If you know anything about Bitcoin, you know that part of the reason it became popular so quickly was an illegal website called Silk Road. The website was an online marketplace for illegal drugs that used Bitcoin to help keep buyers and sellers anonymous. In fact, some have speculated that Bitcoin came about primarily as a means to fund the Silk Road website. When using Bitcoin and the Tor web browser, it was possible to stay anonymous while purchasing drugs online.
The original Silk Road website was taken down by federal authorities eventually, but as often happens online, a successor was soon found. It even kept the same name – the Silk Road. CNN is running a story about the new Silk Road and problems they’re having. Surprisingly, the problems aren’t with federal authorities or law enforcement. It’s with hackers. Using the same bug that caused MtGox and other large Bitcoin Exchanges to suspend withdrawals recently, there are reports that the new Silk Road has lost approximately 4,440 bitcoins, which were worth around $2.7 million at the time they were stolen.
As might be expected, confidence in Bitcoin has fallen quite a bit – along with the value. While it recovered somewhat from the initial drop in value, some are wondering if it will recover the rest and restore the $1,000 for one BTC value it enjoyed recently. Silk Road isn’t your typical website, but the fact that something happening on it – in the dark web or deep web as its sometimes is known – is a telling sign that Bitcoin has a long way to go when it comes to being considered a safe investment for some. However, others believe the incident will only help Bitcoin in the long term as security measures are taken more seriously.
Silk Road 2.0
The founders of the original Silk Road website were arrested in October of 2013, but soon after some enterprising souls started up the spiritual and physical successor to the site – even keeping the name Silk Road. What’s interesting to note is that the Silk Road website isn’t easy to get to – unless you’re using the Tor web browser and know a little about what’s known as the Deep Web – vast sections of the Internet that are not indexed by Google and the other search engines.
The website only allowed Bitcoin to make purchases. Because of this, people had to feed bitcoins into the system that were stored with Silk Road before transactions were made. This is the source of the roughly 4,400 bitcoins that were stolen recently. This means a lot of people are out of money, although the new founders of Silk Road 2.0 don’t seem to be too concerned with it. In fact, they called on the thieves to give the money back in the spirit of the community, but this doesn’t appear it’s going to happen. They might not know of the phrase, “there’s no honor among thieves.”
A person only known as Defcon wrote an initial message when it first happened that started with the ominous phrase, “I am sweating as I write this.” He went on to explain that three alleged attackers used the same flaw that took down several Bitcoin exchanges. He even published information about the three cyber thieves, asking the community to do whatever it felt necessary to exact justice on the Bitcoin bandits.
The fact that Bitcoin is not insured like a bank is one reason that some people are hesitant about investing in Bitcoin as a currency. However, there are others who see this theft from online drug dealers as something that will only help the Bitcoin community in the long run as tougher security measures are put in place to stop things like this from happening in the future.
“I failed you as a leader and am completely devastated by today’s discoveries,” Defcon wrote.
That being said, there are some who wonder if the anonymous Defcon didn’t grab all the money by faking the hack. Because buying and selling drugs is illegal, there’s likely going to be no law enforcement activity to try to retrieve the funds for people who used the website.
Before you start thinking that you should stay away from Bitcoin, however, it’s important to point out that it was the illegal activity that caused problems in this case, not Bitcoin itself. If you have your money stored in your Bitcoin Wallet and don’t give out your private key, there’s a good chance that you’re going to be safe from losing all your bitcoins. On the other hand, if you engage in illegal activities online, there’s no telling if your money – whether USD or BTC – will be safe online these days.