Silk Road as a Self-Regulating Black Market
The last place you might expect to find a singular cultural dedication to high quality products and killer customer service is the digital den of drug-dealers known as Silk Road. The Deep Web black market is among the farthest from the reach of the state. It facilitates an estimated $30 million worth of illegal transactions each year, with impunity, using the concealing tools and ethos of the cypherpunks. It is Chuck Schumer’s worst nightmare. It is also a great case study of a self-regulating black market in action.
It is remarkable that Silk Road was able to overcome its significant coordination challenges to begin with. While traditional black markets rely on intricate in-person trust networks to survive outside of the law, Silk Road is founded on pseudonymity. Merchants know that their property rights will be respected by no formal court. Customers know they can get easily ripped off by an anonymous online dealer, to say nothing of the mysterious chemicals that may lurk in their purchases. Both must initially engage in an iterated dance of blind trust: that neither is a police officer, that promises will be kept, and that neither will snitch. A game theorist might declare this solution concept untenable from the start.
Somehow, Silk Road overcame the odds. Whether due to a strong shared belief in the benefits of peaceful voluntary exchange or for the mere sake of filthy lucre, the community overcame Metcalfe’s dreaded corollary and developed credible trust mechanisms. Some of these perform functions that are widely thought to be only possible through government.
The market’s popular nickname, the “Amazon of illegal drugs,” is apt; Silk Road’s feedback mechanisms and customer services rival that of its more polite relative. Like on Amazon, merchants on Silk Road are subject to constant feedback and ratings from their customers. The standards are as high as the stakes: An improperly packaged shipment from Amazon might be an inconvenience, but on Silk Road they could spell an indictment. Product quality of everything from boutique strands of marijuana to, yes, black tar heroin, is meticulously conveyed in the comment sections of each merchant’s page. Merchants compete for the best ratings and feedback by providing stellar products and delivery to their customers; to fall behind your competitors’ rankings is to succumb to the downward spiral of digital sketchiness and dwindling sales. On Silk Road, service and integrity pay handsomely.
Customers, too, are subject to ratings from merchants. Given the considerable risks that merchants shoulder, they want to be sure their potential customers are credible. Customers must communicate clearly with merchants and quickly submit payments if they want to keep a good reputation. Feedback from highly-rated customers, then, is valued more highly than the fly-by-night Charlies who leave scathing reviews out of petty spite. This interconnected feedback system has enabled the Silk Road community to successfully self-regulate and largely avoid both the wrath of law enforcement and the potential for impure and (more) dangerous products.
In addition to this micro-level self-regulation, the community as a whole plays a part in shaping the moral culture of Silk Road. From the beginning, their übermenschlich leader, the loquacious Dread Pirate Roberts, was adamant that no products on Silk Road could be the result of fraud or injustice. Don’t expect to find stolen identities or the sordid products of sexual exploitation among the offerings of psychedelics and forged documents. Community members later petitioned to remove all weapon sales from Silk Road; they were worried that it reflected poorly on their more legitimate business of pushing narcotics. Administrators obliged by moving all weapons sales to a new market, the Armory, which was ultimately short-lived due to lack of demand.
Even drug dealers have standards, after all.
Of course, the fact that Silk Road can operate efficiently is cold comfort to those who believe its enterprise to be fundamentally immoral. On the other hand, those who believe the War on Drugs is immoral or ineffective will cheer this unprecedented foray as agorist praxis. So far, attention to Silk Road has understandably focused on this catnip of initial moral reactions.
Silk Road is noteworthy for another reason: as a successfully self-regulating black market. Regardless of one’s opinion of drugs, Silk Road is a reminder that moral orders and accountability can emerge without government–even from the alleged dregs of society!–when nourished by the right institutions. If a globally-scattered group of ne’er-do-wells on the internet can manage to peacefully exchange in a high-risk, extralegal market traditionally fraught with violence, it is worth wondering what upstanding merchants and customers might be similarly capable of in the absence of centrally-imposed regulations.
Silk Road provides a model for entrepreneurs of all markets: black, grey, or white. The experimental recipe of feedback mechanisms and emergent self-regulation may prove to be a more cost-effective alternative to modern state-driven regulation. Fully adopting this ethos ultimately requires going to the “dark” side, which many will balk to commit. But if a black market in any item proves to be safer and less expensive than the legal one, it’s hard to remember exactly what we’re being protected from.
