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Silk Road bitcoin drugs ross ulbricht

“People should have the right to buy and sell whatever they wanted so long as they weren’t hurting anyone else.”

That was Ross Ulbricht’s vision when he launched the Silk Road, but it soon turned from a utopian ideal to the world’s most notorious dark-web marketplace. What emerged was an “anonymous amazon.com” attracting drug dealers across the planet, all transacting in bitcoin.

It drew mainstream media attention to bitcoin and cryptocurrency, but ultimately the website was shut down, leading to the arrest and imprisonment of Ross Ulbricht, a 34-year-old now serving a double life sentence plus 40 years without parole.

But this story is not straightforward. It’s a story of drugs, aliases, corruption, conspiracy, and the dark web.

Outlined below are the many twists and turns on the road to justice (or injustice). Rebecca Campbell reports:

The Beginnings of Silk Road

Launched in February 2011, the Silk Road website, created by American Ross Ulbricht, was envisioned to be a “free-market economic experiment” that focused on user anonymity. 

Using two key pieces of technology, bitcoin and Tor – a network of computers that makes it impossible to trace by routing internet traffic through servers by anonymizing IP addresses, Ulbricht believed that “people should have the right to buy and sell whatever they wanted so long as they weren’t hurting anyone else.”

ross ulbricht silk road
Ross Ulbricht: the founder of Silk Road

However, while counterfeits, weapons, pedophilia and anything that could be used to defraud or harm others were prohibited, what could be listed for sale was left open to interpretation. 

As time went on many vendors began to realize that Silk Road was a safe haven for the sale of drugs. Of course, while Ulbricht may have envisioned an open market platform driven by the community, it wasn’t long before it started to gain the attention of the media.

“The Underground Website Where You Can Buy Any Drug Imaginable”

In June 2011, shortly after it was launched, an article was published on Gawker. Titled The Underground Website Where You Can Buy Any Drug Imaginable, the exclusive report detailed how Silk Road enabled people to buy drugs of any kind – cannabis, weed, hash, ecstasy – and that it was like Amazon, “if Amazon sold mind-altering chemicals.” 

Silk Road marketplace screenshot
A screen capture of the Silk Road website before it was shut down

At the time, however, while many embraced Silk Road and what it stood for, others believed that it would tarnish the emerging cryptocurrency, bitcoin, attracting the attention of the federal authorities.

Unsurprisingly, it wasn’t long before an American politician called for federal authorities to shut down Silk Road. Not long after the Gawker article was published, Senator Charles Schumer called for the Drug Enforcement Agency (DEA) and the Department of Justice to shut the site down now that it had become public knowledge.

At the time, Schumer said in a report to NBC New York: “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.”

He also added that “I’d bet my bottom dollar in this instance [an investigation] is underway.”

Who is Dread Pirate Roberts?

The person operating the site did so under the pseudonym Dread Pirate Roberts, named after a character in the 1973 novel The Princess Bride. 

The name is often used to refer to Ross Ulbricht, but that’s not entirely accurate. There’s good evidence to suggest that Ulbricht handed over the site to someone else, and that person is the Dread Pirate Roberts.

Ross Ulbricht
Ross Ulbricht: Ulbricht reportedly sold the Silk Road website to someone else, the infamous Dread Pirate Roberts

Ulbricht Reportedly Sells Silk Road

With the website growing, Ulbricht initially turned to Richard Bates, a college friend, who had studied computer science and was working for PayPal and eBay. According to a court transcript filed in 2015, Bates offered help with the site but distanced himself over concerns with law enforcement.

Over time, Ulbricht turned to an anonymous person he met through the site who eventually took control of it. 

This person then operated under the pseudonym Dread Pirate Roberts (DPR).

In a 2013 Q&A interview with Forbes, Dread Pirate Roberts confirmed that he was not the original owner, confirming that Ross Ulbricht had sold the site.

DPR spoke about how the torch was passed to him from Ulbricht and that Ulbricht was fairly compensated for the site. The interviewee mentioned that he had discovered a major vulnerability in Silk Road and that while Ulbricht ignored him at first, DPR eventually got his trust.

Back in 2011, Ulbricht is reported to have told Bates that he had sold the website to someone and that it was no longer in his hands to shut down.

In was in 2012, that Dread Pirate Roberts first announced his screen name on the site, which, would become the main point of interest for the authorities.

If Not Ulbricht, Who Else Could Be Dread Pirate Roberts?

French-born Mark Karpeles, former-owner of the now-defunct Mt. Gox Bitcoin exchange, was, at one time, a suspect in connection with Silk Road.

Karpeles ran a DNS registrar and a web hosting company during the time the Silk Road launched, and it was this connection that aroused suspicion.

Investigator Jared Der-Yeghiayan, who went undercover to help bring down Silk Road, discovered that www.silkroadmarket.org was registered to a domain name server (DNS) called XTA.net. 

He then discovered that this DNS was registered with Mutum Sigillum, a company owned and operated by Mark Karpeles. 

Mark Karpeles suspect in Silk Road case
Mark Karpeles: at one time, a suspect in the Silk Road case

In a report dated 6th July 2012, Der-Yeghiayan claimed: 

“I believe since KARPELES has used his [email addresses redacted] to register with a few internet companies that he may have received record of registering, paying for or owning certain aspects of the www.silkroadmarket.org website.”

Mark Karpeles has denied the accusation and the judge in the investigation asked the jury to ignore it because it was based on Der-Yeghiayan “beliefs” rather than hard evidence.

Investigators Went “Rogue”

The case was supposed to be kept as quiet as possible, in order to make sure suspects were not aware of the investigation.

However, information was ultimately leaked to two Baltimore agents – DEA agent Carl Mark Force and Secret Service agent Shaun Bridges.

Bridges then went “rogue,” according to court documents.

As part of their rogue investigation, Bridges and Force hijacked a number of Silk Road accounts and arrested one Silk Road administrator named Curtis Green. At the same time, around $350,000 disappeared from Silk Road vendors, tracing back to Green’s account.

Dread Pirate Roberts heard about the missing money, and turned to another Silk Road colleague, “Nob.” But “Nob” had also been hijacked by Carl Force.

It’s alleged that DPR asked Nob to track Green down and retrieve the stolen money. Green was still in custody at this time, but Force played along, and even pretended to kill him.

In the end, the rogue pair were discovered. Force was sentenced to 6 ½ years. Bridges was initially sentenced to nearly six years in prison; however, in 2017 he was sentenced to an additional two years after admitting to a new crime.

Ross Ulbricht on trial for Silk Road case
Ross Ulbricht in courtroom sketch during Silk Road trial. Credit: STRINGER/Reuters

Conspiracy?

As Der-Yeghiayan continued to pursue Karpeles, who he believed to be Dread Pirate Roberts, another Silk Road account by the name “notwonderful” was reportedly feeding DPR inside information about the investigation.

According to the defense, this insider information gave Dread Pirate Roberts enough time to get get a plan in place that “incriminated Mr. Ulbricht falsely.”

In other words, they claim Ross Ulbricht was set up by the new Dread Pirate Roberts.

Connecting Ross Ulbricht to Silk Road…

It wasn’t long before the government then apprehended Ulbricht. Yet, it had to provide an explanation as to why Ross was DPR. 

An IRS agent, Gary Alford, found a forum post on bitcointalk.org by a user named Altoid. It was posted in January 2011 and read:

“Has anyone seen Silk Road yet? It’s kind of like an anonymous Amazon.com.”

Alford then tracked everything written by Altoid and eventually found a post where he revealed an email address. Altoid asked for programming advice and gave the address: [email protected]

ross ulbricht altoid post on bitcointalk forum

Of course, with Ulbricht’s email and a plausible explanation linking him to Silk Road, it was only a matter of time before the authorities found him.

The Arrest of Ross Ulbricht – October 2013

Ross Ulbricht was arrested in a San Francisco library while logged in to Silk Road as the Dread Pirate Roberts admin. He was unknowingly talking to an undercover agent at the time.

Why was Ulbricht logged in as DPR even though he had allegedly sold Silk Road and moved on? The defense claims that someone convinced him to briefly get involved again. DPR then gave him access to all accounts, files, software, and records. 

When he was arrested on 1st October 2013, all this information was on his laptop, including a bitcoin wallet containing 144,000 bitcoins.

Dread Pirate Roberts Logs On Again, While Ulbricht is Locked Up…

Notably, at the time of Ulbricht’s solitary confinement, it was reported that someone accessed DPR’s Silk Road account before it was eventually taken down. 

According to Motherboard, “the logical conclusion is that someone else had access to the account that was said to belong to the mastermind of the massive Dark Web drug bazaar.”

It confirmed what many believed: Ross Ulbricht might have started Silk Road, but he wasn’t the only one operating as Dread Pirate Roberts.

Ulbricht Appears in Court

Ross’s first courtroom appearance was in front of Judge Kevin Fox, who ultimately denied his Eighth Amendment right to bail. On the 4th February 2014, Ulbricht was indicted. In another case in front of Judge Katherine Forrest, who had been recommended to the bench by Schumer, she said in her ruling that Ulbricht was acting as a “sort of godfather.”

Ross Ulbricht in court Silk Road trial
Ross Ulbricht stands trial. Credit: Wall Street Journal

At one stage during the trials, Ulbricht’s defense lawyer was to call Andreas Antonopoulos, a best-selling author and someone with the technical expertise to explain complex matters, and Steven Bellovin, Computer Science professor at Columbia University and leading expert on computer networking and internet security. However, the court precluded these two experts.

Yet, Judge Forrest was more flexible with the prosecuting side.

Two Life Sentences, with No Possibility of Bail

Before his sentencing, one hundred people who knew Ulbricht wrote to Forrest asking for her to apply the shortest sentence. In a court transcript, it said: “The district court was confused by the letters which showed Mr. Ulbricht to be a different man than the one [Forrest] thought him to be.”

Ultimately, though, Forrest gave Ulbricht two life sentences plus 40 years in prison without the possibility of parole for non-violent charges. In this case, it was not in her power to give him the death penalty.

Following the verdict, even Curtis Green tweeted: “Ross Ulbricht got a raw deal. There is so much more to the Silk Road story than people know, and I can’t yet talk about. I don’t believe Ross is dangerous or that it’s in his character to order a hit on anyone. He should never have gotten that horrible sentence.”

Seven weeks after Ulbricht’s trial, Force and Bridges were indicted for corruption. Compared to Ulbricht’s sentence, though, they got off lightly. 

An appeal was filed to a Second Circuit panel consisting of Judges Jon Newman, Gerard Lynch, and Christopher Droney in 2016. However, the Second Circuit judges decided in 2017 to deny Ulbricht’s appeal.

Last December, a petition was filed to the Supreme Court by Williams and Connolly LLP, led by Kannon Shanmugam, who was representing Ulbricht. It was arguing questions on constitutional law, focusing on the impact of the Fourth and Sixth Amendments. The petition was supported by 21 groups. On 28th June 2018, the petition was denied.

The Fight Continues

Silk Road remains a complicated story that has more twists and turns in it than a cheap garden hose. 

Corruption, deception, and intrigue are wrapped up in this case. Yet, despite the truth coming out about several of those involved in the investigation, the sentence against Ulbricht still stands.

After five years in prison and unable to communicate with the outside world, Ulbricht is speaking through his family at the @RealRossU Twitter account that was set up in June 2018. The first tweet went out in July. There is also the FreeRoss.org website that has been set up by “friends, family and supporters who are working to free Ross Ulbricht from a barbaric, double life sentence for all non-violent charges.”

A petition, which was launched by his mum, Lyn Ulbricht, has received over 100,000 signatures. The goal is to hit 150,000 as his family seeks clemency for him.

His next hope of clemency lies with the President of the United States.

Learned something new in this article? Subscribe to the Block Explorer newsletter to get exclusive crypto insights before they appear on the site.

cryptocurrency communities

If it weren’t for strong cryptocurrency communities, we wouldn’t be where we are today.

There would be no debates on whether Bitcoin is better than Bitcoin Cash. Telegram wouldn’t have raised  $1.7 billion in its token sale, EOS probably still wouldn’t have launched its mainnet, and, well, it’s hard to tell for sure if crypto would even exist as we know it.

Block Explorer identified the strongest crypto communities and figured out why they were so important for the blockchain universe.  

The Strongest Crypto Community #1:  Bitcoin 

Bitcoin began as a small community of cryptography geeks and cypherpunks. They shared ideas on obscure forums and mailing lists years before it gained mainstream attention.

Satoshi Nakamoto was the one who created and envisioned bitcoin, but it gained traction because a dedicated community worked together on the development. (Note: you can read the very first community thread about bitcoin here)

In the ten years since, the bitcoin community has grown across the world. Bitcoin has suffered some huge price drops and dips in popularity, but every time, it comes back stronger. After bitcoin reached almost $1,200 in December 2013, it went down to $400 in just three months and did not grow back till the beginning of 2017.

But even in spite of all the roller coasters and bad publicity, bitcoin is still alive and thriving due to the large community of believers around. At the moment of writing, the Bitcoin Core client is the product of almost 19,000 unique code contributions from almost 600 individual developers. 

Its public Github repository also tracks so-called “forks” of the code, the copies that can be modified for any specific purpose. To this date, the developers have forked Bitcoin Core reference client over 21,000 times. That’s a massive amount of people involved. 

And let’s not forget the number of bitcoin wallets created so far – more than 30 million people have registered Blockchain wallets, and more than 20 million created Coinbase accounts. 

No, bitcoin most likely won’t be disappearing any time soon.

The Strongest Crypto Community #2:  Ethereum 

purple ethereum logo on blue background

If it wasn’t for the strong community, we can’t even imagine where Ethereum would be right now. 

Let’s recap some disasters. Remember 2016 and the imperfections of the DAO (Decentralized Autonomous Organization)? At that time more than $50 million worth of ether was stolen from the infamous DAO and transferred into its smaller version called “child DAO.”

DAO explained: A DAO is an organization or business without a central authority. Instead, it makes decisions using digital “smart contracts” and voting mechanisms on the Ethereum blockchain.

Forking the blockchain was the only way to fix it. That meant a change to Ethereum’s code that split the currency into two versions. Users had to choose between by either updating their software or not. 

It was risky. However, the fork was successful with 85% of users moving over to the new version.

Want to know more about this hack? Read our beginner’s guide to Ethereum.

What is Ethereum

 

 

 

 

 

 

 

 

In 2017, another hack breached a vulnerable Ethereum wallet, but the community quickly stepped in to re-route the funds and prevent a further theft. And, well, Ethereum is still around. 

The Strongest Crypto Community #3: EOS  

EOS was developed by Block.one, as a faster, cheaper alternative to Ethereum. EOS begins with one of the most respected minds in the industry, Dan Larimer, who also created Bitshares and co-founded Steemit. 

He has been described as a visionary and was very articulate about the need to eliminate fees in decentralized applications long before EOS appeared.

On top of the fees elimination, EOS intends to help fix the scaling problem in Ethereum. EOS implemented an alternative network that could, one day, manage millions of transactions per second and introduced a developer-friendly sandbox for creating new, fast decentralized applications (dapps). 

Also, it has a great appeal for new blockchain entrepreneurs since it suggests a simple alternative for fundraising – switching from initial coin offering (ICO) to airdrops and airgrabs.

So, it’s not surprising that in a year-long ICO, EOS raised $4 billion for its blockchain and smart contracts platform.

However, even though the project is in its early stages, it has already experienced significant shakedowns. At one point hackers managed to gain control of Block.one’s Zendesk account and used it to send persuasive phishing emails. 

Hackers could have got away with millions of dollars if it weren’t for the community to spread the word about the incident. 

Less than a week away from the EOS mainnet launch, an internet security firm from China, called Qihoo360, reported that it found several vulnerabilities in the EOS system. The holes would allow hackers to gain remote control of EOS nodes and even access private keys. 

Then, the much anticipated mainnet launch event was a disaster by itself. It was scheduled on the 2nd of June, 2018. But almost a week later the blockchain was not yet live because it required EOS token holders to vote. 

And the voting process itself was very confusing and not very friendly to a non-techy audience. But that case only demonstrated the power of the project’s community. At the time, dozens of brilliant and helpful members of the EOS ecosystem developed a bunch of handy tools for voting along with the sets of instructions and guidelines. That promptly enabled the ability of token holders to vote for the mainnet launch and the network was successfully started on the 14th of June, 2018.

The Strongest Crypto Community #4: Monero

Monero logo

Monero’s community is united around a core group of principals: privacy, security, and decentralization.

Recently, the Monero community rallied together to fund a deep audit of its new bullet-proofs technology. The audit ultimately turned up a vulnerability that could have lead to a 51% attack.

It would have been easy to ignore a security audit, but the Monero community felt strongly enough about security to fund it themselves.

Further, the Monero community actively fights against the use of mass-market mining tools (ASICs) to protect its decentralized nature. A community that puts its core principals ahead of economic gain is one worth keeping an eye on.

What’s your favorite story about the strongest crypto communities? Go ahead and share it in the comment section below.

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bitcoin banks

A version of this article first appeared in our exclusive newsletter. If you’d like Block Explorer’s cutting-edge analysis before it hits our website, sign up now.

It’s funny… I was re-reading the Bitcoin white paper last week as it’s now ten years old.

Bitcoin’s founder Satoshi Nakamoto constantly refers to bitcoin as a way to avoid using a “trusted third-party,” like banks or financial institutions.

And yet it seems like all anyone can talk about right now is Wall Street adoption of crypto and banking bitcoin.

Just look at what happened in the last few weeks:

1. Coinbase is now a “qualified custodian” to hold cryptocurrencies in New York (the same designation given to banks that hold your money). (CoinDesk)

2. Mastercard filed a patent to launch a “fractional reserve” crypto bank. (CCN)

3. Bank of America filed a patent for a crypto storage system. (CCN)

3. Gemini announced full insurance for its exchange and custody service. (Block Explorer)

4. BitGo is approved as a qualified custodian to hold cryptocurrencies. (Bloomberg)

mastercard bitcoin
Credit: Cryptocoinmastery

None of these stories are groundbreaking on their own.

But it’s a very clear trajectory. Major “third party” institutions are competing to hold (or bank) cryptocurrencies on behalf of others.

What we’re talking about is the quiet emergence of bitcoin banks.

Are “Bitcoin Banks” a Good Thing?

Yes!

On the one hand, cryptocurrency institutions like Coinbase, Gemini, and Bitgo are taking storage security seriously. With almost $1 billion cryptocurrency stolen in exchange hacks this year alone, we need to provide better security and storage options for traders.

Secure custody also gives confidence to institutional investors who are looking to enter the space. Arguably, the next big influx of capital will come from institutional investors, who need trusted custody before making large investments.

No!

Bitcoin was designed to operate outside the banking system. It was created so that you don’t have to trust a bank or third-party.

Crypto evangelists (ourselves included) have always advocated keeping your cryptocurrency off exchanges entirely. Unless you’re trading large volumes of crypto every day, there’s no good reason to store your bitcoin on Coinbase, Gemini or any other exchange.

Instead, you need a safe, offline, cold-storage solution where you control the private key (with backups, of course). It might be more hassle, but it’s worth it for peace of mind and security.

Further reading: 8 Cryptocurrency Best Practices (Keep Your Crypto Safe)

It seems our newsletter subscribers agree, especially when it comes to big banks wading into crypto storage. We asked them, on a scale of 1-10, how much they would trust an institution like Bank of America to look after their cryptocurrency. Every respondent picked either one or two out of ten.

Conclusion

Like it or not, bitcoin banks are coming. It might start small with custody solutions at Gemini and Coinbase, but the big-names are slowly getting involved. While this should bring more legitimacy to the cryptocurrency world, there are worrying ramifications, too. Mastercard filing a patent for a “fractional reverse crypto bank” is a worrying precedent that pulls bitcoin towards the very system it was designed to avoid.

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Block Explorer aims to bring bitcoin to the mainstream with simple, easy-to-understand guides. Absolutely Everything You Need To Know About Bitcoin is our flagship ebook, and starting point for all our crypto resources.

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