An Introduction to the Darknet and Bitcoin
By Jinnie Chua, Assistant Editor of In Public Safety
The Darknet is an encrypted network where many criminals in today’s digital age are doing business. All manner of illegal things and services are available for purchase on the Darknet. There are individuals engaging in drug dealing, human trafficking, terrorism, hit for hire, tax evasion and much more.
To keep up with the growing rate of crime on the Darknet, it’s important for officers to have a solid understanding of how it works. Earlier this year, as part of American Military University’s Law Enforcement Webinar Series, Jim Deater gave a presentation on the basic knowledge officers need to have about the Darknet.
”In every corner of the world, wherever there’s data service, the Darknet is probably being used,” said Deater. “The more you understand and the more you know, the better off you are to face it.”
Beyond the Surface Web
Many of us use the internet every day, but almost all of the websites we use – such as Google, Amazon, and Facebook – only make up the visible or surface web. These sites are accessible with any browser and indexed by regular search engines. Much like an iceberg, the surface web makes up only four percent of the world wide web. The other 96 percent of content is considered the Deep Web and the Dark Web.
The Deep Web is home to things like academic databases, medical records, legal documents, and some scientific and government reports. These are sites not indexed by search engines but still accessible by any browser if you have the URL. The Dark Web is a subset of the Deep Web and makes up less than one percent of the world wide web.
The Dark Web consists of the sites that live on the Darknet. These sites are inaccessible via regular browsers and users must first download a specific browser with specific protocols, such as Tor (The Onion Router). Tor utilizes multiple layers of encryption to conceal a user’s identity. The anonymity of the Dark Web can provide protection for individuals such as journalists, dissidents and whistleblowers, but also shields illegal activity.
“Just about anything you can imagine that can be sold or services that can be rendered that aren’t of the legal sort are there,” said Deater.
Just a few months ago, Deater’s son who is a state trooper had his personal information, including his name, address, and social security number, hacked from his high school database and put up for sale on the Dark Web. “We were able to get in and find it, but there’s not a whole lot you can do to remove it,” said Deater. “We were able to take screenshots and provide the credit bureau with that information, but it shows that no one is immune.”
Digital Currencies and Bitcoin
There are a variety of marketplaces selling different things on the Darknet, but dollars, euros and other regular currencies won’t get you far. Instead, users can convert their money into digital currencies through a currency exchange platform such as Coinbase. Similar to Paypal, anyone can simply create an account on Coinbase and connect their bank account.
The most widely used form of digital currency is bitcoin. A form of cryptocurrency, bitcoin is created and held electronically. There’s a finite amount of bitcoin and demand is what drives the value up and down. Although it constantly changes, one bitcoin is currently equivalent to $2,370 (USD).
Although it’s commonly associated with the black market, bitcoin wasn’t created to aid criminal activity and is growing in popularity among mainstream retailers. Large companies such as Overstock.com and several high-end car manufacturers (e.g. Lamborghini) were some of the first to accept bitcoin as payment. Since then, many other mainstream retailers across the world have followed suit.
Bitcoin is appealing because of several characteristics:
- Easy – It’s easy to send bitcoin from any electronic device to anyone, anywhere in the world, at any time.
- Secure – Transactions are verified with the same state-of-the-art encryption used in banking, military and government applications.
- Open – Bitcoin is fully decentralized. The most popular client is maintained by a community of open-source developers.
- Fair – Using the bitcoin network is free, although there is a voluntary fee you can add to speed up transaction processing.
“The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees,” said Deater. “Basically the people control the money.”
In order to be verified by the network of miners, all bitcoin transactions are visible to the public and any member of the public can trace the transfer of bitcoins from one “bitwallet” to another. However, the owner of a bitwallet has the option to be anonymous, and this is what makes it attractive for conducting illegal activity. Even in the corporate world, it’s common for individuals who have embezzled money to convert that money into bitcoin to make it harder to trace.
“In my experience of over 27 years working in law enforcement, with every legitimate thing that has been created, bad guys will figure out ways to exploit it,” said Deater. “We launder U.S. dollars, we launder euros – bitcoin is no different.”
The Law Enforcement Response
To keep up with the growth of the Darknet, law enforcement officials must invest resources towards investigating the criminal activity that occurs there. While it is possible for officers to monitor a user’s activity on the Darknet, it remains a very difficult task for two reasons. Firstly, it requires the right interception equipment and software, which can be extremely expensive. Secondly, it must be a lawful interception, meaning a court order is required and these can be very hard to obtain.
Deater encourages law enforcement to not overlook what can be done. For example, you can post your own ads to invite criminals to engage with you. “There are all kinds of ways to flip the Darknet around on the bad guys,” he said.
However, Deater warns that if you enter the Darknet unprepared and without the proper firewalls, there’s a high possibility that experienced users will be able to discover and target you. This includes accessing sensitive information in your computer’s history or placing malicious code in your system, so it’s important to ensure you understand what you’re up against.
Use of the Darknet is not slowing down. Whether in the corporate or law enforcement world, it is likely that you or someone you know will at some point encounter illegal activity on the Darknet. “You might not have been hit with it yet, but I can guarantee that day is coming in short order,” said Deater.