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The Battle Is On - Silk Road vs Government, and Bitcoin Anonymity

Written by Subject: Drugs and Medications
author: Vitalik Buterin
published: 2011-06-07 11:00:56 UTC

Recently, there has been a surge of media attention on the Silk Road market, which connects sellers and buyers of illegal drugs and uses Bitcoin as a means of payment. Naturally, part of this attention is attention from government, and the government has every incentive to try as hard as possible to bring Silk Road down. "Never before has a website so brazenly peddled illegal drugs online," a senator intent on cracking down on Silk Road said, and it is true. Silk Road's website looks like a legitimate, professionally done E-bay like service, and represents a move away from black markets in the shadows to blatant agorism - acting as if the government itself is illegitimate. Why is Silk Road so much more brazen than before? The simple reason is - because it can. Before, the weakest link in a drug transaction was payment - either a physical meeting (risky), a credit card or Paypal transfer (easily traced to physical identity) or a mail cash transfer (requires too much trust) was necessary, so participants in the drug economy had to rely on security through obscurity, keeping their websites and forums known to few, to avoid detection. Now, however, physical delivery is the only weak link, so although the security is not perfect the internet side of the transaction is, in theory, almost completely anonymous.

In order for anonymous transactions to be possible through Bitcoin, however, a mixing system must be used. There are two types of mixing systems: those secure against attack from people viewing the public transaction block, like Bitcoin Laundry and those secure against attack from the mixing system itself, like Open Transactions. The first work in something similar to the following:

Alice wants to transfer 10 BTC to Bob. Alice deposits 10 BTC into the system, and gets a 10 BTC balance within the system. Alice gives Bob her one-time account key. Bob withdraws 10 BTC, but the coins come not from Alice but from some other people who had deposited 10 BTC earlier. Thus, there is no chain from Alice to Bob in the public transaction log.

Bits and bob


1 Comments in Response to

Comment by Ed Price
Entered on:

It is obvious that government is NEVER illegitimate. Right from the smallest government, the family, to the greatest super-power, government is always legitimate. The difficult question is, which government is the government of power?

Certainly there is government among the drug lords. They have their rules, their laws if you will. If you are part of their group - part of their "nation" - you better obey their laws, if you know what's good for you. The only time you can disregard their laws is if you are stronger than they.

It is the same with any government. As long as a government can hold sway over its people by force or by propaganda, it is a powerful government. When it loses its strength and control because the people wake up, the government of the people and by the people and for the people begins to return.

The "few" who are using the U.S. Government to control the "many" in ways that were never intended, have been a GOVERNMENT over even the U.S. Super-power. If they can retain their power over the U.S. Government and the people, if they can conquer even Bitcoin, then they will remain the GOVERNMENT. Otherwise, they may fall away and be gone forever.