Blog / Articles / U.S. Marshals auction off 30,000 Bitcoins seized from Silk Road, another step towards Bitcoin becoming a globally adopted currency

U.S. Marshals auction off 30,000 Bitcoins seized from Silk Road, another step towards Bitcoin becoming a globally adopted currency

U.S. Marshals auction off 30,000 Bitcoins seized from Silk Road, another step towards Bitcoin becoming a globally adopted currency

Silk Road is an online marketplace which launched in February 2011 and is designed to be completely anonymous. Just about every drug in existence is available on Silk Road, including Heroin, Cocaine, Methamphetamine, pharmaceuticals, and Cannabis. The only way to access Silk Road is through Tor, which is a browser that makes it nearly impossible to trace IP addresses. Bitcoin is the sole payment method used on Silk Road, since with Bitcoin you can send money worldwide near instantly and anonymously. Compare this to credit cards or almost any other payment method, where your personal information is needed to complete a transaction. Also Bitcoin payments can't be reversed, unlike credit cards.

Silk Road became extremely popular soon after opening. The most conservative estimate is that $60-80 million of drugs were sold on Silk Road per year. Silk Road drug dealers and the FBI estimate revenue was much higher, and $1.2 billion of drugs were sold on Silk Road in total, with the site owners making $80 million of profit. There are few arrests associated with Silk Road despite the massive volume of drugs that were sold, showing just how powerful the combination of Tor and Bitcoin is. Silk Road played a crucial role in increasing the popularity and use of Bitcoin. The price of Bitcoin rapidly increased during the lifespan of Silk Road, from less than $1 to nearly $1000. Much of this price increase was undoubtedly due to people buying up Bitcoin to use on Silk Road.

In October 2013 Silk Road was shut down by the Federal Bureau of Investigations (FBI). The owner of Silk Road, Ross Ulbricht (AKA Dread Pirate Roberts) was arrested in Francisco for drug trafficking, money laundering, soliciting hit men, and computer hacking. He was logged into his administrator account on Silk Road when he was arrested, enabling the police to seize all the Bitcoins on Silk Road. In total 29,658 Bitcoins were seized ( ) which is over $18 million currently. Another 144,341 Bitcoins were seized from Ross Ulbricht himself, which is worth nearly $90 million today ( ).  The 174,000 Bitcoins seized by the FBI represent 1.33% of the total number of Bitcoins in the world. It is important to note that Silk Road quickly came back to life after the FBI shut it down. The source of Silk Road was given to all the administrators, making it impossible to truly end Silk Road. If one version of Silk Road is shut down an exact copy of it pops up shortly afterwards. Silk Road is still operating to this day.

It was decided that the 30,000 Bitcoins seized directly from the Silk Road would be auctioned off by the U.S. Marshals, while the 144,000 Bitcoins from Ross Ulbricht would be kept by the government unless a court mandated that they be sold. The 30,000 Silk Road Bitcoins were divided into 10 lots of 3,000 Bitcoins each, and each lot could be bid on separately. At market rate each 3,000 Bitcoin lot was worth over $1.8 million. A $200,000 deposit was required to participate in the auction, so only the wealthiest Americans could even place bids. 45 bidders participated in total. One of these bidders was actually a syndicate of 42 investors who pooled their money in an attempt to win the auction, but they were outbid on every lot.

Ultimately Tim Draper won all 30,000 Bitcoins, and the Bitcoins were transferred to him the day after the auction. It is unknown how much he paid for the Bitcoins, and he refuses to discuss it. Tim Draper is planning on storing all 30,000 Bitcoins in Vaurum, which is a Bitcoin exchange. Tim Draper is one of the earliest Vaurum investors, and was among a group who invested $4 million into Vaurum last May. Essentially Vaurum enables financial institutions to run their own Bitcoin exchange anywhere in the world. The 30,000 Bitcoins from the auction will be used by Vaurum to provide more liquidity and services. The main goal of Vaurum is to attract investors in parts of the world with weak national currencies. Bitcoin is a much stronger investment than many of the highly inflationary currencies around the world, and it can be quite profitable for investors to keep their money in Bitcoin rather than fiat. This will help improve the economies of countries with weak currencies, and simultaneously it will help spread Bitcoin globally.

Perhaps the most important aspect of the Silk Road Bitcoin auction is the United States government recognized Bitcoin as having value, and also they recognized that it can be used for legitimate purposes. The Security and Exchange Commission (SEC) has branded Bitcoin as being highly dangerous to investors, and the overall tone of their statements and actions is that Bitcoin has no place in the economy. If the Justice Deparment held the same sentiment they would have likely locked up the Bitcoins and thrown away the key. Instead they realized the seized Bitcoins had significant value, and seeked out accredited investors to buy them. The Silk Road Bitcoin auction resulted in a lot of publicity for Bitcoin from big name news services like The Wall Street Journal, Forbes, Business Insider, etc., which undoubtedly attracted more people to start using Bitcoin. The price of Bitcoin rose steeply after the auction, from $570 to $650 (14%), which quelled fear in the community that the 30,000 Bitcoins would be dumped on the open market and crash Bitcoin's price. Overall, the Silk Road Bitcoin auction was another step towards Bitcoin becoming a globally adopted currency.

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