This is one article in a collection of 52 articles published weekly throughout 2023 on the basics of Bitcoin. The series is intended for people unfamiliar with Bitcoin or people wishing to enhance their understanding of the fundamentals that underpin the technology. Please contact us, if you have any questions or comments.
As we have previously discussed, the first Bitcoin block was mined in January 2009. Through Bitcoin’s first several years of existence there was a credible argument that Bitcoin had no real purpose and solely served as an untested utopian form of currency. That changed in February 2011 when Dread Pirate Roberts, a pseudonymous person, put the Silk Road online.
The Silk Road was a marketplace where users could buy and sell services of any kind with complete anonymity, or so the users thought. The website leveraged the TOR network which was developed by the United States government. The TOR network allowed users operating within the network to communicate anonymously by concealing the true IP addresses of computers within the network. The Silk Road quickly gained popularity among those wishing to participate in the illegal drug marketplace both on the buyer and seller side. The currency the Silk Road used was bitcoin. By transacting in Bitcoin users were able to keep their identities masked from authorities.
In June 2011 the website Gawker published an article discussing the Silk Road marketplace. In part, this led to more people learning about the website and the Silk Road’s business began to boom. In fact, throughout its existence, sales from the Silk Road totaled 9,519,664 bitcoin which amounted to total revenue equivalent to $1.2 billion. The website took a commission for its service of generating the sales which totaled around $80 million, all paid in bitcoin, for Dread Pirate Roberts and his staff.
The Silk Road was the first concrete evidence that the Bitcoin network was in fact permissionless. As the website gained popularity there was an outcry from politicians to shut it down. Senator Chuck Schumer held a press conference to call for the closure of the Silk Road. Schumer stated “Literally, it (the Silk Road) allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identities through a program that makes them virtually untraceable. It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by lightyears.” Schumer was aghast that the Silk Road even had a feature for users to rate the delivery of the product as well as the underlying quality of the drugs shipped!
The Silk Road was clearly operating a criminal enterprise and, as Schumer pointed out in the quote above, this was being done in clear view for anyone to participate! The Silk Road is a perfect example of Bitcoin being permissionless. For something to be truly permissionless there must be use cases with which an individual ardently disagrees but exist anyway to fulfill the definition of permissionless. The Silk Road was the first true use case for Bitcoin and many people view it as an ugly chapter in the revolutionary technology’s history. However, when something is truly permissionless that is an inevitable chapter which will be repeated over and over as people use the permissionless feature to fulfill their end goals.
