tag:theconversation.com,2011:/us/topics/cryptomarkets-13654/articlesCryptomarkets – The Conversation2022-07-25T13:57:22Ztag:theconversation.com,2011:article/1871412022-07-25T13:57:22Z2022-07-25T13:57:22ZCryptocurrencies are gaining ground across Africa. That’s both good news and bad<figure><img src="https://images.theconversation.com/files/474385/original/file-20220716-12-et8a8k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Some of the of 19,000 private cryptos in use by end of June 2022. Users have increased sharply in Africa after the COVID-19 outbreak. Silas Stein/Picture Alliance via </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/june-2022-baden-wuerttemberg-rottweil-the-application-apps-news-photo/1241318687?adppopup=true">Getty Images</a></span></figcaption></figure><p><em>Cryptocurrencies have become popular in African and other developing countries. That’s according to a <a href="https://unctad.org/system/files/official-document/presspb2022d8_en.pdf">policy brief</a> released recently by UNCTAD, a United Nations agency. Significant proportions of Kenya <a href="https://www.citizen.digital/tech/kenya-leads-in-africas-cryptocurrency-ownership-5th-in-world-un-n301621">(8.5%)</a>, South Africa (7.1%) and Nigeria’s (6.3%) populations are using these digital currencies. In June, the Central African Republic <a href="https://www.bbc.com/news/world-africa-61565485">adopted</a> bitcoin as a legal tender.</em></p>
<p><em>The report warns that widespread use of unregulated digital currencies poses danger to the continent’s financial system. In an interview with The Conversation Africa, Iwa Salami, an expert in financial technology law and regulation, examines the future of digital currencies in Africa.</em></p>
<h2>Why is cryptocurrency becoming popular in Africa?</h2>
<p>Cryptocurrencies have gained acceptance among a large proportion of the low-income population that was, previously, <a href="https://www.tandfonline.com/doi/pdf/10.1080/23322039.2022.2058734">financially marginalised</a>. Most banks in Africa were not accessible to this segment. Even when they were, low-income account holders were discouraged by <a href="https://www.weforum.org/agenda/2017/04/financial-inclusion-south-africa/">high transaction costs</a>. </p>
<p>Another factor is economic stagnation compounded by debt crises and political instability in African economies since the era of independence. This has resulted in weak currencies ravaged by inflation in countries like <a href="https://www.brookings.edu/wp-content/uploads/2016/07/kenya-country-case.pdf">Kenya</a> and <a href="http://jedsnet.com/journals/jeds/Vol_5_No_2_June_2017/4.pdf">Nigeria</a>. </p>
<p>Cryptocurrencies promised to address both financial exclusion and the problem of weak domestic currencies.</p>
<p>Cryptocurrency gives everyone with access to a mobile device and internet connectivity the opportunity to engage in activities similar to those conducted through financial institutions and intermediaries. That includes payments, sending remittances and making investments.</p>
<p>Investment is particularly inviting to the <a href="https://furtherafrica.com/2022/06/08/crypto-adoption-in-africa-soars-despite-challenges/#:%7E:text=Rising%20acceptance%20rates%20in%20Africa,persons%20has%20acknowledged%20using%20cryptocurrency">technically savvy</a>. It gives them the opportunity to hold assets that aren’t affected by rising inflation and depreciating domestic currencies. </p>
<p>Cryptocurrencies are also quicker, cheaper and easier to use than conventional methods. That’s because the technology facilitates <a href="https://www.blockchain-council.org/blockchain/peer-to-peer-network/">peer-to-peer</a> transactions rather than relying on intermediaries. These currencies were <a href="https://clsbluesky.law.columbia.edu/2021/03/26/how-the-covid-19-pandemic-affected-the-cryptocurrency-market/">more accessible</a> than traditional banks during the pandemic and lockdowns. This further drove their use and growth across Africa.</p>
<h2>What does a high number of people holding cryptos imply?</h2>
<p>This can facilitate economic activity in African countries. People with no access to banks and banking services are able to pay for goods and services using cryptos. </p>
<p>Crypto transactions are also believed to be a more secure way of transacting. Unless someone gains access to the private key for your crypto wallet, they cannot sign transactions or access your funds. </p>
<p>The system also facilitates transparency. All cryptocurrency transactions take place on the publicly distributed blockchain ledger. There are tools that allow anyone to look up transaction data – including where, when, and how much of a cryptocurrency someone sent from a wallet address. </p>
<h2>But there are risks, too. What are those?</h2>
<p>First, cryptocurrencies are very complex. They require a bit of technological astuteness to embrace. A significant proportion of the adult population in sub-Saharan Africa (34.7%) is <a href="https://www.statista.com/statistics/262886/illiteracy-rates-by-world-regions/">illiterate </a> and may not be able to grasp it. This, to a certain extent, turns the financial inclusion argument on its head.</p>
<p>Secondly, although it is argued that the blockchain is a more secure way of transacting, the downside, of course, is that if you lose your private key there’s no way to recover your funds. This is a threat that does not exist if you have a bank account. </p>
<p>Thirdly, cryptocurrencies have had a history of <a href="https://www.forbes.com/sites/nicolelapin/2021/12/23/explaining-cryptos-volatility/?sh=3c053c927b54">volatility</a>, (as is currently being <a href="https://www.cnbc.com/2022/07/14/why-the-2022-crypto-winter-is-unlike-previous-bear-markets.html">experienced</a> in the crypto market). This has adversely affected retail investors, especially those who do not understand this type of asset class. </p>
<p>Another issue of profound concern to African states is the potential threat to monetary sovereignty. Should crypto ever be more widely used than domestic fiat currency, national monetary agencies such as central banks may not be able to <a href="https://www.afronomicslaw.org/2020/03/06/why-african-countries-must-consider-national-digital-currencies-to-counter-the-threats-posed-by-private-digital-currencies-like-facebook-libra">steer their economies</a> to a path of growth using monetary policy. Such policy is, after all, primarily administered through domestic currencies. </p>
<p>An associated threat is the weakening of effective capital controls in African states. These are needed to prevent <a href="https://boycewire.com/causes-and-effects-of-capital-flight/">capital flight</a> from domestic economies. Any weakening can result in significant volatility in currency rates and the rapid depreciation of domestic currencies. </p>
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Read more:
<a href="https://theconversation.com/decentralised-finance-calls-into-question-whether-the-crypto-industry-can-ever-be-regulated-151222">Decentralised finance calls into question whether the crypto industry can ever be regulated</a>
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<p>There are also threats to financial stability. This could arise from significant exposure that financial institutions, like banks, have to crypto firms such as through loans. Regulation in some African countries, <a href="https://www.cbn.gov.ng/Out/2021/CCD/Volume%203%20Number%202%20CBN%20Update%20February%202021.pdf">such as Nigeria</a> addresses this by restricting transactions between banks and crypto assets service providers.</p>
<h2>What is the future of cryptocurrencies in Africa?</h2>
<p>Despite the ongoing downturn in the market, cryptocurrency represents the future of finance and financial transactions. And there are indications that cryptocurrencies are here to stay which is seen from their increasing recognition by countries. At one extreme, the governments of El Salvador and the Central African Republic have adopted bitcoin as legal tender, although the implementation and impact of this on their broader economies have been faced with <a href="https://www.bloomberg.com/news/articles/2022-05-04/bitcoin-adoption-by-central-african-republic-a-concern-imf-says">severe criticisms</a>.</p>
<p>Others, such as <a href="https://theconversation.com/nigerias-digital-currency-what-the-enaira-is-for-and-why-its-not-perfect-171323">Nigeria</a>, have recognised the need for state representation of digital currencies in the form of central bank digital currencies. Many other countries are now <a href="https://www.bis.org/about/bisih/topics/cbdc.htm">exploring</a> this option. </p>
<p>It is important to note, however, that the <a href="https://coingeek.com/nigeria-enaira-now-available-via-ussd-to-boost-adoption-and-financial-inclusion/">uptake</a> of central bank digital currencies has been <a href="https://www.vanguardngr.com/2022/04/enaira-pushes-through-difficult-environment/">very low</a> in developing countries that have rolled them out. There are also ongoing <a href="https://www.refinitiv.com/perspectives/future-of-investing-trading/the-rise-of-central-bank-digital-currencies/">investigations</a> by countries into the economic impact of central bank digital currencies and whether adoption is the right approach. </p>
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Read more:
<a href="https://theconversation.com/nigerias-digital-currency-what-the-enaira-is-for-and-why-its-not-perfect-171323">Nigeria's digital currency: what the eNaira is for and why it's not perfect</a>
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<p>But if cryptocurrencies are to live up to their promise, both on the African continent and elsewhere, there must be a globally <a href="https://www.europeanfinancialreview.com/cryptocurrencies-cross-border-financial-regulatory-dimensions/">coordinated</a> and <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3733647">holistic approach</a> to regulation, since transactions are global. Although some action on this front is emerging, the current fragmented approach to regulation across the world is not ideal.</p><img src="https://counter.theconversation.com/content/187141/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Iwa Salami does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To live up to their promise, both on the African continent and elsewhere, digital currencies must be globally coordinated.Iwa Salami, Reader (Associate Professor) in Law, University of East LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1828862022-05-12T14:16:25Z2022-05-12T14:16:25ZStablecoin volatility shows an urgent need for regulation to protect consumers<figure><img src="https://images.theconversation.com/files/462772/original/file-20220512-19-r6yph2.jpg?ixlib=rb-1.1.0&rect=79%2C26%2C8768%2C4936&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/top-five-cryptocurrency-stablecoin-tokens-by-2139614619">Shutterstock/David Sandron</a></span></figcaption></figure><p>Some cryptocurrencies have always been fairly volatile, with values soaring or plunging within a short space of time. So for the more cautious investor, “stablecoins” were considered the sensible place to go. As the name implies, they are designed to be a steadier and safer bet. </p>
<p>At the moment though, that stability is proving hard to find. The value of one of the most popular stablecoins, Terra (also known as UST), has fluctuated wildly in the last few days, before dropping dramatically – and is <a href="https://coinmarketcap.com/currencies/terrausd/">yet to recover</a>. </p>
<p>Before the crash, Terra was in the top 10 cryptoassets, with a value of over US$18.7 billion. At the time of writing, this had collapsed to less than <a href="https://coinmarketcap.com/currencies/terrausd/?period=90d">US$7 billion</a>. </p>
<p>Investors have taken to <a href="https://www.thesun.co.uk/money/18542264/terra-luna-crash-investor-lost-400000-savings/">social media</a> to lament this development. Some spoke of lost life savings and the devastating impact of the currency’s collapse.</p>
<p>And they are right to be worried. The impact of volatility in the stablecoin arena should not be underestimated and could destabilise the entire sector.</p>
<p>For in theory, stablecoins are supposed to offer the transactional benefits of more traditional cryptoassets (such as Bitcoin) but with a predictably stable worth. </p>
<p>Many stablecoins are backed by other assets (typically the US dollar) or commodities (often gold) and involve the stablecoin provider buying – and then holding – the equivalent amount of their chosen asset to ensure the coin remains stable. So while the value of the underlying asset might increase or decrease, the value of the stablecoin should at least remain at a consistent ratio with whatever underpins it.</p>
<p>But “algorithmic stablecoins” like Terra <a href="https://youtu.be/KqpGMoYZMhY">work differently</a>. Terra holds no reserve asset or commodity, and instead is meant to hold its value using an algorithm, which is designed to maintain a balance between the stablecoin and a partner coin (a more traditional cryptocurrency). </p>
<p>In this case Terra is tied to a partner coin called Luna – and the value of Luna has crashed. Its value is now <a href="https://coinmarketcap.com/currencies/terra-luna/">less than US$0.06</a> having been trading at around US$82.00 just seven days earlier. In a climate where the value of Terra and Luna are both drastically declining, the algorithm cannot solve the issue of decreasing faith in the paired currencies – and the stabilisation feature simply does not work. </p>
<p>As a result, fear kicks in and more people sell, just like a traditional bank run, where there is mass withdrawal of funds and sudden drastic loss in value. Stablecoins backed by assets tend to avoid this, due to the long term steady value of their peg which builds consumer confidence. </p>
<p>But they have issues too. Tether, a coin pegged to the US dollar, has had <a href="https://www.cftc.gov/PressRoom/PressReleases/8450-21">bumps in the road</a> amid questions over whether the company which issues the coins hold the reserves it <a href="https://www.theverge.com/22620464/tether-backing-cryptocurrency-stablecoin">claims to have</a>. And in recent days Tether too has seen its <a href="https://coinmarketcap.com/currencies/tether/">value fall</a>. </p>
<h2>Save the savings</h2>
<p>All of this undermines the basic premise of these coins – that they will remain stable. Customers choose to buy them to either shield against volatility in traditional crypto markets until they rise again, or to use them as a more traditional account (like a regular bank account) and take advantage of the benefits they offer with regard to speed, cost, and ease of international transactions. </p>
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<img alt="Stressed out man looking at financial graph." src="https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=467&fit=crop&dpr=1 600w, https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=467&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=467&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=586&fit=crop&dpr=1 754w, https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=586&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/462775/original/file-20220512-16-vfcpp1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=586&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Feeling down.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businessman-grabs-head-concept-business-chart-351140789">Shutterstock/Who is Danny</a></span>
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<p>But investors with their funds in Terra have seen their savings drop by around half. The fact it has still not stabilised does little to alleviate worries. In simple terms, the potential for a cryptocurrency crisis is very real.</p>
<p>This is why the approach of governments worldwide needs to change. While plenty has been said about regulation <a href="https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub">in the UK</a> and <a href="https://www.wsj.com/articles/yellen-renews-call-for-stablecoin-regulation-after-terrausd-stumble-11652208165">the US</a>, there has been little meaningful action. </p>
<p>If they fail to act, it will be difficult to advocate the use <a href="https://theconversation.com/plan-to-become-a-cryptoassets-hub-may-just-be-the-uk-government-hedging-its-bets-180717">of stablecoins</a> if they continue to expose consumers to the very volatility and risk they are supposed to avoid. </p>
<p>The time for allowing the sector freedom to innovate seems to have passed. Regulation is essential – to offer consumer protection, and ban excessively risky practices – if the potential of stablecoins is to be realised. That potential is something that <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1066166/O-S_Stablecoins_consultation_response.pdf">many feel</a> could revolutionise the global economy, speeding up transactions, reducing costs and increasing transparency.</p>
<p>But allowing the sector the opportunity to innovate should not come at the expense of people’s savings. If withdrawals persist, it will test both the stability of a particular stablecoin, and more broadly, whether the entire sector has a future. One stablecoin struggling is bad news. But two or more could be catastrophic for customer confidence.</p><img src="https://counter.theconversation.com/content/182886/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Shillito does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Uncertainty is affecting what used to be the safer end of the market.Matthew Shillito, Lecturer in Law, University of LiverpoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1760272022-02-03T05:59:33Z2022-02-03T05:59:33ZCrypto theft is on the rise. Here’s how the crimes are committed, and how you can protect yourself<figure><img src="https://images.theconversation.com/files/444197/original/file-20220203-17-bixps8.jpeg?ixlib=rb-1.1.0&rect=47%2C35%2C7940%2C4455&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="https://www.coindesk.com/tech/2022/02/02/blockchain-bridge-wormhole-suffers-possible-exploit-worth-over-250m/">News emerged</a> overnight of the potential theft of more than US$326 million (A$457.7 million) of Ethereum tokens from a blockchain bridge (which connects two blockchains so cryptocurrency can be exchanged between them). </p>
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<p>It’s no surprise. Crypto crime has been on the rise – especially since the pandemic began. How are these crimes committed? And what can you do to stay ahead of scammers? </p>
<h2>Direct theft vs scams</h2>
<p>There are two main ways criminals obtain cryptocurrency: stealing it directly, or using a scheme to trick people into handing it over. </p>
<p>In 2021, crypto criminals directly stole a record US$3.2 billion (A$4.48 billion) worth of cryptocurrency, according to <a href="https://blog.chainalysis.com/reports/2022-crypto-crime-report-introduction/">Chainalysis</a>. That’s a <a href="https://go.chainalysis.com/2021-Crypto-Crime-Report.html">fivefold increase</a> from 2020. But schemes continue to overshadow outright theft, enabling scammers to lure US$7.8 billion (A$10.95 billion) worth of cryptocurrency from unsuspecting victims. </p>
<p>Crypto crime is a fast-growing enterprise. The rise of the crypto economy and decentralised finance (or DeFi), coupled with <a href="https://time.com/nextadvisor/investing/cryptocurrency/bitcoin-record-high-price/">record</a> cryptocurrency prices in 2021, has provided criminals with lucrative opportunities.</p>
<p>Australian data confirm the global trends. The <a href="https://www.accc.gov.au/publications/targeting-scams-report-on-scam-activity/targeting-scams-report-of-the-accc-on-scam-activity-2020">Australian Consumer and Competition Commission reported</a> more than A$26 million was lost to scams involving cryptocurrency in 2020 from 1,985 reports. In December, federal police <a href="https://www.abc.net.au/news/2021-12-08/cryptocurrency-scams-targeting-australians-losing-millions/100678848?utm_campaign=abc_news_web&utm_content=link&utm_medium=content_shared&utm_source=abc_news_web">told the ABC</a> crypto scam losses for 2021 exceeded A$100 million. That’s despite many incidents likely left unreported, often due to embarrassment by victims. </p>
<h2>Theft from exchanges</h2>
<p>Most consumers obtain cryptocurrency from an <a href="https://www.finder.com.au/cryptocurrency/exchanges">exchange</a>. This involves opening an account and depositing currency, such as Australian dollars, before converting it to a chosen cryptocurrency. </p>
<p>Typically the cryptocurrency is held in a “custodial wallet”. That means it’s assigned to the consumer’s account, but the private keys that control the cryptocurrency are held by the exchange. In other words, the exchange stores the cryptocurrency on the consumer’s behalf. </p>
<p>But just as a bank doesn’t hold all of its deposits in cash, an exchange will only hold enough cryptocurrency in “hot” wallets (connected to the internet) to facilitate customer transactions. For security, the remainder is held in “cold” wallets (not connected to the internet). </p>
<p>Unlike a bank, however, the government does not have a <a href="https://www.apra.gov.au/about-financial-claims-scheme">financial claims scheme</a> to guarantee cryptocurrency deposits if the exchange goes bust. </p>
<p>The recent BitMart hack is a cautionary tale. On December 4, <a href="https://support.bmx.fund//hc/en-us/sections/360000817854-Media-">the exchange announced</a> it had “identified a large-scale security breach” resulting in the theft of about US$150 million (A$210.6 million) in crypto assets from hot wallets. </p>
<p>BitMart temporarily suspended withdrawals and later promised it would use its “own funding to cover the incident and compensate affected users”. It’s unclear when this will happen, with the <a href="https://www.cnbc.com/2022/01/07/cryptocurrency-theft-bitmart-still-owes-victims-of-200-million-hack.html">CNBC reporting in January</a> that customers were still unable to access their cryptocurrency. BitMart wasn’t the first exchange to be hacked, and it won’t be the last. </p>
<p>Similarly, consumers may be left with losses if an exchange fails for commercial reasons, rather than theft. Australians were left stranded in December when liquidators were <a href="https://publishednotices.asic.gov.au/browsesearch-notices/notice-details/myCryptoWallet-Pty-Ltd-619265548/cf805712-a08f-46f2-8ace-45ab1300cb10">appointed over Melbourne-based exchange myCryptoWallet</a>. </p>
<p>One way consumers can protect themselves from exchange theft, or insolvency, is to transfer their cryptocurrency from the exchange to a software wallet (a secure application installed on a computer or smartphone) or a hardware wallet (a hardware device that can be disconnected from the computer and internet). </p>
<p>The cryptocurrency will then be under your direct control. But be warned, if you lose your private keys, <a href="https://www.cnbc.com/2021/01/15/uk-man-makes-last-ditch-effort-to-recover-lost-bitcoin-hard-drive.html">you lose your cryptocurrency</a>.</p>
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Read more:
<a href="https://theconversation.com/the-metaverse-is-money-and-crypto-is-king-why-youll-be-on-a-blockchain-when-youre-virtual-world-hopping-171659">The metaverse is money and crypto is king – why you'll be on a blockchain when you're virtual-world hopping</a>
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<h2>Types of scams</h2>
<p>Drawing on the ACCC’s latest edition of <a href="https://www.accc.gov.au/publications/the-little-black-book-of-scams">the Little Black Book of Scams</a>, the following types of scam are commonly observed in the cryptocurrency space, where the scammer is not personally known to the target: </p>
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<li><p>Email phishing</p>
<p>The scammer sends unsolicited emails asking for personal login details, which can be used to steal cryptocurrency. Alternatively, they may offer “prizes” or “rewards” in exchange for a deposit. </p></li>
<li><p>Investment scams</p>
<p>The scammer creates a website that resembles a legitimate investment trading platform. It may be a fraudulent copy of a real business, or a completely bogus one. They may even post fake advertisements on social media platforms, with fake celebrity endorsements. In the <a href="https://www.theguardian.com/australia-news/2022/feb/03/andrew-forrest-launches-criminal-action-against-facebook-over-scam-ads-that-used-his-image">latest news</a>, billionaire mining magnate Andrew “Twiggy” Forrest has launched criminal proceedings against Meta (previously Facebook) for allowing scam ads using his image.
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More sophisticated operations will have multiple scammers emailing and calling victims to give the impression of being a legitimate organisation. After cryptocurrency deposits are made, victims may be able to “trade” on the fake platform but can’t withdraw their supposed earnings. Delay tactics include asking for further deposits to be made for fees or taxes. </p></li>
<li><p>Romance scams</p>
<p>The scammer creates a fake profile and matches with victims on a dating app or website. They may then ask for funds to help them with a personal crisis, such as needing a surgery. Or they may say they’re trading cryptocurrency and encourage the target to get involved, leading the victim into an investment scam, as described above. </p></li>
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<p>If a victim doesn’t already have a cryptocurrency exchange account, scammers may also coach them on how to open one. Some will mislead victims into installing remote access software on their computer, granting the scammer direct access to their internet banking or exchange account. </p>
<h2>Practical challenges</h2>
<p>There are practical legal challenges in the crypto crime environment. While <a href="https://www.scamwatch.gov.au/report-a-scam">reporting scams</a> can be helpful in providing data and intelligence for regulators and law enforcement, it’s unlikely to result in the recovery of funds.</p>
<p>Taking civil legal action may be possible, too, but identifying perpetrators is difficult. Since cryptocurrency is by its very nature global and decentralised, payments are often made to parties outside of Australia. </p>
<p>So prevention is easier than a cure. The main way to avoid being scammed is to ensure you know exactly who you’re dealing with, transact through a reputable exchange and ensure all the channels you go through are verified. If an offer sounds too good to be true, it almost certainly is. </p>
<h2>Regulation on the horizon</h2>
<p>In Australia, cryptocurrency exchanges must be registered with <a href="https://www.austrac.gov.au/">AUSTRAC</a>, in compliance with anti-money laundering and counter-terror financing obligations. But there are currently no other licensing requirements (such as capital requirements or cybersecurity, for example). </p>
<p>Last year, the Senate Select Committee into Australia as a Technology and Financial Centre <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Financial_Technology_and_Regulatory_Technology/AusTechFinCentre/Final_report">recommended</a> a more comprehensive licensing framework. The Australian government <a href="https://treasury.gov.au/publication/p2021-231824">agreed with the recommendation</a>, and the federal treasury department is due to begin consulting on what this will look like. </p>
<p>Mandatory measures to curb cryptocurrency crime at the exchange level will likely be high on the agenda.</p><img src="https://counter.theconversation.com/content/176027/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Aaron M. Lane works for the RMIT University Blockchain Innovation Hub and holds honorary research positions at the UCL Centre for Blockchain Technologies and the University of Divinity. Aaron is a member of the Digital Commerce Committee of the Law Council of Australia. Aaron is also Special Counsel at law firm Duxton Hill where he advises on matters involving cryptocurrency. </span></em></p>Although it’s estimated illicit activity amounts to less than 1% of all cryptocurrency transactions, figures of losses are still staggering – and on the rise.Aaron M. Lane, Senior Lecturer in Law, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1759112022-01-31T19:06:28Z2022-01-31T19:06:28ZCryptocurrency has an impact on economies. That’s why some are afraid of it – and some welcome it<figure><img src="https://images.theconversation.com/files/443344/original/file-20220131-23-1h56c4e.jpeg?ixlib=rb-1.1.0&rect=159%2C70%2C3771%2C2138&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>One month into 2022 and the debate on cryptocurrency is already heating up, with calls for regulation causing a rift between jurisdictions that are “crypto friendly” and those that aren’t. Which will determine the future of the market?</p>
<p>Russian Deputy Prime Minister Dmitry Chernyshenko has reportedly signed a roadmap to <a href="https://news.bitcoin.com/russian-government-drafts-roadmap-to-regulate-not-ban-crypto-report-unveils/">regulate crypto operations in Russia</a>. The news comes after Russia’s central bank published a <a href="https://www.cbr.ru/Content/Document/File/132242/Consultation_Paper_20012022_eng.pdf">consultation paper</a> that <a href="https://www.aljazeera.com/economy/2022/1/20/russias-central-bank-proposes-ban-on-crypto-mining-and-trading">proposed</a> a blanket ban on crypto-related activity in the country. </p>
<p>The paper, titled Cryptocurrencies: Trends, Risks, and Regulation, states “a wider adoption of cryptocurrencies creates significant risks for the Russian financial market”. It says non-state-based currencies pose a threat to citizens’ well-being, through loss of investments as a result of market volatility, scams and cyber attacks.</p>
<p>Jurisdictions have grappled with the idea decentralised digital currencies provide an alternative to sovereign currency – and thus pose a threat to central banks’ power over monetary policy. </p>
<p>Although Russia has stopped short of completely stifling operations inside its borders, the latest events follow a broader trend of nations struggling to embrace cryptocurrency. Future bans or regulations will determine the future of the industry.</p>
<h2>Crypto ban or crypto friendly?</h2>
<p>China has banned cryptocurrency trading multiple times. An outright <a href="https://cointelegraph.com/news/china-crackdown-shows-industrial-bitcoin-mining-a-problem-for-decentralization">ban on crypto mining</a> last year was a massive loss to the industry, as most crypto mining <a href="https://ccaf.io/cbeci/mining_map">happened in China</a>.</p>
<p>Mining involves running software on computer servers to solve cryptographic algorithms. This process validates transactions and maintains a shared record of transactions across the blockchain network. People who participate, the “miners” are automatically rewarded in cryptocurrency. </p>
<p>Mining is an international industry, and large capital outlay goes towards the land, power and infrastructure needed to set up mining warehouses.</p>
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<strong>
Read more:
<a href="https://theconversation.com/why-is-bitcoins-price-at-an-all-time-high-and-how-is-its-value-determined-152616">Why is Bitcoin's price at an all-time high? And how is its value determined?</a>
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<p>The mining ban in China drove miners to sell or ship their equipment overseas and invest capital in friendlier jurisdictions, particularly the United States. One consequence was the strengthening of the network, as mining operations were diversified. As such, future bans may have less of an effect on the market. </p>
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<iframe src="https://flo.uri.sh/visualisation/8568462/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:600px;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation" width="100%" height="400"></iframe>
<div style="width:100%!;margin-top:4px!important;text-align:right!important;"><a class="flourish-credit" href="https://public.flourish.studio/visualisation/8568462/?utm_source=embed&utm_campaign=visualisation/8568462" target="_top"><img alt="Made with Flourish" src="https://public.flourish.studio/resources/made_with_flourish.svg"> </a></div>
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<p>Currently, most <a href="https://ccaf.io/cbeci/mining_map">Bitcoin mining</a> occurs in the US, Kazakhstan, Russia, Canada, Malaysia and Iran. Some networks face great challenges. In Kazakhstan, for instance, power has <a href="https://www.coindesk.com/business/2022/01/25/kazakh-crypto-miners-cut-off-from-electricity-supply-until-end-of-january/">reportedly</a> been rationed away from miners to conserve energy during electricity shortages, forcing miners to leave the country. </p>
<p>Reports estimate <a href="https://news.bitcoin.com/power-deficit-forces-crypto-miners-to-leave-kazakhstan/">this will cost</a> Kazakhstan’s economy US$1.5 billion (or A$2.14 billion) over the next five years, including US$300 million in tax revenue. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/443348/original/file-20220131-17-14u40vs.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Cryptocurrency transactions exist on the blockchain, an immutable database not governed by banks or governments.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>Crypto isn’t entirely ‘anonymous’</h2>
<p>Crypto has come a long way since Bitcoin’s anonymous launch in 2009. There are now thousands of cryptocurrencies, with an estimated total <a href="https://coinmarketcap.com/">market cap</a> of US$1.66 trillion (about A$2.36 trillion).</p>
<p>It’s often stated, including in the recent report from Russia’s central bank, that the anonymity of cryptocurrencies enables illegal activity such as money laundering, terrorism financing and drug trade. </p>
<p>This isn’t entirely true. In fact transaction history on public blockchains, such as Bitcoin and Ethereum (the largest by market capitalisation), is public. </p>
<p>Many governments (including those of Australia and the US) collaborate with large private blockchain analytics firms to monitor citizens’ crypto wallet addresses and transactions. They do this to mitigate risks of money laundering and tax evasion. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/around-the-world-regulators-are-realising-bitcoin-is-money-45934">Around the world, regulators are realising Bitcoin is money</a>
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<p>Contrary to popular belief, most cryptocurrencies aren’t anonymous; they are pseudonymous. If a person’s identity is linked to their wallet address via a central touch point, such as a cryptocurrency exchange or an email, that wallet is traceable to the individual. </p>
<p><a href="https://www.rand.org/pubs/research_reports/RR4418.html">Research</a> (commissioned by Zcash but carried out by the Rand corporation) found there isn’t widespread illicit use of “privacy coins” preserving users’ anonymity.</p>
<h2>Policy will determine future directions</h2>
<p>Cryptocurrency continues to become increasingly mainstream as an investment asset class, technological infrastructure and a social experiment in non-state-based infrastructure. </p>
<p>With this, crypto communities hold growing influence in public policy debates. For example, crypto advocates were able to slow down a major federal government infrastructure bill in the US last <a href="https://www.bloomberg.com/news/videos/2021-08-09/crypto-slows-u-s-infrastructure-bill-video">year</a>.</p>
<p>Yet jurisdictions are choosing different pathways regarding policy and regulation. Some such as China and Russia view it as a fiscal and ideological challenge to sovereign monies. Others view it as an opportunity for innovation, investment and economic growth. </p>
<p>As different approaches emerge, 2022 may be a defining year for both the crypto industry and those competing to either ban or welcome it. </p>
<p>Past examples suggest countries that welcome crypto networks reap <a href="https://www.fortunebusinessinsights.com/industry-reports/cryptocurrency-market-100149">economic benefits</a> through innovation, investment, jobs and taxes. Business <a href="https://www2.deloitte.com/us/en/pages/audit/articles/corporates-using-crypto.html">benefits</a> of adopting crypto as a digital asset include access to new demographics and technological efficiencies in treasury management.</p>
<p>At the same time, the effects of policy and regulation on the industry demonstrates cryptocurrency isn’t a completely decentralised thing that exists only on the blockchain.</p>
<h2>Australia’s position</h2>
<p>In the competition to limit but benefit from cryptocurrency, Australia has emerged as a potential destination of “crypto friendliness”. A report published in October by the Senate Select Committee on Australia as a Technology and Financial Centre looks favourably on cryptocurrencies. </p>
<p>It proposes market licensing for crypto exchanges, streamlined taxation arrangements and a regulatory structure for “decentralised autonomous organisations”, or <a href="https://www.newyorker.com/culture/infinite-scroll/the-promise-of-daos-the-latest-craze-in-crypto">DAOs</a>. These function using the same philosophy of self-governance as decentralised cryptocurrency networks, using blockchain technology and cryptocurrency tokens to manage participation and enforce rules.</p>
<p>Australia’s choice is to capture the enormous economic potential of decentralised digital assets. How this will impact the national economy remains to be seen. But if history is a lesson to be learned from, we can expect policy to shape outcomes.</p><img src="https://counter.theconversation.com/content/175911/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kelsie Nabben works for the RMIT University Blockchain Innovation Hub.</span></em></p>Jurisdictions have long contended with the threat cryptocurrencies pose to central banks’ power over monetary policy.Kelsie Nabben, Researcher / PhD Candidate, RMIT Blockchain Innovation Hub / Centre for Automated Decision Making & Society / Digital Ethnography Research Centre, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1571152021-03-15T12:58:55Z2021-03-15T12:58:55ZWhy would anyone buy crypto art – let alone spend millions on what’s essentially a link to a JPEG file?<figure><img src="https://images.theconversation.com/files/389379/original/file-20210313-23-ezvdf8.jpg?ixlib=rb-1.1.0&rect=2169%2C0%2C2410%2C1592&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Since so much our social lives are lived online, maybe it makes sense for our art collections to reside online, too.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/illustration/web-royalty-free-illustration/1162714011?adppopup=true">Ihor Melnyk via Getty Images</a></span></figcaption></figure><p>As an <a href="https://scholar.google.com/citations?user=ZcWO2AEAAAAJ&hl=en&oi=ao">academic researcher</a>, developer of artistic technology and amateur artist, I was quite skeptical about crypto art when <a href="https://www.artnome.com/news/2018/1/14/what-is-cryptoart">I first read about it several years ago</a>. </p>
<p>However, I follow a community of artists on social media, and some of the artists there whom I respect, like Mario Klingemann and Jason Bailey, <a href="https://twitter.com/quasimondo/status/1310612476011175936?s=20">embraced</a> and <a href="https://twitter.com/artnome/status/1310614348260352000?s=20">advocated for</a> crypto art. Within the past few months, activity and prices seemed to snowball. I started thinking it deserves to be taken seriously. </p>
<p>Then the Beeple sale happened.</p>
<p>On March 11, Beeple, a computer science graduate whose real name is Mike Winkelmann, auctioned a piece of crypto art at Christie’s <a href="https://www.npr.org/2021/03/11/976141522/beeple-jpg-file-sells-for-69-million-setting-crypto-art-record">for US$69 million</a>.</p>
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<p>The winning bidder is now named in a digital record that confers ownership. This record, called a <a href="https://news.yahoo.com/explained-non-fungible-tokens-nfts-010049576.html">nonfungible token</a>, or NFT, is stored in a shared global database. This database is decentralized using blockchain, so that no single individual or company controls the database. As long as the specific blockchain survives in the world, anyone can read or access it, and no one can change it.</p>
<p>But “ownership” of crypto art confers no actual rights, other than being able to say that you own the work. You don’t own the copyright, you don’t get a physical print, and anyone can look at the image on the web. There is merely a record in a public database saying that you own the work – really, it says you own the work at a specific URL.</p>
<p>So why would anyone buy crypto art – let alone spend millions on what’s essentially a link to a JPEG file?</p>
<h2>Art is inherently social</h2>
<p>It might be helpful to think about crypto art in the context of why people buy original works of art. </p>
<p>Some people buy art for their homes, hoping to incorporate it into their living spaces for pleasure and inspiration. </p>
<p>But art also plays many important social roles. The art in your home communicates your interests and tastes. Artworks can spark conversation, whether they’re in museums or homes. People form communities around their passion for the arts, whether it’s through museums and galleries, or magazines and websites. Buying work supports the artists and the arts.</p>
<p>Then there are collectors. People get into collecting all sorts of things – model trains, commemorative plates, rare vinyl LPs, sports memorabilia – and, like other collectors, art collectors are passionate about trying to hunt down those rare pieces.</p>
<p>Perhaps the most visible form of art collecting today, and the one that drives so much public discussion about art, is the art purchased for millions of dollars – the pieces by <a href="http://content.time.com/time/specials/packages/article/0,28804,1917097_1917096_1917100,00.html">Picasso</a> and <a href="https://www.clc.sllf.qmul.ac.uk/?p=391">Damien Hirst</a> traded by the ultrawealthy. This is still social: Whether they’re at Sotheby’s auctions or museum board dinners, wealthy art collectors mingle, meet and talk about who bought what.</p>
<p>Finally, I think many people buy art strictly as an investment, <a href="https://www.bbc.com/news/business-42011989">hoping that it will appreciate in value</a>.</p>
<h2>Is crypto art really that different?</h2>
<p>If you look at the reasons people buy art, only one of them – buying art for your home – has to do with the physical work. </p>
<p>Every other reason for buying art that I listed could apply to crypto art. </p>
<p>You can build your own virtual gallery online and share it with other people online. You can convey your tastes and interests through your virtual gallery and support artists by buying their work. You can participate in a community: Some crypto artists, who have felt excluded by the mainstream art world, say they <a href="https://twitter.com/MattKaneArtist/status/1370396745851605008?s=20">have found more support in the crypto community</a> and <a href="https://twitter.com/missalsimpson/status/1369798571747389443">can now earn a living making art</a>.</p>
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<p>While Beeple’s big sale made headlines, most crypto art sales are much more affordable, in the tens or hundreds of dollars. This supports a much larger community than just a select few artists. <a href="https://twitter.com/artnome/status/1356708775915384838?s=20">And some resale values have gone up</a>. </p>
<h2>Value as a social construct</h2>
<p>Aside from the visual pleasure of physical objects, nearly all the value art offers is, in some way, a social construct. This does not mean that art is interchangeable, or that the historical significance and technical skill of a <a href="https://artsandculture.google.com/exhibit/rembrandt-master-printmaker-cincinnati-art-museum/uQKi73GQ6NY4IQ?hl=en">Rembrandt</a> is imaginary. It means that the value we place on these attributes is a choice. </p>
<p>When someone pays <a href="https://www.nytimes.com/2019/05/15/arts/jeff-koons-rabbit-auction.html">$90 million for a metal balloon animal made by Jeff Koons</a>, it’s hard to believe that the work has that much “intrinsic” value. Even if the materials and craftsmanship are quite good, surely some of those millions are simply buying the right to say “I bought a Koons. And I spent a lot of money on it.” If you just want an artfully made metal balloon animal, there are cheaper ways to get one.</p>
<figure class="align-center ">
<img alt="Two people take photographs with their smartphones of a banana taped to a wall." src="https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/389373/original/file-20210313-15-5d6ity.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Maurizio Cattelan’s ‘Comedian’ displayed at Art Basel Miami in 2019.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/people-post-in-front-of-maurizio-cattelans-comedian-news-photo/1186756719?adppopup=true">Cindy Ord/Getty Images</a></span>
</figcaption>
</figure>
<p>Conversely, the conceptual art tradition has long separated the object itself from the value of the work. Maurizio Cattelan <a href="https://news.artnet.com/art-world/maurizio-cattelan-banana-explained-1732773">sold a banana taped to a wall for six figures, twice</a>; the value of the work was not in the banana or in the duct tape, nor in the way that the two were attached, but <a href="https://www.nytimes.com/2019/12/08/arts/design/a-critics-defense-of-cattelan-banana-.html">in the story and drama around the work</a>. Again, the buyers weren’t really buying a banana, they were buying the right to say they “owned” this artwork.</p>
<p>Depending on your point of view, crypto art could be the ultimate manifestation of conceptual art’s separation of the work of art from any physical object. It is pure conceptual abstraction, applied to ownership.</p>
<p>On the other hand, crypto art could be seen as reducing art to the purest form of buying and selling for conspicuous consumption. </p>
<p>In Victor Pelevin’s satirical novel “<a href="https://www.penguinrandomhouse.com/books/286440/homo-zapiens-by-victor-pelevin/">Homo Zapiens</a>,” the main character visits an art exhibition where only the names and sale prices of the works are shown. When he says he doesn’t understand – where are the paintings themselves? – it becomes clear that this isn’t the point. Buying and selling is more important than the art. </p>
<p>This story was satire. But crypto art takes this one step further. If the point of ownership is to be able to say you own the work, why bother with anything but a receipt?</p>
<h2>Manufacturing scarcity</h2>
<p>It still seems hard to get used to the idea of spending money for nothing tangible. </p>
<p>Would anyone pay money for NFTs that say they “own” the Brooklyn Bridge or the whole of the Earth or the concept of love? People can create all the NFTs they want about anything, over and over again. I could make my own NFT claiming that I own the Mona Lisa, and record it to the blockchain, and no one could stop me.</p>
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<p>But I think this misses the point.</p>
<p>In crypto art, there is an implicit contract that what you’re buying is unique. The artist makes only one of these tokens, and the one right you get when you buy crypto art is to say that you own that work. No one else can. Note, though, that this is not a legal right, nor is there any enforcement other than social mores. Nonetheless, the value comes from the artist creating scarcity.</p>
<p>This is the same thing that’s happened in the art world <a href="https://www.artsy.net/article/artsy-specialist-buying-limited-editions">ever since photographers and printmakers had to figure out how to sell their work</a>. In the world of photography, a limited-edition print is considered more valuable than an unlimited edition; the fewer prints in the edition, the more valuable they are. Knowing that you have one of a few prints personally made and signed by the artist gives you an emotional connection to the artist that a mass-produced print doesn’t.</p>
<p>This connection could be even weaker in digital art. But what you are buying is still, in part, a connection with the artist. Artists sometimes <a href="https://twitter.com/MattKaneArtist/status/1370059188660011009?s=20">publicly tweet their thanks to their crypto art patrons</a>, which may strengthen this emotional connection.</p>
<h2>A bubble bound to burst?</h2>
<p>Personally, I want to buy only art I can hang on my walls, so I have no interest in buying crypto art. There are also environmental costs. <a href="https://memoakten.medium.com/the-unreasonable-ecological-cost-of-cryptoart-2221d3eb2053">Certain blockchains used for crypto art are really bad for the climate</a>, because they require computations that consume staggering amounts of energy.</p>
<p>That said, if buying it right now gives you pleasure – and you enjoy sharing what you’ve bought and the community around it and you’re using <a href="https://github.com/memo/eco-nft/">a more environmentally friendly blockchain</a> – that’s great.</p>
<p>If you’re buying it for some future reward, however, that’s risky. Will people care about your personal virtual gallery in the future? Will you care? Will crypto art even be a thing in a few years?</p>
<p>As an investment, it just seems inconceivable to me that the higher prices reflect true value, in the sense of these works having higher resale value in the long term. As in the traditional art world, there are a lot more works being sold than could ever possibly be considered significant in a generation’s time. </p>
<p>And, in the crypto world, we’re seeing highly volatile prices, a sudden frenzy of interest, and huge sums being paid for things that seem, on the surface, not to have the slightest bit of value at all, such as <a href="https://www.theverge.com/2021/3/9/22321464/jack-dorsey-nft-tweet-auction-bitcoin-donate-charity">the $2.5 million bid to “own” Jack Dorsey’s first tweet</a> or even the <a href="https://opensea.io/assets/0x495f947276749ce646f68ac8c248420045cb7b5e/34250611840767046457364755162887744273167171110707576795476315639371094032385">$1,000 bid on a photo of a cease-and-desist letter about NFTs</a>. </p>
<p><a href="https://www.nytimes.com/2021/03/13/technology/crypto-art-NFTs-trading-cards-investment-manias.html">Much of this energy seems to be driven by price speculation</a>. It’s also worth noting that <a href="https://amycastor.com/2021/03/14/metakovan-the-mystery-beeple-art-buyer-and-his-nft-defi-scheme/">the winner of the Beeple auction seems to be heavily invested in the success of crypto art</a>. The cryptocurrencies that drive crypto art are often considered highly speculative.</p>
<p>I have no doubt that, right now, there’s a big NFT bubble. </p>
<p>[<em>Over 100,000 readers rely on The Conversation’s newsletter to understand the world.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=100Ksignup">Sign up today</a>.]</p>
<p>There have been lots of bubbles before – <a href="https://www.history.com/news/tulip-mania-financial-crash-holland">tulips</a>, <a href="https://slate.com/culture/2010/03/the-great-baseball-card-bubble.html">baseball cards</a>, <a href="https://www.wbur.org/hereandnow/2015/03/02/beanie-baby-bubble">Beanie Babies</a> – objects that were flying off the shelves one year and then piled up in landfills the next. And, in a bubble, <a href="https://www.nytimes.com/2021/02/07/business/gamestop-stock-losses.html?searchResultPosition=9">a few headline-making winners get rich, while a whole lot of others lose their shirts</a>. Even if crypto art lasts, maybe the particular artist or platform where you’re buying won’t be popular in the future.</p>
<p>My feelings about crypto art aside, I do believe that art is, fundamentally, a social activity. The more our social lives are lived online, the more it may make sense for some people to have their art collections online, too – whether or not blockchain is involved.</p><img src="https://counter.theconversation.com/content/157115/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Aaron Hertzmann works for Adobe Research, however, opinions expressed here are solely his own.
</span></em></p>If you look at the reasons people buy art, almost none of them have to do with the physical work.Aaron Hertzmann, Affiliate Faculty of Computer Science, University of WashingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1014202018-08-16T13:38:08Z2018-08-16T13:38:08ZThe darknet is not a hellhole, it’s an answer to internet privacy<figure><img src="https://images.theconversation.com/files/231892/original/file-20180814-2924-1pkzdbk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/cyber-security-metallic-combination-lock-inbuilt-1068036806?src=N4xggQRHvPKnQ6BlwvUQRw-2-67">Sergey Tarasov</a></span></figcaption></figure><p>On the back of scandals such as those that engulfed the <a href="https://theconversation.com/privacy-2013-from-snowden-to-facebook-to-amazons-drones-20353">NSA</a> and <a href="https://theconversation.com/cambridge-analyticas-closure-is-a-pyrrhic-victory-for-data-privacy-96034">Cambridge Analytica</a>, online privacy and data protection have become major political concerns. Many of us <a href="http://time.com/4673602/terms-service-privacy-security/">worry that</a> private companies and governments know more about us than our closest friends and relatives. </p>
<p>One alternative is to switch to the darknet, which offers anonymity and protection from those who keep track of what people do online. Yet it is controversial, to say the least. The darknet has been associated with everything from drug and weapons dealers to child porn, hitmen and identity thieves. Even the name suggests a dark, sinister space. Yet when you actually investigate this encrypted network, the reality is a bit more complicated. And it’s time to call the darknet’s sleazy reputation into question. </p>
<p>The darknet is a worldwide decentralised network of hundreds of computers, whose owners configure them and contribute internet bandwidth to create a series of routing points or nodes. These nodes feature a form of layered encryption, that often <a href="https://www.geeksforgeeks.org/onion-routing/">gets compared</a> to an onion – hence the collective name <a href="https://www.torproject.org">The Onion Routing network</a>, or Tor for short. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/231893/original/file-20180814-2891-1096aqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Onion ring.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bratislava-slovakia-july-3-2018-tor-1126165718?src=Nc6LIKgz1pro6QADBCDmtw-1-8">Pe3k</a></span>
</figcaption>
</figure>
<p>Onion routing was originally developed in the 1990s by the US Naval Research Laboratory to protect US intelligence communications online. Free Tor software was first made publicly available in 2002, and the not-for-profit <a href="https://www.torproject.org">Tor project</a> was set up in 2006 to maintain the system. It has received funding over the years from governments, NGOs, foundations and companies, as well as thousands of personal donations. </p>
<p>Since April, <a href="https://metrics.torproject.org">between</a> 2m to 2.5m people use Tor worldwide every day. The number fluctuates greatly over time; there was a short-term peak in the fourth quarter of 2013, for instance. This was perhaps related to the emerging popularity of so-called cryptomarkets like <a href="https://www.wired.com/2015/04/silk-road-1/">Silk Road</a>, when global traffic reached almost 6m. In the UK at that time, the user base rose to 157,000 – now it’s more like 70,000. </p>
<h2>The darknet goes dark</h2>
<p>The launch of Silk Road in 2011 has much to do with the controversy around the darknet. The first of its kind, Silk Road <a href="https://www.forbes.com/sites/niallmccarthy/2018/03/22/where-guns-are-sold-through-the-darknet-infographic/#6fb4627e647a">was a market space</a> for everything from firearms to illegal drugs. By the <a href="https://theconversation.com/end-of-the-silk-road-how-did-dread-pirate-roberts-get-busted-18886">time</a> it was <a href="https://www.forbes.com/sites/andygreenberg/2013/10/02/end-of-the-silk-road-fbi-busts-the-webs-biggest-anonymous-drug-black-market/">busted</a> by the FBI in October 2013, the media was essentially equating it with the entire darknet. <a href="https://www.richardvanhooijdonk.com/en/blog/complex-dangerous-disturbing-underworld-darknet/">Subsequent reports</a> about drug crime, child porn and hitman services only strengthened the association. </p>
<p>Few would <a href="https://www.cyberscoop.com/tor-dark-web-andrew-lewman-securedrop/">disagree today</a> that the darknet attracts a lot of criminal activity, so what’s the case for the defence? For one thing, the network offers safe space to many activities that require anonymity. Socially sensitive communications are a <a href="https://www.jstor.org/stable/j.ctt13x07xx">good example</a> – such as forums for people who have survived rape or child abuse. Journalists use Tor to interact more safely <a href="https://darkwebnews.com/dark-web/how-whistleblowers-use-the-darknet-for-good/">with whistleblowers</a>, while it enables activists in repressive regimes to communicate politically sensitive information – the likes of Human Rights Watch actually <a href="https://openscholarship.wustl.edu/law_globalstudies/vol11/iss3/6/">encourage</a> this. </p>
<p>When my colleague at the University of Aberdeen, Hanifi Baris, was <a href="https://www.pressandjournal.co.uk/fp/news/aberdeen/1514218/outspoken-aberdeen-university-academic-has-been-arrested/">recently arrested</a> by the Turkish authorities for sharing anti-Erdoğan information on Facebook and Twitter, it underlined the importance of the darknet as an outlet for protest. There was a rather telling <a href="https://metrics.torproject.org">sharp peak</a> in Tor users in Turkey during the last presidential elections in June. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=298&fit=crop&dpr=1 600w, https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=298&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=298&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=375&fit=crop&dpr=1 754w, https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=375&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/231894/original/file-20180814-2906-118b3aw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=375&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Twitter campaign.</span>
</figcaption>
</figure>
<p>When it comes to illicit drugs, darknet services can be a safer option for people who would take drugs anyway. Buyers avoid the risk of physical violence that comes with scoring on the street. Buyer reviews put pressure on darknet dealers to sell drugs of decent <a href="https://serval.unil.ch/resource/serval:BIB_670B021B4620.P001/REF">quality</a> – <a href="https://www.sciencedirect.com/science/article/pii/S0955395915003503">albeit</a> some reviewers <a href="https://www.sciencedirect.com/science/article/pii/S095539591630130X?via%3Dihub">will have</a> more expertise than others and experiences are always going to be somewhat subjective. </p>
<p>At any rate, the darknet has amassed a collectively built database of knowledge and shared experiences about drug consumption in cryptomarkets that can offer guidance and support for anyone who wants to use them. Given that drugs always vary in strength and purity depending on the seller and the batch, this information can be incredibly important – and often much more helpful than a generic forum or drug info website. </p>
<p>As for some of the other illegal activities on the darknet, child pornography is banned in most cryptomarkets, for example, while hitman services <a href="https://darkwebnews.com/scams/sicilian-hitmen-scam/">have usually</a> turned out to be scams. Additionally, the darknet does not turn people into drug addicts, arms dealers, assassins or paedophiles. The decision to engage in such activities usually happens outwith that space.</p>
<h2>Darknet/clearnet</h2>
<p>The conventional internet is not merely a platform for us to communicate, game, shop, download and so on. These activities all feed valuable data to governments and companies. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=683&fit=crop&dpr=1 600w, https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=683&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=683&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=858&fit=crop&dpr=1 754w, https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=858&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/231895/original/file-20180814-2894-1p1eqyh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=858&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Eye cloud.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bratislava-slovakia-july-3-2018-tor-1126165718?src=Nc6LIKgz1pro6QADBCDmtw-1-8">Lightspring</a></span>
</figcaption>
</figure>
<p>Most of us are surrounded by personal devices that are almost always online, and we’ve made ourselves open to massive marketisation, exploitation, monitoring, control and repression. It’s the hefty price we pay for internet freedom – and new legal frameworks like the General Data Protection Regulation (GDPR) <a href="https://theconversation.com/gdpr-isnt-enough-to-protect-us-in-an-age-of-smart-algorithms-97389">will not</a> significantly change this. </p>
<p>The darknet is hardly a panacea in this regard, but it does allow people to <a href="https://www.rollingstone.com/politics/politics-news/the-darknet-is-the-government-destroying-the-wild-west-of-the-internet-198271/">reclaim privacy</a> and protect their identities online. Admittedly there are limits to this: Tor enables users to hide their geographical location, but any data you provide once you are inside a website is accessible to whoever is running it, plus any organisations they may collaborate with. Log in to gmail from Tor and your emails are not private (try ProtonMail or Snapchat instead). Every Twitter search via Tor is logged like it is for any user – just like it is for Amazon and so on. </p>
<p>Another major problem is the speed of Tor, which depends on the number of nodes on the available bandwidth. Everything is slowed down by the secure encryption and user anonymity built into the structure. Although Tor has gained markedly in speed and security since its inception, it is still slower than the conventional internet. </p>
<p>This compromise between speed and exposure/protection will probably continue for the foreseeable future. If you want to help, however, you might consider running a relay. Everyone is invited to collaborate – here’s <a href="https://blog.torproject.org/new-guide-running-tor-relay">a guide</a> explaining what to do. Instead of shunning the darknet as a badland for bad people, it’s time more of us saw its potential as a force for good.</p><img src="https://counter.theconversation.com/content/101420/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andreas Zaunseder does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The case for all things Tor.Andreas Zaunseder, Doctoral Fellow, Centre for Citizenship, Civil Society and Rule of Law, University of AberdeenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/925812018-03-07T02:54:09Z2018-03-07T02:54:09ZPhenibut, online drug markets and the limits of law enforcement<p>Seven high school students in Queensland were taken to hospital last month after <a href="https://www.sbs.com.au/news/queensland-students-critical-overdose-suspected">reportedly</a> overdosing on a substance identified as <a href="https://theconversation.com/weekly-dose-phenibut-the-russian-anti-anxiety-drug-linked-to-gold-coast-teens-overdoses-92339">Phenibut</a>. It’s an anti-anxiety drug developed for Russian cosmonauts that also has cognitive-enhancing qualities.</p>
<p>According to the Australian Therapeutic Goods Administration, Phenibut is a <a href="https://www.tga.gov.au/book-page/33-phenibut">Schedule 9 prohibited substance</a>, which means that it cannot be sold legally in this country. Nevertheless, according to <a href="http://www.news.com.au/lifestyle/health/health-problems/police-seize-mobile-phones-in-investigation-into-school-overdose/news-story/ace12f1eadfe40bd2bcce3c471a4d05f">reports</a>, the students were able to buy the drug online and have it delivered to them on the Gold Coast. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/weekly-dose-phenibut-the-russian-anti-anxiety-drug-linked-to-gold-coast-teens-overdoses-92339">Weekly Dose: phenibut – the Russian anti-anxiety drug linked to Gold Coast teens' overdoses</a>
</strong>
</em>
</p>
<hr>
<p>This incident reveals the limits of law enforcement practices developed over the 20th century in relation to more traditional drug markets. Current strategies for policing drugs would not have prevented these young people from gaining access to Phenibut. </p>
<h2>Why are online drug markets different?</h2>
<p>While conventional illicit drug markets have relied on physical exchanges of drugs, the internet has created new opportunities for illicit drug markets to flourish through both the “dark” net and the “surface” net.</p>
<p>“Dark net marketplaces” or <a href="https://theconversation.com/explainer-what-are-drug-cryptomarkets-64596">cryptomarkets</a> operate in the hidden portion of the internet. Cryptomarkets are online forums that enable the trade of goods between individuals who use digital encryption to conceal their identities. Although cryptomarkets offer many types of illegal goods and services (and some legal services), the most commonly purchased items are illicit drugs. </p>
<p>Most illicit drugs sold through cryptomarkets are those taken by recreational drug users (for example, cannabis-related products, stimulants, pharmaceuticals). The heavy presence of recreational drugs is linked to the fact that planning purchases ahead of time and waiting for shipments will not suit individuals who need immediate access to illicit substances, such as dependent drug users.</p>
<p>In contrast to buying Phenibut from the surface net, as the Gold Coast students allegedly did, purchasing from a cryptomarket is a technologically challenging endeavour. These websites are not accessible through familiar search engines; a specialised anonymising browser, the specific URL address of the marketplace, and the possession of cryptocurrency (such as <a href="https://theconversation.com/what-is-bitcoin-it-is-not-that-complicated-if-you-ignore-the-geek-speak-46512">Bitcoin</a>) are required to perform the transaction. </p>
<p>The term surface web refers to all of the content accessible through popular search engines (such as Google). It contains the sites most people use in their everyday browsing. Drug markets that operate through the surface net often fall into legal grey areas. This is a consequence of significant legislative variation across jurisdictions regarding the production, distribution and possession of some drugs – particularly those that are not specifically identified as illicit in various international conventions and protocols. </p>
<p>The drugs most commonly sold in the surface web drug markets are new psychoactive substances (otherwise known as “research chemicals”, “legal highs” and “bath salts”) and counterfeit versions of prescription-required pharmaceuticals. The surface web drug trade mostly revolves around access to lifestyle drugs such as performance and image-enhancing substances.</p>
<p>This is the context in which people are able to get Phenibut with relative ease. It could be bought through the surface web, using Google to locate a web store willing to ship the product to Australia after an electronic funds transfer. </p>
<p>Even though Phenibut is a scheduled substance in Australia, it is likely that the servers for many of these retail web stores are located in countries where it is entirely legal to manufacture, possess and distribute the drug.</p>
<h2>What does this mean for drug control strategies?</h2>
<p>Dominant models for controlling illicit drugs mostly work through a combination of prohibition and targeted law enforcement crackdowns on local drug markets. These approaches are grounded in broader criminological understandings that offenders rationally consider the costs and benefits of an act, and that the perceived and actual threat of punishment deters crime. Such models have been <a href="http://www.ijdp.org/article/S0955-3959(05)00056-3/abstract">widely criticised</a> for their ineffectiveness and negative health consequences.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/small-potent-doses-of-illegal-drugs-are-evading-authorities-but-having-a-huge-impact-87081">Small potent doses of illegal drugs are evading authorities but having a huge impact</a>
</strong>
</em>
</p>
<hr>
<p>Admittedly, online drug markets represent only a small portion of the overall global drug trade. Taking into account the ubiquitous nature of the surface web, and the relative ease of acquiring drugs like Phenibut, such markets are likely to grow.</p>
<p>Following the Queensland case, police were quick to <a href="http://www.news.com.au/national/queensland/crime/police-crackdown-on-online-drug-trade/news-story/16cea5d388f39bc110e3c590787db43e">announce</a> a number of seizures of various illicit substances that had been “trafficked” through the domestic mail stream. </p>
<p>Methods for policing online drug markets are relatively new and still being developed. These appear to adopt <a href="https://www.businessinsider.com.au/methods-that-police-use-to-catch-deep-web-drug-dealers-2016-8">similar approaches</a> to those used to address conventional drug markets, even though it is likely that online markets attract different types of customers and operate according to different principles. New strategies are needed that help to reduce harm by better understanding the nature of buyers in these digital domains.</p><img src="https://counter.theconversation.com/content/92581/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The increasing availability of drugs online raises questions about policing methods that were developed to deal with more traditional drug markets.Andrew Childs, Doctoral Candidate, Griffith UniversityMelissa Bull, Associate Professor, School of Criminology and Criminal Justice, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/911682018-02-11T08:17:05Z2018-02-11T08:17:05ZWhy it would be in everybody’s interests to regulate cryptocurrencies<figure><img src="https://images.theconversation.com/files/205238/original/file-20180207-74506-nil6pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>There are growing <a href="http://www.wired.co.uk/article/six-ways-to-regulate-cryptocurrency-without-destroying-its-future">calls</a> for regulation of the cryptocurrency market, which is rapidly approaching a market capitalisation of <a href="https://www.cnbc.com/2017/12/18/cryptocurrencies-could-be-worth-1-trillion-in-2018-blockchain-ceo.html">$1 trillion</a>. But there’s little agreement about the forms this should take.</p>
<p>If the case for government regulation is strong, the case for a clear, coordinated regulatory approach is even stronger. It would increase the flow of institutional capital into cryptocurrency markets. And that would further strengthen corporate governance in cryptocurrency companies.</p>
<p>The trick for regulators is to balance investor protection and systemic stability with the need to protect innovation and encourage capital formation in different legal systems.</p>
<p>At present the regulatory environment is a muddle because there’s rapid divergence in the regulation of cryptocurrencies across jurisdictions. Countries like Japan, while thorough, have a more open approach. China is more strict. </p>
<p>Sovereign governments need to develop coherent frameworks for cryptocurrency oversight. But solutions will only be found through international cooperation in this cross-border market.</p>
<h2>Growing concerns</h2>
<p>Cryptocurrencies <a href="https://cointelegraph.com/bitcoin-for-beginners/what-are-cryptocurrencies">originated</a> as an alternative payment mechanism to traditional currencies. But they are now also <a href="http://www.cftc.gov/bitcoin/index.htm">traded</a> on spot exchanges as highly speculative investment assets. </p>
<p>Recent spin-off crowd funding opportunities such as <a href="http://bitcoinafrica.io/2017/09/08/sarb-says-no-protection-for-ico-investors/">initial coin offerings</a> have become a particular cause of concern. These involve startup cryptocurrency companies offering initial investment stakes in new token issues. China and Vietnam have <a href="https://www.ft.com/content/05b2748c-c903-11e7-aa33-c63fdc9b8c6c">banned</a> them. Japan has taken a friendlier <a href="https://www.wsj.com/articles/regulators-are-looking-at-cryptocurrency-1516836363">attitude</a> while the UK and the US have adopted a wait and see approach. South Africa, like many other developing countries, offers zero protection to investors in initial coin offerings.</p>
<p>These different responses are due to different legal definitions of cryptocurrencies. The rapidly evolving technology behind them doesn’t help the situation either.</p>
<p>The precise nature of an initial coin offerings depends on its structure as well as its context which can change quickly and have hybrid characteristics of financial instruments. </p>
<p>The definition, and hence legal treatment, of the tokens issued under an initial coin offering can be as diverse as a currency, commodity, security, property, loan, deposit, derivative or forex contract. Agreeing a taxonomy of cryptocurrencies defined by how they’re used is clearly one of the most urgent tasks facing regulators.</p>
<h2>Towards a taxonomy of cryptocurrencies</h2>
<p>Cryptocurrency expert <a href="https://new.innovatefinance.com/news/lawrence-wintermeyer-steps-ceo-innovate-finance/">Lawrence Wintermeyer</a> has argued that distributed ledger technology powered digital assets could be organised into three potential buckets: cryptocurrencies, cryptocommodities, and <a href="https://www.forbes.com/sites/lawrencewintermeyer/2018/01/07/my-2018-crypto-predictions/#6294e3976b71">cryptotokens</a>. </p>
<p>But the lack of harmonisation across jurisdictions is a wider problem than nomenclature.</p>
<p>Cryptocurrency companies sometimes use the distributed nature of these assets – which sit on digital ledgers held by multiple token holders – to argue that there is no issuer. They also sometimes argue that these assets are not securities, and that they should therefore not be subjected to a particular jurisdiction’s securities laws.</p>
<p>There are also clear cross border regulatory <a href="https://www.ft.com/content/32315636-cb01-11e7-ab18-7a9fb7d6163e">gaps</a>. What makes it difficult to reconcile these is that the assets can easily be transferred and their origins are difficult to trace. Tokens could be issued in a more token-friendly jurisdiction like Japan. The same tokens could land up in the hands of unassuming retail investors in stricter jurisdictions such as the US. </p>
<h2>Avoiding money laundering and financial crime</h2>
<p>This cross border confusion allows token companies to pick and choose jurisdictions with favourable rules. This could make money laundering easier.</p>
<p>There are a few steps governments can take to close these gaps.</p>
<p>They should support investment in technology that makes the provenance of tokens clearer while preserving their encryption. Regulators could then enforce an “indicator of origin” as a standard. This would make it less easy for the assets to be transferred illegally.</p>
<p>Offshore centres like Jersey <a href="https://www.ft.com/content/e591541e-007e-11e6-99cb-83242733f755">have got a lot of bad press</a> in the recent backlash against international financial centres. But there’s a great deal to learn from well-regulated offshore jurisdictions. They are beginning to take the lead with potential applications of international best practice and corporate governance for cryptocurrencies. They offer investors in digital assets an extra set of gatekeepers’ eyes, and potentially, a more calculated risk. </p>
<p>In jurisdictions like Jersey issuers of initial coin offerings have to jump through quite a few hoops. This includes using a regulated service provider which has to make an application to the Jersey companies registry for a consent. The service provider is among a number of <a href="https://www.gov.je/News/2017/Pages/InitialCoinOfferings.aspx">requirements</a> that provide checks in relation to anti-money laundering and countering the financing of terrorism.</p>
<h2>Current frameworks and global co-ordination</h2>
<p>But what could a coordinated global regulatory approach to cryptocurrencies look like?</p>
<p>Harmonisation via a code of conduct or voluntary signatory to a global compact could certainly stop token companies from cherry picking jurisdictions to their advantage. Not being signatories to the codes would place token companies outside the market. </p>
<p>A multilateral code of conduct or global convention or compact, such as those administered by the inter-governmental <a href="http://www.fatf-gafi.org/">Financial Action Task Force on Money Laundering</a>, or a United Nations co-ordinated approach could be model solutions. </p>
<p>Standard regulatory codes are particularly critical for some pockets of the investment community. For example, there has been a significant <a href="https://cointelegraph.com/news/institutional-investors-will-bet-big-on-cryptocurrencies-in-2018">surge</a> in the establishment of investment funds looking to invest in initial coin offerings on behalf of sophisticated investors. </p>
<p>Standard codes for institutional investors in the first instance, could help both regulation as well as innovation. Institutional investors, unlike retail investors, can withstand, and even benefit from, the upside of volatility over time. </p>
<p>For now, the poorly regulated speculative hoarding of cryptocurrencies reduces the potential of assets like this to become a public good. This ultimately affects the potential value of the tokens by amplifying volatility.</p>
<p>Paying attention to this is important for investors and regulators as well as issuers. There will also have to be a degree of self regulation by issuers as global regulators get up to speed.</p><img src="https://counter.theconversation.com/content/91168/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Desné Masie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While sovereign governments need to develop coherent frameworks to regulate cryptocurrency, permanent solutions will be found through international co-operation.Desné Masie, Visiting Researcher in International Political Economy, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/645962016-09-01T20:18:58Z2016-09-01T20:18:58ZExplainer: what are drug cryptomarkets?<figure><img src="https://images.theconversation.com/files/136044/original/image-20160831-826-r698pr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The average user is a male in his 20s.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-336271154/stock-photo-late-night-internet-addiction-or-working-late-man-using-laptop-computer-in-the-dark.html?src=79rRayu7g4WO29XqTRogEA-2-2">Brian A Jackson/Shutterstock</a></span></figcaption></figure><p>When we first discovered Silk Road, we could not believe it was real. People were buying illegal drugs anonymously through a global marketplace that resembled eBay or Amazon. It was a <a href="https://theconversation.com/the-internet-poses-unique-challenges-for-drug-prohibition-6262">brazen challenge</a> to the prohibition of drugs.</p>
<p>Silk Road was the first drug “cryptomarket”. Many similar marketplaces followed after the FBI took it down in 2013. </p>
<p>Today there are <a href="https://www.deepdotweb.com/2013/10/28/updated-llist-of-hidden-marketplaces-tor-i2p/">more than 20 cryptomarkets</a> selling illicit drugs, or more than 55 if single-vendor markets are included.</p>
<p>On Tuesday, the <a href="http://www.ijdp.org/">International Journal of Drug Policy</a> published the first special issue on drug cryptomarkets, which we guest-edited. <a href="http://www.ijdp.org/issue/S0955-3959%2816%29X0012-6">All papers are open-access</a> until 31 October. </p>
<h2>What are they and how do they work?</h2>
<p>Cryptomarkets host multiple sellers or “vendors”, provide participants with anonymity via their location on the hidden web and the use of <a href="https://theconversation.com/au/topics/cryptocurrency-8321">cryptocurrencies</a> for payment, and aggregate and display customer feedback ratings and comments.</p>
<p>The hidden web, also known as the <a href="https://theconversation.com/explainer-what-is-the-dark-web-46070">dark web</a>, can only be accessed using anonymising software that masks the internet user’s identity. Cryptocurrencies, the most famous of which is <a href="https://theconversation.com/what-is-bitcoin-it-is-not-that-complicated-if-you-ignore-the-geek-speak-46512">Bitcoin</a>, are digital, non-identity-carrying forms of cash. </p>
<p>Drugs are usually sent through regular postal services, with vendors typically using stealth techniques to increase the chances that the goods will arrive undetected. While some buyers have elaborate systems to evade detection (drop points, alter egos, and so on), <a href="https://www.reddit.com/r/DarkNetMarketsNoobs/wiki/step-by-step">how-to guides advise buyers</a> to use their real names and addresses to receive deliveries that are generally sent in standard business envelopes.</p>
<h2>What drugs are sold?</h2>
<p>The most popular drugs on cryptomarkets are remarkably consistent from market to market and across time.</p>
<p>Whether by counting the number of <a href="http://www.ijdp.org/article/S0955-3959%2816%2930226-2/fulltext">listings placed by vendors</a>, or by counting customer feedback ratings to <a href="http://www.ijdp.org/article/S0955-3959%2816%2930133-5/fulltext">estimate sales revenue</a>, the drugs that dominate these marketplaces are cannabis, ecstasy/MDMA, stimulants (such as amphetamine and cocaine), and pharmaceuticals (such as sedatives and performance enhancers). </p>
<p>Cryptomarkets appear so far to serve recreational and “party” drug users more than dependent or problem drug users. </p>
<h2>Are they better quality?</h2>
<p>Cryptomarket users describe the drugs bought there as <a href="http://www.ijdp.org/article/S0955-3959%2816%2900033-5/fulltext">better quality</a> and <a href="http://www.ijdp.org/article/S0955-3959%2816%2930132-3/fulltext">more likely to be pure</a>. </p>
<p>Through laboratory testing, <a href="http://energycontrol.org/international.html">Energy Control</a> has confirmed drugs such as cocaine were <a href="http://www.ijdp.org/article/S0955-3959%2816%2930130-X/fulltext">higher in purity and less likely to be cut</a> when obtained through cryptomarkets than through more traditional sources. </p>
<p>But it’s important to remember <a href="http://www.ijdp.org/article/S0955-3959(15)00350-3/fulltext">drug purity is not the same as drug quality</a>. Some people may praise drug combinations for their unique effects, while others may consider these “adulterated”. </p>
<p>In addition, cryptomarkets do not always sell pure or unadulterated products. Last year, a <a href="https://www.deepdotweb.com/2015/10/17/warning-fentanyl-being-sold-as-heroin/">warning was circulated</a> about drugs sold as heroin on cryptomarkets actually containing <a href="https://theconversation.com/fentanyl-and-other-synthetic-opioids-sold-as-counterfeits-in-deadly-new-trend-62814">fentanyl, a particularly potent opioid</a>. </p>
<h2>Who is buying them?</h2>
<p>Four papers in the special edition surveyed or interviewed people who obtained drugs from cryptomarkets (<a href="http://www.ijdp.org/article/S0955-3959(15)00350-3/fulltext">1</a>, <a href="http://www.ijdp.org/article/S0955-3959(16)30098-6/fulltext">2</a>, <a href="http://www.ijdp.org/article/S0955-3959(16)00033-5/fulltext">3</a>, <a href="http://www.ijdp.org/article/S0955-3959(15)00363-1/fulltext">4</a>). In all cases, the profile of participants was mainly male (at least 80%) and aged in the early- to mid-20s.</p>
<p>Most people who buy drugs from cryptomarkets had already established their drug-use careers. But <a href="http://www.ijdp.org/article/S0955-3959(16)30098-6/fulltext">a small number</a> used cryptomarkets to buy drugs for the first time or to reengage with drug use after long periods of abstinence. </p>
<h2>How do they affect broader drug markets?</h2>
<p>Cryptomarkets do not solely cater for the drug consumer. They also play a brokerage role at the wholesale level. <a href="http://www.ijdp.org/article/S0955-3959(16)30133-5/fulltext">One quarter of estimated revenue</a> was derived from wholesale transactions and <a href="http://www.ijdp.org/article/S0955-3959(16)30132-3/fulltext">one quarter of survey respondents</a> reported obtaining drugs through cryptomarkets to supply to others. </p>
<h2>Do cryptomarkets reduce drug market violence?</h2>
<p>According to <a href="https://www.globaldrugsurvey.com/">Global Drug Survey</a> data, cryptomarket customers report <a href="http://www.ijdp.org/article/S0955-3959(16)30132-3/fulltext">fewer incidents of violence</a> when purchasing from cryptomarkets than their preferred alternative source, usually friends or dealers they knew.</p>
<p>Conflict may <a href="http://www.ijdp.org/article/S0955-3959%2816%2930133-5/fulltext">manifest in other forms</a> including damage to reputation via “doxxing” (gaining access to personal information and threatening exposure), other forms of blackmail, theft, fraud and cyber-bullying. <a href="http://www.ijdp.org/article/S0955-3959%2815%2900363-1/fulltext">Vendors may scam buyers</a>, buyers may scam vendors, and through “exit scams”, administrators may close the entire marketplace and abscond with funds, in some cases millions of dollars.</p>
<p>While cryptomarkets enable a globalisation and flattening of drug trading, international trading is not an inevitable outcome. <a href="http://www.ijdp.org/article/S0955-3959(16)30172-4/fulltext">Willingness to ship internationally</a> was associated with smaller weight of packages, lower vendor feedback ratings, and lower perceived effectiveness of law enforcement in the country from which vendors shipped. </p>
<p>Vendors in countries with wealthier populations and higher drug expenditure were less willing to ship internationally. </p>
<h2>Beyond drugs</h2>
<p>Cryptomarkets are not only places to trade drugs and other commodities or services. Famously, Silk Road had a <a href="http://reason.com/blog/2013/08/20/silk-road-proprietor-says-libertarian-mi">libertarian mission</a> to support only minimal state intervention in the lives of citizens.</p>
<p>Libertarian discourses that permeated Silk Road <a href="http://www.ijdp.org/article/S0955-3959(16)30174-8/fulltext">sharply declined across the cryptomarket ecosystem following its closure</a>. New cryptomarkets emerged, perhaps built with different primary motives. </p>
<p>Despite this decline, cryptomarkets can still be understood as a form of political activism and resistance of dominant paradigms. These markets fall outside of state control, relying instead on informal governance and community self-regulation.</p>
<h2>What does the future hold for cryptomarkets?</h2>
<p>While trends indicate <a href="http://motherboard.vice.com/read/more-people-than-ever-say-they-get-their-drugs-on-the-dark-web">increased usage rates of drug cryptomarkets over time</a>, there may be limits to their growth. </p>
<p>One challenge could occur through <a href="http://fortune.com/2015/07/29/tor-vulnerability/">compromises to the technologies</a> on which cryptomarkets rely (such as Tor and Bitcoin). </p>
<p>Second, marketplace regulatory mechanisms could be compromised through the eroding of trust through undercover law-enforcement infiltration and exit scams. </p>
<p>Third, drug buyers may perceive greater risks purchasing through cryptomarkets than through conventional drug deals.</p>
<p>Regardless of these potential challenges, innovations are occurring rapidly, with <a href="https://blog.surfwatchlabs.com/2016/07/05/top-dark-web-markets-hansa-piracy-and-exit-scams/">some markets</a> designed to make it impossible for administrators to abscond with funds. </p>
<p>If it becomes easier to obtain cryptocurrencies and their use even more difficult to trace, we may see a dramatic upswing in the use of cryptomarkets by drug sellers and their drug-buying customers.</p><img src="https://counter.theconversation.com/content/64596/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Monica Barratt receives funding from the National Health and Medical Research Council. She is also Director of Research at Bluelight.org, a not-for-profit harm reduction website.</span></em></p><p class="fine-print"><em><span>Judith Aldridge has been funded in the UK from the Economic and Social Research Council, the innovation charity NESTA, and the Netherlands Ministry of Security and Justice.</span></em></p>Today, there are more than 20 cryptomarkets selling illicit drugs, or more than 55 if single-vendor markets are included.Monica Barratt, NHMRC Post-Doc Research Fellow, National Drug and Alcohol Research Centre, UNSW SydneyJudith Aldridge, Professor; Deputy Director of Research and Director of Postgraduate Research, School of Law, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/314652014-10-10T01:12:26Z2014-10-10T01:12:26ZDigital refugees flee via Silk Road to black markets in drugs<figure><img src="https://images.theconversation.com/files/60845/original/p972kwc7-1412560091.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Silk Road was once a river of commerce across continents. It lives again on the ‘dark net’, that part of the internet that operates on the encrypted TOR network.</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Recent media reports have once again put the public spotlight on cryptomarkets, the eBay-style websites operating on the encrypted dark net. They facilitate a vast and anonymous global trade in black market goods and services, particularly illicit drugs. </p>
<p>To date, only <a href="http://www.forbes.com/sites/andygreenberg/2014/02/12/five-men-arrested-in-dutch-crackdown-on-silk-road-copycat/">two cryptomarkets have been taken offline</a> by state authorities. The biggest success for law enforcement – the much-lauded FBI operation that shut down the infamous Silk Road – resulted in only a <a href="https://media.gractions.com/314A5A5A9ABBBBC5E3BD824CF47C46EF4B9D3A76/5f8d4168-c36a-4f78-b048-f5d48b18dc0a.pdf">short-term reduction</a> in cryptomarket trading activity. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/60844/original/c447yh8x-1412559714.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Alleged Silk Road founder Ross William Ulbricht was arrested in the Science Fiction section of the Glen Park Library on October 2, 2013. Silk Road 2.0 came online 35 days later, on November 6.</span>
<span class="attribution"><span class="source">Steve Rhodes/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Cryptomarkets are proving surprisingly resistant to attack by law enforcement.
Despite ongoing arrests, site closures, hacks, Bitcoin seizures and frauds, the online drugs business is not only persisting but is <a href="https://media.gractions.com/314A5A5A9ABBBBC5E3BD824CF47C46EF4B9D3A76/5f8d4168-c36a-4f78-b048-f5d48b18dc0a.pdf">estimated to be bigger than ever</a>. </p>
<p>An unprecedented number of illicit sites are in operation. Even the once-dominant Silk Road was recently <a href="http://www.digitalcitizensalliance.org/cac/alliance/content.aspx?page=Darknet">eclipsed in size</a> by another cryptomarket, the upstart Agora. </p>
<p>Cryptomarkets have shown a remarkable capacity to persist in the face of constant attacks by law enforcement and cybercriminals. It is worth reflecting on the factors that underpin the resilience of online illicit drug trading. </p>
<h2>Chasing clouds: the difficulty of cybercrime</h2>
<p>Technical and logistical complexity are undoubtedly the most prominent and commented upon factors that frustrate the efforts of law enforcement and contribute to the survivability of cryptomarkets. </p>
<p>Free yet incredibly powerful communications and encryption technologies conceal the identities, locations and financial transactions of those engaging in illicit transactions online. </p>
<p>Physical separation also complicates the work of investigators. Unlike conventional drug deals, illicit drugs ordered online are delivered through the post. This means that the vendor and consumer never meet face to face. </p>
<p>This also precludes the possibility for much of the violence associated with conventional drug dealing. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=512&fit=crop&dpr=1 600w, https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=512&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=512&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=643&fit=crop&dpr=1 754w, https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=643&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/60848/original/5rjw73z2-1412564588.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=643&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Traditional policing methods struggle to contain the contraband, drugs, laundered money and guns that stream through the internet.</span>
<span class="attribution"><span class="source">Scorpians and Centaurs/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Encryption and geographical separation make the policing of cryptomarkets extraordinarily difficult. Staples such as face-to-face “buy-bust” operations or raids on drug-dealing “hotspots” are impossible. </p>
<p>Gathering enough evidence to simply locate and identify online drug traders – let alone prove guilt in court beyond reasonable doubt – is a complex and resource-intensive process. </p>
<p>Another important, though less obvious factor that contributes to the resilience of online drug trading is the interdependence and mobility of users operating across multiple sites. </p>
<p>Drug vendors often post simultaneous listings on “seller pages” across different cryptomarkets. This allows them to continue trading if any individual site goes offline. </p>
<h2>Digital ‘refugees’ find a home</h2>
<p>Online consumers, on the other hand, appear to favour a single cryptomarket as a digital “home”. The strength of user affiliation towards individual cryptomarkets is demonstrated by the language employed to discuss movement between different sites. </p>
<p>When a cryptomarket is unexpectedly closed down, its users often describe themselves as “refugees” who are forced to “migrate” to different online spaces.
Interestingly, the discourse on online migration often follows similar refrains with regard to offline population movements. </p>
<blockquote>
<p>I migrated [a] couple weeks back … Lets make this a solid, safe and sounding community.
Agora user [18/5/2014]</p>
</blockquote>
<p>Digital migration strains the resources and infrastructure of destination cryptomarkets. As dealers struggle to meet increased demand, waiting times increase for their existing “native” customers. This creates potential for conflict between digital refugees and natives.</p>
<blockquote>
<p>There are very worrying signs of the times ahead if the new marketplace is to [sic] inundated with the refugees.
Silk Road 2.0 user [15/5/2014]</p>
<p>I have to say that I really really like Pandora but lately with all of the refugees, there has been many issues with downtime, timeouts and it has made it impossible for me to conduct business.
Pandora user [13/4/2014]</p>
</blockquote>
<p>Not all digital natives are hostile to newcomers, advocating instead support and tolerance towards refugees. This welcoming approach reflects solidarity between cryptomarket users in the face of ever-present and unpredictable external threats. </p>
<p>Intriguingly, the biggest blows to online drug trading have come not from law enforcement, but rather from fraudsters, hackers and other cybercriminals who populate the dark net. </p>
<p>Hacking attacks have breached the cyber-defences of numerous cryptomarkets, <a href="http://www.deepdotweb.com/2014/02/13/silk-road-2-hacked-bitcoins-stolen-unknown-amount/">looting millions of Bitcoins</a> left vulnerable in escrow accounts. </p>
<p>Several high profile cryptomarkets have also <a href="http://www.forbes.com/sites/andygreenberg/2013/12/01/silk-road-competitor-shuts-down-and-another-plans-to-go-offline-after-6-million-theft/">shut down unexpectedly</a> after site administrators absconded with their users’ funds. </p>
<p>The strength, resilience and interdependence of cryptomarket communities allow them to continue functioning in the face of this uncertainty; cryptomarket users never know if or when their own digital homes will come under assault from the forces of the state or from cybercriminals. </p>
<p>They are all too aware that they could be the next digital refugees in search of a new home on the dark net.</p><img src="https://counter.theconversation.com/content/31465/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research is drawn from Drugs on the Dark Net, recently published by Palgrave Macmillan.</span></em></p>Recent media reports have once again put the public spotlight on cryptomarkets, the eBay-style websites operating on the encrypted dark net. They facilitate a vast and anonymous global trade in black market…James Martin, Senior Lecturer in Criminology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.