arXiv Silk Road Study

[SpontaneousDisorder]

http://arxiv.org/abs/1207.7139

We further discovered that
sales volume is increasing; currently corresponding to approximately USD 1.9 million/month for the entire
marketplace, corresponding to USD 143,000/month in commissions for Silk Road operators

[divergenta]

Very interesting. Thank you for sharing.

[Peter Todd]

http://arxiv.org/abs/1207.7139

We further discovered that
sales volume is increasing; currently corresponding to approximately USD 1.9 million/month for the entire
marketplace, corresponding to USD 143,000/month in commissions for Silk Road operators

An interesting point about this study is how the feedback they're using as their data source is probably actually quite good data. Consider what would happen if SilkRoad was hiding feedback to decrease the apparent trade volumes: people would notice their feedback was missing from the seller's site, and wonder what else silk road was hiding. Similarly, faked feedback, without informing the sellers at least, is equally likely to blow up in their face as sellers get suspicious.

They can't even try to target individual users: if we cook the feedback for Alice she can anonymously login as Bob and notice something is up. Similarly cooking feedback for users who do a lot of searches but never buy anything doesn't work either as the researchers can just make multiple new accounts.

Even creating fake sellers is risky, as people might try to buy from them... Although if you only offer really high-value items, for instance, you could probably get away with that. Note how this is much more likely to be a problem on their sister site, The Armory...

[Serge]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

[Mushoz]

Over our entire collection interval, the daily volume
of sales approaches 11,650 BTC/day. By means of comparison, the average daily volume of exchanges for
US dollars on the largest Bitcoin exchange, Mt.Gox [4] is approximately 59,980 BTC/day

Very interesting quote in my opinion. A buyer on SR needs to buy BTC, while the seller on SR needs to sell it if he wants fiat.
So every BTC traded on SR is traded twice on Mtgox. That means 11,5k daily SR volume can lead to 23k daily Mtgox volume.
That's close to _half_ of Mtgox volume!!

Now not every seller will want to sell his BTC, but it's an interesting quote nevertheless.

Edit: Okay, maybe not close to half. But significant still. This does dismiss other exchanges though. How big of a market-share does Mtgox currently have? 60% I believe?

[Shadow383]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

You're comparing two very different things. Stock exchange volume world wide is many times global GDP...

[fornit]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

You're comparing two very different things. Stock exchange volume world wide is many times global GDP...

contrary to previous speculations that stock exchanges have anything to do with production on this planet.

[stochastic]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

What is your point?

The FOREX market has a total daily turnover rate of $4 trillion.  The gross world product is about $80 trillion.  SR is selling manufactured goods, they take capital and labor and create goods that are more valuable than the parts separate.  MtGox is a zero-sum game for speculators and just a place to exchange currency for those that want to buy or sell something using the Bitcoin currency.

[Littleshop]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

What is your point?

The FOREX market has a total daily turnover rate of $4 trillion.  The gross world product is about $80 trillion.  SR is selling manufactured goods, they take capital and labor and create goods that are more valuable than the parts separate.  MtGox is a zero-sum game for speculators and just a place to exchange currency for those that want to buy or sell something using the Bitcoin currency.

exactly.  When I was day trading on gox I was doing 5-10 trades a day of most of my balance so the trade volume has nothing to do with how much money is actually there or doing something of value.

[nimda]

Daily crawls? Damn. I didn't think Tor was fast enough that they could access every SR page in only 24 hours.

[niko]

Over our entire collection interval, the daily volume
of sales approaches 11,650 BTC/day. By means of comparison, the average daily volume of exchanges for
US dollars on the largest Bitcoin exchange, Mt.Gox [4] is approximately 59,980 BTC/day

Very interesting quote in my opinion. A buyer on SR needs to buy BTC, while the seller on SR needs to sell it if he wants fiat.
So every BTC traded on SR is traded twice on Mtgox. That means 11,5k daily SR volume can lead to 23k daily Mtgox volume.
That's close to _half_ of Mtgox volume!!

Now not every seller will want to sell his BTC, but it's an interesting quote nevertheless.

Edit: Okay, maybe not close to half. But significant still. This does dismiss other exchanges though. How big of a market-share does Mtgox currently have? 60% I believe?

Given that MtGox follows the KYC requirements and even bans Tor logins, it is highly likely that most of SR-related exchange happens elsewhere. It is also likely that a portion of SR coins stays withing the system, simply enabling barter (dope for guns for lamps and back).

Gox currently has ~80% of non-OTC trades.

[FreeMoney]

Over our entire collection interval, the daily volume
of sales approaches 11,650 BTC/day. By means of comparison, the average daily volume of exchanges for
US dollars on the largest Bitcoin exchange, Mt.Gox [4] is approximately 59,980 BTC/day

Very interesting quote in my opinion. A buyer on SR needs to buy BTC, while the seller on SR needs to sell it if he wants fiat.
So every BTC traded on SR is traded twice on Mtgox. That means 11,5k daily SR volume can lead to 23k daily Mtgox volume.
That's close to _half_ of Mtgox volume!!

Now not every seller will want to sell his BTC, but it's an interesting quote nevertheless.

Edit: Okay, maybe not close to half. But significant still. This does dismiss other exchanges though. How big of a market-share does Mtgox currently have? 60% I believe?

No way does every SR trade hit Gox twice. Lots of miners are going to just buy directly, lots of sellers are going to save in BTC, some will spend revenue back at SR as mentioned. Then you've got the fact that other exchanges make up about 20% of formal volume and the fact the SR users are going to tend more heavily away from Gox and will sell OTC if possible. I'd be very surprised if 1/2 of SR volume ended up on Gox, def not 2x.

[SpontaneousDisorder]

Since every buy is a sell also, there should be no need to double count SR volume?

[niko]

It struck me that monthly profits are estimated at $140k.  Let's say with stealth deals $200k. The amount of work behind SR must be enormous: coding, constant security audits, server infrastructure (likely distributed), management of escrows, dispute resolution, customer support, whatnot.  There is no way a single person can run this business with this success.

So, it's a small group of people working very hard and risking a lot for a miserable renumeration.

===

As for the SR trade volume, it's estimated at $65k daily.  For comparison, Gox daily volume has generally been in the range of $200-$400k. Overall daily Bitcoin transaction volume, after eliminating the "change" transactions to self, has been equivalent to ~one million USD (blockchain.info).

What I'd really like to know is what fraction of overall BTC transaction volume is due to "mixing" services. If this is significant, it could be argued that SR represents a significant part of BTC economy; if mixing does not contribute a lot, then the conclusion is that there is much, much more to Bitcoin (1-2M daily) than SR (65k daily).

[Serge]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

What is your point?

The FOREX market has a total daily turnover rate of $4 trillion.  The gross world product is about $80 trillion.  SR is selling manufactured goods, they take capital and labor and create goods that are more valuable than the parts separate.  MtGox is a zero-sum game for speculators and just a place to exchange currency for those that want to buy or sell something using the Bitcoin currency.

exactly.  When I was day trading on gox I was doing 5-10 trades a day of most of my balance so the trade volume has nothing to do with how much money is actually there or doing something of value.

I refuse to believe that Bitcoin economy is driven strictly by SR marketplace as it was claimed elsewhere on this forum, surprisingly SR is more successful than I initially thought without delving into that realm. Comparing SR and Mtgox volume was indeed inadequate.

[Frankie]

mtgox monthly volume 7-10x larger than SR's,  contrary to previous speculations that mostly SR marketplace fuels Bitcoin economy

What is your point?

The FOREX market has a total daily turnover rate of $4 trillion.  The gross world product is about $80 trillion.  SR is selling manufactured goods, they take capital and labor and create goods that are more valuable than the parts separate.  MtGox is a zero-sum game for speculators and just a place to exchange currency for those that want to buy or sell something using the Bitcoin currency.

exactly.  When I was day trading on gox I was doing 5-10 trades a day of most of my balance so the trade volume has nothing to do with how much money is actually there or doing something of value.

I refuse to believe that Bitcoin economy is driven strictly by SR marketplace as it was claimed elsewhere on this forum, surprisingly SR is more successful than I initially thought without delving into that realm. Comparing SR and Mtgox volume was indeed inadequate.

I agree bitcoin economy is not *strictly* driven by SR, but what other actual commerce occurs in bitcoins? The only thing of a similar magnitude (possibly bigger) is gambling. What else is there? People selling GPUs and doodads OTC. Speculation (some of which is captured by MtGox volume).

Looking at this study, I suspect it greatly underestimates SR-related business. The largest transactions between repeat buyers and sellers almost certainly occur off-exchange, not unlike they do with eBay.

[repentance]

It struck me that monthly profits are estimated at $140k.  Let's say with stealth deals $200k. The amount of work behind SR must be enormous: coding, constant security audits, server infrastructure (likely distributed), management of escrows, dispute resolution, customer support, whatnot.  There is no way a single person can run this business with this success.

It's always good to remember that revenue is an unreliable indicator of profit.  Many people starting their first business grossly underestimate the cost of overheads and especially how much those overheads will increase as the business grows.  You soon reach the stage where it's impossible for one person to handle all aspects of running the business, but often before you have sufficient profits to automate processes and hire additional staff and before your business has anything which makes it attractive to outside investors (even if the owner is willing to trade equity for capital to fund growth).