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Cryptocurrencies and the World of Darknet Markets and Scams

Just like many of us, the criminals also didn't understand cryptocurrencies for a while. But, now it seems that they are now much aware of the use cases of cryptocurrencies such as Bitcoin and Ethereum. We are busy arguing whether cryptos are a currency, a commodity or a store of value while criminals are already adopting and dealing in cryptos for the darker activities.

Why are criminals attracted to Bitcoin?

Cryptocurrencies soon became the most straightforward method for ransomware, cross border funding for terrorist activities and darknet markets. The primary reason for the adoption of crypto in criminal activities was their untraceable transactions. Let's understand this in simple words. Suppose a person wants to operate the dark web. So he will look for such payment systems which are not easily traceable. And what could be a better option than Bitcoin for this?

This is not the only benefit. We know that cryptocurrencies are a trustless way to make any agreement. Now, think that what could be the better option than cryptos when a person doesn’t want to include a trust factor in an agreement? 

In a usual scenario, cash was used for making such sort of deals. But, it's not always easier to deal in cash. When a person gets a substantial sum of cash, it indeed attracts unnecessary attention. Also, a considerable sum of cash is not easy to move across boundaries of countries.

So, now it becomes pretty clear why criminals are also attracted to cryptocurrencies, just like any regular investor. 

Cryptocurrencies and darknet markets

Darknet markets are actually the black markets offering illicit goods for sale. Some products are legal, but most often, goods such as weapons and drugs are sold in the darknet market.

What darknet and crypto have in common is their anonymity, i.e., both offers anonymous transactions. But, anonymity is not always good. It also attracts potentially illegal activities, including smuggling, sale of drugs, terrorist activities and money laundering.

The main thing at the darknet markets is selling drugs, including both pharmaceutical and illegal drugs. The payment on the darknet is often made using cryptocurrencies due to their anonymity.

As of 2020, Darknet Markets have made the record revenue worth $1.7 billion in cryptocurrencies. Darknet has a long history of using cryptocurrencies as a payment method, even before the popularity of cryptos.

Do you know why cryptos are used in darknet markets? Well, we are pretty well-versed with the anonymity of the darknet, i.e., we know that darknet cannot be accessed through Chrome or Firefox. The reason is that all the IP addresses are hidden on the darknet because all the connections are established through unique ports and protocols. The darknet network itself operates on decentralization, and it is not under the control of any authority. Hence, cryptocurrencies play a vital role in these markets.

Defi is emerging as a new threat to fraud.

Nearly 50 per cent of the thefts of 2020 were related to hacks in DeFi space. It was a considerable increase compared to the previous years.

According to the reports, the crime in DeFi space hit its all-time high this year. One of the major reasons for the exploitation of decentralized finance services is the regulation of centralized exchanges. In simple words, we can say that criminals are less likely to hack the centralized systems of financial institutions because of their more robust security. Instead, they are now invading the decentralized sector due to the lack of regulatory schemes.

Closing thoughts

Cryptocurrencies offering decentralization are always under the radar of illicit transactions. Instead of attacking the centralized systems, criminals are now viewing their decentralized counterparts as their targets.

Keeping the cryptos crimes in mind, one can argue that we shouldn't be using cryptocurrencies or the use of crypto should be banned. But, this is not the solution. Crimes are everywhere. Just tell me one space where crime rates are nil. Even the use of cash is not cent per cent safe. So, the problem is not the use of cryptocurrencies. It lies in our mentality.