This week, the “underground” website known as “the Silk Road” made headlines when a DDoS attack brought the website’s servers crashing down. The Silk Road is known as the black market of the internet, a site where the anonymous browser can obtain a wide range of illegal substances. The site is accessible only through a Tor network (a software protocol that reroutes traffic through hundreds of servers and computers to conceal identities).
Most interestingly enough, the Silk Road’s transactions are not in dollars or euros, but in Bitcoins. Bitcoins are a decentralized electronic currency that is free from government control or interference. Recently, Bitcoins have traded as high as $260 USD, before a crash brought them back down to roughly $150 USD per coin. Libertarians and anarchists hail Bitcoin as the herald of a free, internet-based economy with minimal regulatory interference, but Bitcoin has a potentially sinister side as well.
This “crypto-currency” has already been the inspiration for several online robberies where cyber-thieves hack into a computer to steal the vital electronic information at the heart of Bitcoins. Beyond cyber-larceny, the secrecy of Bitcoin poses unique, and even frightening security challenges for a world that has yet to fully understand the problems posed by the internet age.
For example, consider the various national and international anti-money laundering statutes. These laws seek to prevent the illegal flow of currency between criminals, terrorists and other unsavory characters. But these laws require that there are actual shipments of cash between countries and criminal networks (or at the very least funds transfers between banks).
The Bitcoin protocol promises to remove the fundamental risk in money laundering: the risk of interception and detection. By using a monetary exchange like Mt.Gox, criminals can buy Bitcoins at the market rate and then they can sell to a confederate across the world at a higher price, effectuating the exchange of money. Even if Bitcoin performs poorly, it nevertheless provides an opportunity to exchange money via the anonymous P2P network.
The Silk Road can make Bitcoin even more insidious. While the Silk Road, as site policy, forbids the sale of destructive items (stolen credit cards, explosives, etc.), it could be a matter of time before a similar website arises. Then, the firearms laws of the Western world will become virtually useless. Guns can be disassembled, and their parts shipped piecemeal through the postal service. Even substances like Tannerite could be bought and shipped across the globe, providing new opportunities for destructive capacity. If this alone is not enough to compel attention to the growing black market on cyberspace, consider the following.
Bitcoin can make security and law enforcement measures less effective by simply removing the possibility of detection. Terrorist cells or lone wolf operators can get supplies and currency by using the anonymous underbelly of the internet. Government agents are able to detect terrorists through logistical networks (Usama bin Laden was found through his courier). Counter-terrorism, for better or worse, succeeds when it hashumannetworks to exploit. Terrorists need accomplices, handlers, recruits, and suppliers. Sooner or later, one of the individuals in this vast network becomes frightened or disillusioned with the cause and becomes a government informant. Remove the extended logistical network that exposes terrorists to investigation at a critical juncture (where their plans are neither theoretical nor well-supplied enough to implement) and there may be grievous results.
So what legal paths can be utilized to make sure such a development does not occur? The easiest and most effective way to deal with this threat is to make sure that it never comes into fruition. The Silk Road is difficult to take down given its place within the “Deep Internet”, but an arms-trading counterpart may be more susceptible to infiltration and dismemberment.
The second option spells doom for electronic currencies. Much like domestic laws that flag large banking transactions, governments and the private sector can collude to run Bitcoin out of the currency market. Simply put, laws could be passed that force banks to reject bitcoin transactions. Thus, even if Bitcoins continue to be traded, there is no way to turn them back into real currency. The final approach would require nations to expand the police power of domestic and foreign intelligence agencies on the web. While there is a visceral aversion to government personnel infiltrating internet communications, the ultimate security benefits may outweigh the cost to certain freedoms.
Bitcoin promises to usher in a new age in economic development. Ultimately, Bitcoin’s founder Satoshi could try this grand experiment again if Bitcoin fails. Regardless of what may happen, the raw power of internet-based economic systems is not going away any time soon. It is now time that the law catches up.
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