In the early days of Bitcoin there weren’t many days where you could spend it. In February 2011 a new anonymous marketplace was created; this marketplace was called Silk Road. It allowed users to trade buy and sell anything they wanted regardless of it’s legality in the country of purchase or the country of sale. On the Silk Road all transactions were done using bitcoins; to compensate for the partial anonymity the marketplace offered an escrow system where people could send their bitcoins.
The bitcoins sent to escrow would only be released once the buyer confirmed that the goods had been received. Alongside the escrow system a reputation system was built; this helped reduce the number of sellers going rogue and keeping all the money without sending any goods. Because of its unregulated and anonymous nature, the marketplace quickly became a place where people went to sell and buy illegal goods or services.
Most of the transactions that happened on the marketplace involved the sale and purchase of drugs. The marketplace was used a lot for drugs because it offered a way to buy and sell without the risk of violence and the ability to buy something that had already been reviewed by other users. The Silk Road had a large role in the popularization of Bitcoin, as it offered a real life example of how a cryptocurrency could provide real case uses that any other currency would not be able to provide.
The Silk Road was shut down in October 2013, after it’s creator Ross Ulbricht, who was going under the pseudonym of Dread Pirate Roberts (DPR), was arrested in a San Francisco public library. Ulbricht was indicted on charges of money laundering, computer hacking, conspiracy to traffic narcotics, and attempted murder of six people. The take down of the marketplaces was a long and complex operation that took over a year and involved the FBI, DEA, DHS, the IRS, U.S. Postal Inspection, U.S. Secret Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. To take down the marketplace a lot of information had to be gathered from people selling on the exchange.
This information was gathered from people that got arrested for selling on the marketplace. It happened in the science fiction section of the Glen Branch of the San Francisco Public Library while Ulbricht was logged on to the market place as the administrator (DPR) as that was the only way for law enforcement to have access the information on the website.
Ulbricht was sentenced to life in prison without parole with multiple charges, even though none of them were for murder, since they were all dropped before trial. Even though he has been sentenced, the case is not over yet; Ulbrichts lawyers claim that illegal searches had been done during the investigation, and that two corrupt enforcement agents were part of the investigation. Because of the illegal searches and the corrupt officers, Ulbricht’s defense is seeking for an appeal.
So many people in Bitcoin were introduced to the currency through the Silk Road that the price of it dropped by almost 25% when the news that the marketplace was taken down came out. The price dropped from $145 to $109, and eventually went back up to $124 by the end of the next day.
Since the Takedown Bitcoin has come a far way and most transactions are now not from marketplaces like the Silk Road. The take down of the Silk Road did not stop marketplaces with no rules from existing; since the silk road has been taken down, hundreds of similar marketplaces have opened and made it even harder for law enforcement to control the situation.