Cryptomarkets and Drug Market Gentrification

Abstract Cryptomarkets have expanded rapidly since the launch of Silk Road in 2011, offering a significant new mode for the sale and distribution of illicit drugs. One of the key questions accompanying the proliferation of cryptomarkets and online drug distribution concerns how these unique online fora alter relationships between drug suppliers and their customers. Existing research points to an increase in perceptions of safety and respect among people who use cryptomarkets to purchase drugs relative to other ‘offline’ modes of drug acquisition. There is a growing body of evidence that suggests that drug suppliers are also attracted to cryptomarkets by perceptions of increased safety, as well as by market norms and institutional processes that are characterised by respect and courteous engagement. These issues fall broadly under what has been termed market ‘gentrification’ – that is, the substitution of offline drug market norms, which are sometimes characterised by violence, intimidation, suspicion, and exploitation, with relative feelings of safety, respect, and courtesy. This chapter explores the ‘gentrification hypothesis’ and examines how the unique structural characteristics of cryptomarkets, which include user feedback and ratings, dispute resolution systems, and administrator and community ‘policing’ of cryptomarkets, as well as online discussion forums, assist in fostering the development of pro-social norms that appear to be prevalent on cryptomarkets. Keywords Cryptomarkets Dark web Online drugs Gentrification Non-violence Pro-social norms Citation Martin, J. (2023), "Cryptomarkets and Drug Market Gentrification", Tzanetakis, M. and South, N. (Ed.) Digital Transformations of Illicit Drug Markets: Reconfiguration and Continuity (Emerald Studies in Death and Culture), Emerald Publishing Limited, Bingley, pp. 127-139. https://doi.org/10.1108/978-1-80043-866-820231009 Publisher: Emerald Publishing Limited Copyright © 2023 James Martin License This work is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of these works (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode Introduction In late 2016, I was travelling through British Columbia carrying out interviews with participants in the local cannabis trade. I met one interviewee in her home – a large, wealthy suburban house behind a white picket fence where she lived with her husband and their school-age children. It was a surprisingly idyllic representation of North American suburban life. The striking aspect was the contrast – this visibly affluent and respectable woman was, in simplistic terms, a ‘criminal’, the owner and manager of an illicit grow operation of thousands of cannabis plants which comprised a small but significant component of the region’s signature illicit export, BC Bud. Of course, this contrast should not have come as a surprise. Participants in the shadow economy routinely belie the stereotypical images that are presented in news media. Nonetheless, I asked the couple whether they felt there was a contrast between the respectability of their lifestyle and the illegality of their work. ‘It’s not as bad as you might think’, the woman replied, pointing out that with federal legalisation slowly approaching, local law enforcement was not prioritising investigation into cannabis growers, and there was therefore little risk of ‘the police kicking in the door’. More importantly, she continued, the local cannabis growers all knew one another, and the trade no longer involved interaction – and possible confrontation – with outlaw motorcycle gangs and other dangerous organised crime groups. The trade was therefore noticeably safer than it had been in previous years: ‘It’s not like the old days’, she explained, ‘if it was, there’s no way we’d still be doing this’. This exchange was instructive on several levels. Firstly, it demonstrated an intuitive and no doubt well-honed sense of risk perception on the part of a drug market participant with decades of first-hand experience in the local drug economy. Secondly, it showed that the perception of risks in said drug economy could change, and that people use their knowledge of these risks to inform their participation on an ongoing basis. If the level of threat from law enforcement and non-state sources were deemed to be too high, they would find alternative work and the trade would be left to those with greater risk tolerance. If risks were judged to be sufficiently low, more risk-averse actors – such as the woman I was interviewing – would participate in the market. Thirdly, risk, a well understood but exceedingly difficult concept to quantify, seemed at these very low levels to translate into a qualitatively different experience, one where the dangers of arrest, injury, or violent confrontation appeared so remote as to no longer represent a plausible reality. And lastly, the perception of negligible risk seemed likely to be self-reinforcing in that it could attract other risk-averse, ‘respectable’ participants – in this case, the other local growers with whom the interviewee associated – whose presence in the market would further entrench norms favourable to conflict aversion and non-violence. In this way, and with the right conditions, it seemed as though a wave of gentrification could sweep through an illicit industry like those sweeping through inner urban areas of the post-industrial Global North. This anecdote, highlighting the potentially self-reinforcing dynamic between low risk and the attraction of risk-averse market participants, represents just one way that drug markets may experience gentrification. But what exactly does gentrification mean in the context of illicit drug markets? And what factors precipitate its development? This chapter aims to explore these questions from a criminological perspective with particular reference to cryptomarkets and the dark web trade in illicit drugs. It will define gentrification in the context of illicit drug markets, before discussing the processes by which gentrification manifests on cryptomarkets and the empirical basis that underpins them. The chapter will conclude with some exploratory thoughts that may be used as a basis for further research to consider drug market gentrification both on the dark web as well as in other drug markets. First, a quick note on terminology. This chapter refers both to cryptomarkets and the dark web. The dark web, also known as the Tor network, is an encrypted sub-section of the Internet. Accessing the dark web is only possible through the use of a Tor browser, which masks a user’s IP address, which is the unique identifier that allows authorities to track an Internet user’s location, browsing activity, and so on. The dark web is sometimes confused with the deep web, which is a different, much larger part of the Internet which is not accessible via a regular Internet search and is instead behind a paywall or sign-in obstacle of some kind (e.g. a university or business intranet). The clear web, by contrast, constitutes anything on the Internet accessible via a regular search. Cryptomarkets are pseudonymous marketplaces operating on the dark web (Martin, 2014b). Background Gentrification and illicit drugs are often considered to be negatively correlated. On the one hand, conventional urban gentrification is associated with the ‘transformation of a working-class or vacant area of the central city into middle-class residential and/or commercial use’ (Lees et al., 2013, p. xv). It is a process of urban change and renewal that, depending on one’s perspective, may seem alternatively inevitable, desirable, or regrettable. On the other hand, illicit drugs, at least in much of the popular imagination, have traditionally been associated with urban decay, with slums and ghettos, junkies and muggers, and with the great destroyers of property value – crime, disorder, and fear. Aggressive gentrification, whether in São Paulo’s ‘Crackland’ or in Sydney’s Kings Cross, has been implicated in crackdowns on open-air drug dealing and the displacement of drug users, particularly those who are homeless, socially, or economically marginalised, or whose use is visibly problematic (Amaral and Andreolla, 2020; Dertadian and Tomsen, 2019). As is the case with many dichotomies, the seemingly polar and mutually exclusive influences of illicit drugs and gentrification are simplistic and false. Rather than gentrification necessarily working in opposition to illicit drug markets or vice versa, both can inform and influence the other in sometimes complex and mutually reinforcing ways. This is due in large part to the ubiquity of drug consumption among both the working and middle classes across much of the world, including here in Australia (AIHW, 2019; UNODC, 2020). Swapping one class for the other therefore does not preclude the development, continued functioning, or even the expansion of local drug markets. Gentrification does, however, necessitate adaptation on the part of drug market participants in response to changes in the urban environment, such as the destruction or privatisation of formerly public or abandoned spaces in which drugs are sold and/or consumed, shifts in consumer demographics, including their drug preferences and levels of disposable income, and changes in the presence of local law enforcement and the strategies that they employ. One of the most informative accounts of this process in action is provided by Curtis et al. (2002), who undertook a detailed ethnographic study of the effects of urban gentrification on illicit drug markets in New York in the late 1990s. They explained how an assertive police presence as well as demographic shifts from working to middle class among residents in Manhattan’s Lower East Side resulted in the abandonment of open-air drug markets in favour of closed markets where retailers and consumers would meet in private locations. This shift was accompanied by reductions in violence as dealers forewent confrontation with one another over prized drug-retailing ‘turf’ and instead delivered their products discretely to consumers in their own homes. In addition, critical in this shift was the role of new technologies – in this case mobile phones and beepers – to facilitate drug sales without relying upon inherently risky and problematic physical retailing sites (Curtis et al., 2002). These insights are valuable in that they demonstrate how alterations in the physical, social, and technological environment in which drug markets operate can produce cascading changes in how market participants behave, interact with one another, and experience the drug markets in which they are involved. Curtis et al. (2002) refer to the changes in the observed drug markets caused by urban gentrification as drug market gentrification, though they do not offer any specific definition of the latter. In general terms, we may therefore consider that drug market gentrification is a process through which potentially violent social norms are replaced by more cordial, professional relationships between market participants (see also Martin, 2018). Of course, as Coomber (2006) and others have pointed out, drug markets are marked by heterogeneity not homogeny, particularly with regard to the prevalence of violence. Not all drug markets experience high levels of violence, and the extent to which they do so is often over-estimated by a general public conditioned by decades of drug war propaganda (Coomber and Maher, 2006; Reuter, 2009). So to do social norms regarding cordiality and professionalism vary significantly between different drug markets, or even within the same markets across different periods of time. Drug markets therefore have significant and perceptible differences in the degrees to which they are gentrified, just as they have variations in endemic levels of violence, competition, profitability, and so on. While drug markets are typically characterised by differentiation rather than similarity, it is intriguing that cryptomarkets appear to be an outlier in this regard in that they are often remarkably similar to one another in terms of operation, structure, and composition. To some extent, the remarkable degree of homogeneity witnessed across cryptomarkets is a product of the success of the original Silk Road website, which provided the essential template upon which subsequent cryptomarkets have been built (Martin, 2014a). Seller pages, the centrality of customer feedback, escrow, and dispute resolution may all be reasonably expected to produce convergence in how cryptomarket participants go about their trade. Also, working in favour of similarity is the fact that users, whether buyers or sellers, often migrate from one site to another with the result that in the inevitable event that a cryptomarket is closed, the very same population is able to continue trading, albeit in a different digital space. This is not to disregard differentiation entirely; cryptomarkets may also be distinguished from one another in various ways, such as their size, (in)tolerance for various kinds of dangerous goods and services, and varying degrees of political engagement among their users (Martin et al., 2019; Munksgaard and Demant, 2016). However, the magnitude of differentiation among cryptomarkets is almost certainly narrower than it is among various kinds of offline drug markets. This is significant in that the conclusions drawn concerning cryptomarkets and gentrification, and indeed other aspects of their operation, are likely to have a greater degree of generalisability than is the case with other sites of drug exchange. Non-Violence As noted above, violence is a persistent threat, if not a reality, in many illicit drug markets, and systemic drug market violence – that is, violence that occurs as part of the functioning of illicit drug markets (Reuter, 2009) – is in many countries a major driver of serious violent crime, including assault, robbery, kidnapping, and homicide (UNODC, 2020). Causes of violence in conventional, offline drug markets (i.e. those that involve at least some element of in-person exchange) include competition between drug suppliers, predation of suppliers by customers and other offenders, retaliation by market participants against scams and other infringements of market norms, and as a means of promoting discipline within drug supply organisations (Reuter, 2009). A lesser but still commonly cited cause of violence is the psychopharmacological effects of some illicit drugs which may predispose users to aggression, paranoia, and other anti-social psychological states (MacCoun et al., 2003). Underlying and aggravating each of these causes is the illegality of the illicit drugs trade which leaves market participants without the capacity to call upon legal authorities for protection, dispute resolution, or insurance against financial and physical risks. All of the causes of violence listed above, with the exception of the general illegality of the drugs trade and the necessity to maintain discipline within drug supply organisations, are construed differently and are in some way ameliorated on cryptomarkets. Consequently, cryptomarkets have been distinguished from other drug markets by a conspicuous absence of violence since their inception. Non-violence was an intended feature of the original Silk Road, whose creator, Ross Ulbricht, aspired for the site to offer a radical, utopian-libertarian alternative to the violence associated with conventional drug markets blighted by the global war on drugs (Greenberg, 2013a, 2013b). There is strong empirical support for the notion that cryptomarkets are not associated with violence. This evidence comes from a range of studies, including quantitative surveys of user experiences (Barratt et al., 2016), qualitative case studies (Tzanetakis et al., 2016; Tzanetakis, 2015), analysis of cryptomarket discussion fora (Morselli et al., 2017), and interviews with both consumers and suppliers who use cryptomarkets (Felstead, 2018; Martin et al., 2020; Van Hout and Bingham, 2013b, 2014). One notable study by Barratt et al. (2016) shows that users of cryptomarkets experience both threats and actualised violence at very low rates, even when compared to other drug markets in which violence is rare: only 3% of users reported threats of violence and 1% reported experiencing violence. The conclusion of the authors regarding the prevalence of violence on cryptomarkets is unambiguous: Cryptomarkets are associated with substantially less threats and violence than alternative market types used by cryptomarket customers, even though a large majority of these alternatives were closed networks where violence should be relatively less common. (Barratt et al., 2016, p. 2) Intriguingly, this study also provides the only known evidence for the existence of any physical violence on cryptomarkets; to date, there has never been a verified case of violence between cryptomarket participants in the history of their operation. That said, non-physical violence, which includes threats of physical violence and intimidation or the release of identifiable, often incriminating information (known as ‘doxing’), is encountered on cryptomarkets, though as Barratt et al. (2016) show, this too occurs at levels lower than is reported in other drug markets. There are a variety of reasons why (physical) violence is so rarely encountered on cryptomarkets. The first and most obvious is that cryptomarket users do not meet face-to-face but rather have drugs delivered by post, courier, or via ‘dead drop’ where drugs are concealed in a location revealed to the buyer upon receipt of payment. By not meeting in person, both buyers and sellers are protected from the possibility of violence occurring between them. Similarly, an absence of physical interaction also helps insulate buyers and sellers from the possibility of violence occurring at the hands of external parties, including police and other offenders. The physical safety of cryptomarket users is enhanced further by their use of pseudonyms and encrypted communications which delineate users’ online offending from their offline identities. By not meeting in person, and by keeping the names and physical locations of drug suppliers secret, there is effectively no possibility that they can be targeted by those prepared to use violence to relieve them of their drugs or illicit earnings. As described in the introduction of this chapter, an absence of violence incentivises the participation of traders who are averse to violence, as well as to other forms of conflict. This perspective is described by one cryptomarket vendor interviewed by Martin et al. (2020, p. 10): I hadn’t ever thought about selling drugs in any capacity because I dislike violence and it just seemed impossible to be involved in selling drugs in ‘real life’ without running into some sort of confrontation pretty quickly …. I was always too scared and slightly nerdy to do that and never really contemplated it seriously until the darknet. In having a reputation for non-violence, cryptomarkets attract users who have a preference for either avoiding conflict or resolving conflicts via non-violent means. These alternative means are provided by institutional features built into cryptomarkets. In particular, escrow and dispute resolution incentivise honest conduct between buyers and sellers and enable conflicts, in those instances when they do arise, to be resolved by cryptomarket administrators (Tzanetakis, 2015). Discussion forums provide a further means by which conflict can be managed between buyers and sellers on cryptomarkets. For example, Morselli et al. (2017) describe how notifications of scamming behaviour and calls for ostracism shared on discussion forums is the first option typically employed by cryptomarket users in situations of potential conflict. The existence of these fora, and the importance of customer feedback and vendor reputation in attracting new clientele, helps ensure that vendors behave honestly – or at the least maintain a plausible veneer of honesty – which in turn further reduces the potential for conflict. There are limitations to the notion that cryptomarkets are entirely violence-free. One exception to this concerns those who reveal their identities or locations in the process of either sourcing or selling drugs outside of cryptomarkets – for example, vendors who purchase drugs from an offline supplier but then subsequently sell them online, or who in addition to selling drugs via cryptomarkets also do so in person. In these instances, however, cryptomarkets are not directly implicated in the violence that may result. Another possibility for violence which is harder to decouple from cryptomarkets is the necessity for physical interaction with offline drug suppliers on the part of cryptomarket vendors as part of securing their own drug supply. While some vendors are known to also source their drugs via cryptomarkets, these online-to-online buyer-vendors (OOBVs) are also in the minority (see Martin, 2019) with most cryptomarket vendors sourcing their drugs in person, thus exposing themselves to potential violence. Another scenario associated with violence related to cryptomarkets is the necessity to maintain discipline within drug vending firms. Relatively little is known about the structure of large-scale cryptomarket vendors. We do, however, have evidence that some large-scale vendors work in teams (Martin et al., 2020), which potentially exposes them to pressures comparable to those of conventional drug supply networks operating in the offline drugs trade and among whom violence is well documented (Reuter, 2009). Comparable to this scenario is the potential for violence not among vendors but within the administrative structure of cryptomarkets. The prime example of this concerns Silk Road and its administrator Ross Ulbricht, who was implicated in ordering multiple ‘hits’ on members of his administrative team (see Greenberg, 2013c). The fact that these executions were never carried out, and that the alleged hitman and at least one target were working undercover for law enforcement (Jeong, 2015), does not invalidate the potential for violence occurring within cryptomarkets as a means of maintaining discipline among members; indeed, it is an example of precisely the opposite – that under extreme conditions, at least one cryptomarket administrator has shown himself willing to employ lethal violence to protect themselves and their operations. Professionalism and Cordiality Professionalism is a term historically reserved for particular occupations such as medical doctors, lawyers, and engineers which, according to Evetts (2003), require specialised knowledge and expert skillsets, serve a public good, and engender and necessitate trust on the part of customers or clients. Professionalism is also associated with institutional control in the form of professional associations which control group membership and set explicit, codified standards for appropriate and ethical conduct on the part of members (Noordegraaf, 2007). While it may appear somewhat of a stretch to apply this concept to illegal occupations, cryptomarket vending has been associated with professionalism since its inception (see Martin, 2014a; Van Hout and Bingham, 2014). This is not simply because vendors often refer to themselves as ‘professional’ or offering ‘professional’-type services; there are several ways in which the workplace activities of cryptomarket vendors meet the various formal criteria of professionalism described above. This section of the chapter will discuss the empirical support for this concept. Before discussing the ways in which cryptomarket vending and professionalism overlap, however, it is important to note that vendors are not a homogenous group, but may vary according to the size and sophistication of their operations as well as the amount of illegal revenues that they generate. In an analysis conducted on the cryptomarket Alphabay, Paquet-Clouston et al. (2018) find that approximately half of all revenues are generated by an ‘elite’ top 1% of vendors. Beneath these top performers sit a middle band of vendors, comprising 9% of sellers who account for 36% of sales, with the remaining 90% of vendors making very few to no sales. Tzanetakis (2018a) shows a similar degree of revenue concentration among the top tiers of vendors in her analysis of Alphabay. Given that the overwhelming majority of cryptomarket vendors are either inactive or de facto so, and generate little to no revenue as a result, it makes little sense to think of them as ‘professionals’. Rather, this section of the chapter is written with reference to both the second and particularly the first elite tier vendors who together make up the vast bulk of cryptomarket sales and revenues. Specialised Knowledge and Expert Skillsets There are a variety of studies that show that cryptomarket vendors possess specialised knowledge and expert skillsets that are necessary to trade drugs online safely and successfully. These include managing operational security (OPSEC), marketing strategies, and customer service skills. Operational security refers to the various practices employed by vendors to maintain anonymity and to manage and mitigate risks emanating from law enforcement and other threats. It includes digital aspects, such as knowledge and utilisation of encryption (see Bancroft and Scott Reid, 2016), as well as non-digital ones, such as product concealment (known colloquially as ‘stealth’) which is used to facilitate the covert passage of drug consignments through postal screening. According to vendors interviewed by Munksgaard and Martin (2020), developing a sufficiently robust understanding of operational security requires time, effort and a degree of technical proficiency. The difficulty in acquiring these skills has been posited as a significant barrier to enter cryptomarket vending, particularly in comparison to the relatively minimal skills and capabilities required in various forms of offline drug supply (Kowalski et al., 2019; Maddox et al., 2016; Paquet-Clouston et al., 2018). The process of learning operational security is facilitated by access to related discussion forums hosted on cryptomarkets and, increasingly, other dark web sites (such as the discussion forum Dread), as well as those on the clearnet (Kowalski et al., 2019; Martin, 2014a). Other necessary skills, however, such as marketing and branding are more likely to be learnt via an understanding of digital sales and retail operations in the legal economy. As Tzanetakis (2019, p. 68) notes, marketing is not associated with other offline forms of drug supply due to the fact that ‘increased visibility corresponds with an increased risk of law enforcement activity’. On cryptomarkets, however, marketing is essential as it provides one of the only means available to vendors to stand out among intense competition and to rise to the most profitable tiers of vendor activity. Marketing is also used by site administrators to attract users to new and emerging cryptomarkets (Martin, 2014a). The practices involved with marketing on cryptomarkets are diverse and, according to Tzanetakis (2018b), include indirect activities such as professional communication and visibility on platforms and associated forums, product branding, providing comprehensive information on the drug item (e.g., purity), speedy dispatch of slightly overweight drugs, and activities such as dispatching free sample items, free shipping, special discounts and promotion offers. (Tzanetakis, 2018a, p. 68) Seller pages provide the first and most obvious context for the use of marketing on the part of cryptomarket vendors, and they include vendor names and logos, photographs of products, and textual information regarding product quality and composition, special discounts and, promotional offers (Martin, 2014a; Van Hout and Bingham, 2014). Ladegaard (2018) provides an intriguing insight into the use of one such marketing practice – the provision of free samples – on the Agora cryptomarket. He notes previous research from Coomber (2003) and others demonstrating the rarity of free samples in offline drug markets, and contrasts this with the widespread prevalence of the practice among cryptomarket vendors. Ladegaard (2018, p. 240) finds that free or low-cost (<US$10) samples are available across all major drug categories, and that this practice is used by some vendors to ‘introduce themselves and their businesses’ either when establishing a new vending enterprise or when migrating from another cryptomarket. Free samples are particularly useful when provided to established ‘critics’ who will accept these goods in exchange for a (hopefully positive) detailed review posted to a cryptomarket discussion forum (Ladegaard, 2018). Customer Service, Cordiality, and Trustworthiness Underpinning and accompanying the various marketing practices employed on cryptomarkets is a widespread commitment to a high level of customer service and professional, cordial engagement with customers or ‘clients’, as they are referred to by some vendors (Martin et al., 2020; Munksgaard and Martin, 2020). Customer service on cryptomarkets manifests in a number of ways, including a respectful tone of communication, trustworthiness (i.e. carrying out sales honestly), prompt attention to orders and customer complaints, conflict aversion, and deference to customer wishes when possible (Martin, 2014a; Moeller, 2023, chapter 3; Van Hout and Bingham, 2014). As one vendor int