Silicon Valley's venture capital firms hunt for Bitcoin's killer app with the intensity of prospectors searching for gold. These investors believe some breakthrough use case will drive Bitcoin into th
Silicon Valley's venture capital firms hunt for Bitcoin's killer app with the intensity of prospectors searching for gold. These investors believe some breakthrough use case will drive Bitcoin into the mainstream. A smaller group of observers has understood the answer for years. Bitcoin's killer app existed since 2011.
Bitcoin's first large influx of ordinary users came for a single reason: they wanted to buy drugs. Silk Road, the marketplace hidden on Tor, brought non-technical users into Bitcoin in significant numbers. These newcomers showed no interest in understanding the cryptography. They had no concern with the technical solution to the Byzantine Generals' Problem. They wanted to purchase marijuana and ecstasy without banks blocking the transaction.
Adrian Chen published an article on Gawker that introduced Silk Road to a broader audience on June 1, 2011. Silk Road itself had only been operational for a few months, but growth was accelerating. The article changed things. After Chen's piece reached readers, traffic to Silk Road exploded. Bitcoin's price jumped from below $9 to near $30 over the next week and a half.
The correlation was unmistakable. People who discovered Bitcoin during this period wanted access to illegal drugs. Few cared about the technology itself.
The relationship between black markets and Bitcoin persists and has strengthened. Bitcoin researcher Tim Swanson published a report in April that examined the state of underground and semi-legal activity within Bitcoin. He pulled data from Coinalytics to reach his conclusions. Swanson found that "[Darknet marketplaces] appear to still account for a large supply and demand of [bitcoin] as of April 2015." The data he presented offered a clear picture: ransomware, gambling, darknet markets, and other black or grey market activities make up a large portion of Bitcoin transactions overall. One image from Swanson's report showed a comparison between addresses known to be associated with BitPay and addresses used by Evolution, a darknet market that had operated for some time.
Bitcoin community members and entrepreneurs often look away from Bitcoin's origins in illicit commerce. Doing so carries real consequences. The black market activities that first powered Bitcoin's adoption continue to expand. Justus Ranvier has traced this growth. Bitcoin becomes relevant when someone needs a transaction that traditional systems would block. When users encounter such transactions, they turn to Bitcoin without much concern about whether they understand the technical underpinnings.
The money flowing from venture investors concentrates on building exchanges and wallets. The applications offering the most genuine utility tend to operate in legal gray areas. OpenBazaar could introduce a scale of frictionless commerce previously impossible on the internet. Abra gives ordinary people a mechanism to move US dollars across borders in ways the traditional system cannot intercept or block. Most regular users will turn to Bitcoin only when it becomes the logical tool for their purpose. Based on where things stand today, Bitcoin becomes that logical tool when someone wants to send money in a way financial authorities would prevent.
