Darknet Marketplace Bitcoin Transaction Volume Increases

2014 was quite an interesting year for Bitcoin, as the total number of transactions processed by BitPay were on the rise, compared to the year before.  It has come to our attention that that number of transactions processed by BitPay is just a fraction of the total network transactions, most of which took place through marketplaces on the darknet.

Shady Marketplaces Favour Bitcoin Payments

Even though this topic has been touched upon multiple times in the past, people still associate Bitcoin transactions with illegal activities.  To a certain extent, there is merit to that statement, as shady online marketplaces prefer Bitcoin payments for its alleged anonymity.  Bitcoin is not anonymous, it’s pseudonymous, and it is far from an ideal payment method when involved in illegal transactions of any kind.

That is not keeping uneducated people from using Bitcoin payments through darknet marketplaces though.  In fact, more Bitcoin payments were processed by darknet marketplaces compared to the total number processed by BitPay, the world’s leading Bitcoin payment processor.  An interesting trend to say the least.

Last week, a report was released by Carnegie Mellon University’s, Nicolas Christin and Kyle Soska.  The findings in this report are both astonishing and worrying at the same time, as they estimate the number of daily sales transactions through darknet marketplaces could have been as high as US$650,000 in 2014.

Comparing this to the statistics provided by BitPay earlier this year, a total transaction volume of US$158.8m in 2014 equals to US$450,000 on a daily basis.  As you can see, there is a US$200,000  discrepancy in these daily Bitcoin sales volumes, which indicate the virtual currency is being used far more often than people assume, despite it being for less-than-legal purposes in most cases.

“In the short four years since the development of the original Silk Road, total volumes have reached up to $650,000 daily (averaged over 30-day windows) and are generally stable around $300,000–$500,000 a day, far exceeding what had been previously reported.  In fact, 35 sellers were observed selling over $1,000,000 worth of product and the top 1% most successful vendors were responsible for 51.5% of all the volume transacted.”

These numbers don’t tell the whole story though, as darknet marketplace sellers have become far more cautious in their approach to offering wares for sale.  Most vendors will not sell items for a total value exceeding US$1,000 at a time, in the hopes of avoiding detection by government officials or attracting unwanted attention from other sellers.

Gambling Sites Remain The Most Popular Way To Spend BitcoinOnline Gambling

Despite all of the [valid?] negative focus on where Bitcoin transactions originate from, these numbers are only a small slice of the entire transaction volume taking place on the Bitcoin network.  The most popular way of spending Bitcoins remains online gambling, through Bitcoin-only websites, as well as established platforms that have started accepting virtual currency payments since 2013 and earlier.

Bitcoin provides a great alternative to traditional payment methods when it comes to online gambling and sports betting.  There are no credit card charges under a company name, or any gambling-related references on bank statements.  Plus, Bitcoin transactions are equally as fast as other payment options, without exposing sensitive payment information to a third party.

Source: Usenix

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