Ross Ulbricht, Martyr for Progress, and the Rise of Darkcoin

By Jeffrey Tucker
Feb. 12, 2015

Convicted on all counts, said the jury in the case of Ross Ulbricht, the man who built the original Silk Road website. He faces a minimum of 30 years in prison and a maximum of life.

Never mind that the online drug-distribution market is bigger than ever, and that there are dozens of newer and more polished versions of the Silk Road. It is inconceivable that they will ever go away in this digital age. And the administrators have learned from this trial. They will be more careful next time.

The state wanted this man. Let's say that he goes to jail…for opening a website. This is not justice. There were no victims of his actions. What he did was brilliant, innovative, important, and, as they say in business today, deeply disruptive.

Who gets disrupted? Think about who was most upset when commerce started moving to the Internet. It was the brick-and-mortar stores. They worried about their future. Immediately there would be moves to tax online commerce, regulate it more closely, rein it in, and harass the owners of new dot coms. This is the way incumbent market players respond to innovators.

In the drug world, who are the incumbents? It's the drug cartels and the lords that run them. It is they — with countless billions and with vast political and financial power — who saw the danger that the Silk Road implied for them. They more than anyone else had the desire to shut down the site and prosecute its founder.

Whereas the drug lords work through violence and bribes, the Silk Road offered a peaceful, market-based solution. It worked peer-to-peer, connecting buyers and sellers directly so that they could bypass the entrenched elites.

To what extent are governments working together with narcotics warlords around the world? The allegations appear regularly and seem highly credible. No one in the know seriously doubts the close relationship between the CIA and global narcotics traffic. Anytime government raids and shuts down one supplier, for example, it is benefitting the other suppliers — a fact that cannot be entirely unknown even to governments.

So while it's true that the government wanted this man, it might not be for the reason people suppose. Drugs will never be stamped out. The drug war actually ends up doing the opposite (never forget that Richard Nixon swore some 40 years ago that he would crush marijuana use). Of course there is the element of pride here: the Silk Road was an amazing humiliation to the drug warriors.

Still, there's more going on. If drug production and distribution goes entirely P2P, governments and drug lords both have much to lose. Competition causes prices to fall, and for accountability to be part of the exchange process. After all, Silk Road's key innovation was not only it's P2P structure; it was also its Amazon-style rating system. Drug lords would have been forced to compete.

The proliferation of online drug markets also means potential losses to the banking system that launders the money of the drug cartels. They want this trade to stay in dollars. There's too much at stake to risk have it all moving to cryptocurrencies in which each receiver of funds is his or her own banker.

If you look 5 or 10 years into the future, it's a pretty good bet that online drug markets are going to compete directly with the old-line drug cartels in any case. The government can slow down history but it can't stop it. Once a technology is public, no one can stop its application.

A very telling sign has been the rise of Darkcoin in the days since the Ulbricht verdict.



Darkcoin is essentially Bitcoin that uses a complicated mixing service to obfuscate and thereby anonymize the source of funds. It short circuits all the means by which the feds were able to trace Silk Road funds.

Already, one Darkcoin is worth $3 plus dollars and has the third highest market cap among all the cryptocurrencies. When I see prices like this, I reflect back on how far we have come already in the cryptocurrency world. Very few of the earliest adopters of Biticoin every believed that it would achieve "dollar parity," mean that the exchange rate between Bitcoin and dollar would be identical.

Now, crypto-dollar parity is so routine it hardly makes the news.

Markets always find a way, even when it means defying the world's most powerful governments.

Markets escaped the anti-usury fanatics of the middle ages. Markets prevailed against the anti-coffee hysteria in 18th-century Germany. They won against the alcohol prohibitionists of the 1920s. They have crushed the anti-pot fanatics of the 1970s. And they will win out against the drug cartels and governments today that are trying to stop the migration of trade from the physical to the digital world.

Probably online drug markets already have won. The tragedy is that the true innovators have to hide in the dark and also that there are so many hero/martyrs along the way.


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Jeffrey Tucker is Chief Liberty Officer of Liberty.me (http://liberty.me/join), a subscription-based, action-focused social and publishing platform for the liberty minded. He is also distinguished fellow Foundation for Economic Education (http://fee.org), executive editor of Laissez-Faire Books, research fellow Acton Institute, founder CryptoCurrency Conference, and author six books. He is available for speaking and interviews via [email protected]













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