acquired tartan stripes? Go easy on the mowers, chaps. Footballers find it hard enough to pass in straight lines.

Strips Have you seen the Everton third kit top? Like a cheap market-stall T-shirt, but the colour, my dears, the colour is gorgeous – it’s Thames green. Yes, the very same we painted our front door back in the Seventies. The whole street copied, then le toot middle classes everywhere.

Scott Spedding Which international team do you think he plays for? I switched on the telly to find it was rugby, heard his name and thought, goodo, must be Scotland, come on, Scotland. Turned out to be the England-France game. Hmm, must be a member of that famous Cumbrian family, the Speddings from Mirehouse, where Tennyson imagined King Arthur’s Excalibur coming out the lake. Blow me, Scott Spedding turns out to be a Frenchman. Though he only acquired French citizenship last year, having been born and bred in South Africa. What’s in a name, eh?

Footballers are just so last season. Wayne Rooney and Harry Kane can’t score. The really good ones won’t come here – all we get is the crocks, the elderly, the bench-warmers, yet still we look to them to be our saviour. Oh my God, let’s hope we sign Falcao, he’s a genius, will make all the difference, so prayed all the Man United fans. Hold on: Chelsea fans. I’ve forgotten now where he went. They seek him here, they seek him there, is he alive or on the stairs, who feckin’ cares?

John Stones of Everton – brilliant season so far, now he is a genius, the solution to all of Chelsea’s problems, the heir to John Terry, captain of England for decades. Once he gets out of short trousers and learns to tie his own laces . . .

Managers are the real interest. So refreshing to have three young British managers in the Prem – Alex Neil at Norwich (34), Eddie Howe at Bournemouth (37) and that old hand at Swansea, Garry Monk, (36). Young Master Howe looks like a ball boy. Or a tea boy.

Mourinho is, of course, the main attraction. He has given us the best start to any of his seasons on this planet. Can you ever take your eyes off him? That handsome hooded look, that sarcastic sneer, the imperious hand in the air – and in his hair – all those languages, he’s so clearly brilliant, and yet, like many clever people, often lacking in common sense. How could he come down so heavily on Eva Carneiro, his Chelsea doctor? Just because you’re losing? Yes, José has been the best fun so far – plus Chelsea’s poor start. God, please don’t let him fall out with Abramovich. José, we need you.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 27 August 2015 issue of the New Statesman, Isis and the new barbarism