How Has Bitcoin Helped In The Growth Of The Dark Web Activities?

The dark web activities have been massively influenced by the emergence and growth of Bitcoin and other cryptocurrencies and altcoins. With these, there has been a massive growth in the variations of the dark web activities, including the positive and the negative ones. This article is all about the cryptocurrency Bitcoin and how it has helped in the growth of dark web activities.

The Use Of Bitcoin In Dark Web

The dark web is the hidden segment of the regular internet that runs its transactions using Bitcoin (BTC). Bitcoin is a digital currency or cryptocurrency that is widely used for its quasi-anonymous characteristics. The dark web seems to be a perfect fit for utilizing the digital coin over there. The illegal nature of the darknet, along with the anonymity offered by bitcoin, together gives a fantastic environment to the dark net.

Since the transactions utilizing Bitcoin cannot be traced (ideally), it becomes easier for the darknet users to use them in the various illicit activities that they perform in the darknet. Whatever you see in the darknet being sold, such as weapons, drugs, guns, counterfeit products and more, are all sold using bitcoin. Moreover, with the inclusion of other similar anonymity-blended cryptocurrencies, they are fast accepted alongside Bitcoin. One of the significant examples is the Monero (XMR). Additionally, crypto wallets and escrow services are also widely used on the dark web.

Is Bitcoin Completely Secure?

The bitcoin network is completely secured. However, there are instances that state Bitcoin being stolen. Now, that is a different story altogether.

It is pretty challenging to hack the bitcoin network as it is underpinned by blockchain technology, which is a lot difficult to hack. In blockchain technology, the data is never stored in a central server. Instead, they are stored in a massive network of computers that continuously checks and verifies if the records are accurate. This is what makes it quite a lot harder for a hacker to hack the network. For that, he has to hack a vast number of servers and acquire information.

For example, if an evil hacker tries to get into a single room with a single vault, it would be the most straightforward task for him. However, if the same hacker tries to gather stuff (say information) from multiple vaults from multiple rooms (say one room has over 50 vaults) and each vault contains bits of information of a single locker in a single room. It is massively challenging for the hacker to get into the data. This does not mean that it is impossible, but the hacker has to face a lot of hardships to get to the exact information.

Bitcoins are stored in wallets, and they are traded via digital currency exchanges. This makes it not difficult for the users to access each other’s wallets and steal their digital coins. To make this incidence a lot lesser, two-factor authentication (2-FA) has been introduced as a security measure. In this case, also, the hackers can access the non-crypto related personal information with which they may be able to infiltrate the wallets and steal the bitcoins. This provides the reason for all Bitcoin investors to take adequate precautions for protecting their coins.

What Is The Current Situation Of Bitcoin?

The combined value of the most prominent cryptocurrency, Bitcoin, transacted on the darknet, is up by 65% over the year. A report from the Bitcoin tech company, Bitfury had stated that the dark web activity of Bitcoin has shot to 340% over three years.

The Crystal Blockchain analytics platform of Bitfury had scraped off data in the first quarter of 2019 (Q1). The report stated that the darknet vendors had scoured a total of $240 million in Bitcoin (BTC) as compared to the $87 million in 2017’s first quarter. In 2020, the figure had massively changed to $384 million. Despite the regular routes by law enforcement, the dark web markets are still in the process of gobbling up coins. However, the market users’ appetite for Bitcoin has slightly subsided.

In quarter one of 2020, the dark web vendors had received 47,000 Bitcoin, which is calculated to be a 25% reduction from the similar bitcoin inflows at the same time last year. Now the buyers are moving to other cryptocurrencies such as the altcoins — Monero (XMR) and Litecoin (LTE). This is perhaps owing to avoid escaping the exact blockchain analytics purview that Bitfury has been running to date.

“These drops in bitcoin received and sent could be due to the growing popularity of altcoin usage by darknet entities,” the report reads.

Even with this, the total value transacted in Bitcoin is continuously rising as the price of Bitcoin is taking a leap.

The report provided by Bitfury primarily focuses on Bitcoin, although Ethereum (with all ERC-20 and ERC-721 tokens), Bitcoin Cash (BCH), Litecoin (LTE) and Tether seems to be in the list excluding Monero. The report also contains no traces of altcoin usage. It appears that the future report will definitely include the altcoins as well. Even though the famous cryptocurrency Bitcoin has lost some shares to altcoins, it remains a predominant currency on the dark web.

Bitfury’s data mentioned that the majority of the people are sending BTC directly from the exchanges having no KYC requirements during the checkout. In 2020, 45% of BTC sent to the darknet has been acquired from a KYC-free exchange account. This is mainly down 30% from the year 2017. Interestingly, the KYC exchanges’ payments have massively changed from 14% to 29% in the same time frame. Just 1% of the inflows have been retrieved from the mixing services in 2020.

The funds sent between the dark web marketplaces are also on the rise. In this context, the report says that the graph indicates the dark net users are attempting to conceal their Bitcoin flow within the dark web spectrum. They are also trying to avoid the risk of having their dark web activities uncovered by the exchanges that implemented FATF requirements. However, most of the deep web markets possess in-built wallets for their users’ accounts.

As soon as the deep web vendors receive their Bitcoin, they are most likely to send the Bitcoins to a tumbling service or to a different market. In the first quarter of 2020, the cryptocurrency mixers or the Bitcoin tumblers gobbled up 20% of the darknet market outflows. Only 16% of the outflows had been recycled to another marketplace. In the Q1 of 2017, 46% of the outflow had been sent to the no-KYC exchanges, which earlier was 76%.

Bitfury had furthermore noted that the absolute value of the Bitcoin sent and received from the Know Your Customer (KYC) exchanges had doubled from $36 million in 2019’s Q1 to $73 million in 2020’s Q1. On the flip side, the dark web activity based on mixers and tumblers has experienced a surge. This solely means the users are obscuring a coin’s trace on the blockchain. In the Q1 of 2020, $97 million valued Bitcoin had been sent to the mixers. This is a drastic increase from the low millions in the quarterly dark web activities since 2017.

Bitfury’s Crystal has already been able to track the most sophisticated type of mixing software, CoinJoin, under specific conditions. This being said, the most private methods would then be Bitcoin (properly CoinJoined) or monero privacy and even payments in other altcoins.

Did Increased Bitcoin Price Lead To Increased Crypto Crimes?

Well, yes, it is. 2020 has seen the highest record for hidden and unreported crimes. In total, 80% of the cryptocurrency-related fraud and black hat hacking cases had never been reported to law enforcement agencies. Alongside, 50% of the claims have also not been registered.

The typical fraud schemes that had been noticed throughout the year 2020 include fake ICOs, fake exchanges, fake wallets and applications, a whole lot of investment scams, market manipulations, pump and dumps, Ponzi schemes, exit scams, sim swapping, cryptojacking, crypto-malware, vanity address scam generators, phishing, honeypot smart contracts and trust trading. What we can quickly notice is that the bitcoin value is continuously growing with each quarter of the year, along with the rising number of crypto-related crimes and their variations.