The deepest, darkest corners of the Internet were invaded today by federal agents who raided Silk Road, an online drug market that is alleged to support the selling of cocaine and heroin. Agents swooped in because of an alleged conspiracy by the site’s suspected owner, Ross William Ulbricht, to have a fellow stakeholder killed because he had threatened to blow the cover of their highly secretive operation. In fact, it is alleged that Ulbricht, whose online name is Dread Pirate Roberts, paid a tremendous sum of money in an electronic currency called bitcoin to arrange the hit on his adversary.
This story has it all: murder plots, drug sales, nefarious nerds using electronic currency, and some really cool encryption technology that aims to keep this Internet underworld hidden from traffic sniffers and search engines. It has all the makings of a Hollywood thriller, except that a lot of the technology that underpins Silk Road’s operations isn’t easy to explain to those distracted by popcorn and Skittles in a darkened movie theater.
First, Silk Road kept itself hidden from law enforcement for so long because it uses Tor, a type of tool called a network anonymizer. I wrote about Tor and how it works a few weeks ago. Basically, Tor passes all Internet traffic through a hidden and complicated web of intermediate nodes, encrypting the traffic at each stage. The data takes a Byzantine path from its source to its ultimate destination, and this has the effect of hiding who the original sender was. To get to Silk Road required using a Tor-compliant browser with a special, secret set of acceptable Tor nodes that would route your requests to and from the Silk Road infrastructure. Tor thus made it quite difficult for federal agents to track Silk Road traffic and to identify its customers.
Second, the technology that made Silk Road profitable is an electronic currency called bitcoins. Bitcoins originated as a currency for peer-to-peer exchanges of products and services on the Internet. Creating bitcoins is referred to as “mining” them and requires using computers to perform highly complicated cryptographic operations. The payment for that effort are bitcoins that can be traded online as money. At one point, one bitcoin was worth US $145. It is estimated that Silk Road was processing about $1 billion in sales in bitcoins per month. After the feds seized $1.2 billion in bitcoins today, the value of bitcoins fell precipitously, but their value has since stabilized. How bitcoins actually work will be the subject of a future blog post. For now, I think it’s worth marveling at how cryptography has been used to create an underground currency and an accompany economy of significant size.
Clearly, this was an exciting day of Internet intrigue, much of which was fueled by Galois Field arithmetic, cryptographic hashes, and discrete logarithms. It’s like 007 where the numbers actually mean something. Mathematical madness!