entered a short period of
decline, suggesting just how
important the site was for the
fate of the virtual currency at
this point. Silk Road users
showed up on the Bitcoin
chat channel asking if there
was anywhere else they could
score some drugs. When Silk
Road came back online, the
price of Bitcoin picked up
again.
But the real onslaught
began on June 1 when the
gossip/news website Gawker
published an in-depth story
about Silk Road, based on
interviews with people who
had purchased and received
LSD and purple haze pot
from the site. There were now
340 different items available,
including tar heroin and
Afghani hash.
In the days immediately
after this story came online,
over a thousand new people
were registering for Silk
Road every day and the price
of a Bitcoin on Mt. Gox shot
up, crossing $10 for the first
time the day after the Gawker
story and $15 two days later.
The growth of the black
market was something many
of the old Cypherpunks had
wanted to enable by creating
an anonymous currency—in
the 1990s some of the
Cypherpunks had even talked
about a “Digital Silk Road.”
But now that it was actually
here, it was causing much
more mixed feelings in the
Bitcoin community. While
Martti had welcomed the site
and Roger Ver looked on
approvingly, many of the
Bitcoiners who were more
interested in technology than
politics thought this was the
worst thing that could happen
to the Bitcoin network. Gavin
tried to personally distance
himself and Jeff Garzik, a
programmer living in North
Carolina who had become
one
of
the
steadiest
contributors to the Bitcoin
software, wrote to Gawker to
explain that Bitcoin was
actually less anonymous than
most people believed, owing
to
the
record
of
all
transactions
on
the
blockchain.
Sure,
the
blockchain
didn’t
have
names, but Garzik explained
that
the
police
would
probably be able to determine
the identity of users through
sophisticated
network
analysis.
“Attempting major illicit
transactions
with
Bitcoin,
given
existing
statistical
analysis techniques deployed
in
the
field
by
law
enforcement,
is
pretty
damned dumb. :),” Garzik
wrote.
In
conversations
with
other developers, Garzik was
less worried about Silk Road
users getting caught and more
concerned
about
all
the
negative attention that Silk
Road would bring if it
continued to grow. The worst
fears of people like Garzik
were borne out on June 5
when
Senator
Chuck
Schumer of New York held a
heavily
covered
news
conference, at which he
decried the brazen business of
Silk Road and called for
prosecutors to shut it down.
He described Bitcoin as an
“online
form
of
money
laundering used to disguise
the source of money, and to
disguise who’s both selling
and buying the drug.”
Rather
than
scaring
people
away,
Schumer’s
commentary—and the deluge
of media attention it received
—brought on yet another
surge of interest, sending the
price of Bitcoin on an Icarus-
like rise that had it at $30
within two days. That was a
600 percent rise from a month
earlier, and a 9,000 percent
increase from six months
earlier. Silk Road now had
ten thousand members.
Ross had, by now, fully
recouped
his
initial
investment—earning $17,000
from
the
sale
of
his
mushrooms,
and
$14,000
from commissions collected
on the sales made by others.
But
the
news
out
of
Washington strained Ross’s
already frayed nerves.
“I was mentally taxed,
and now I felt extremely
vulnerable and scared,” he
wrote in his journal. “The US
govt, my main enemy was
aware of me and some of its
members were calling for my
destruction.
This
is
the
biggest
force
wielding
organization on the planet.”
When Ross shut the site
down in mid-June, to take a
breather, he wrote on the
Bitcoin forums that his little
experiment had claimed way
too much attention: “We’ll do
our best to get out of the
spotlight and hopefully the
merits of Bitcoin will become
the focus.”
But for regular Bitcoin
companies,
the
situation
wasn’t going much more
smoothly. Around the same
time Silk Road went down,
Mark Karpeles found himself
unable to process withdrawals
from Mt. Gox for four days.
The problems helped pull the
price of Bitcoin down almost
as quickly as it had gone up.
But even as the price settled
down, below $20, something
in the air was different. Some
of
Bitcoin’s
youthful
innocence seemed to be gone.
Just a few months earlier
—and even a few weeks
earlier—the forums and chat
channels had felt like a cozy
global community. All the
main characters could be
found online talking to each
other at almost any hour.
Now, everyone was too
busy to chat, or was put off
by all the negative energy.
Mt. Gox users were on the
forums complaining about
Mark’s
silence
as
his
exchange struggled and trades
got delayed. In the chat
rooms,
a
few
upstart
exchanges
that
were
attempting to challenge Mt.
Gox slammed Mark and his
maintenance of Mt. Gox.
There
were
a
growing
number of signs that Mark
was indeed falling behind. In
May he had hurriedly decided
to move Mt. Gox into an
expensive office tower, but so
far he had been able to find
only one employee who was
willing to take the risks
involved in working on
Bitcoin. Jed McCaleb sent
Mark suggestions for how to
improve the site but Mark
never responded.
Much of the tension in the
broader Bitcoin community
seemed to be a result of the
deluge of curiosity seekers
and
pranksters,
who
overwhelmed
the
chat
channel
with
inane
commentary. In June, over
15,000 new people joined the
forums, more than doubling
the membership and leading
to 152,000 new postings.
Bitcoin was supposed to