Chainalysis 2024 Report: Darknet Markets are thriving?
Intro
Darknet markets, the hidden online bazaars where illicit goods from drugs to hacking tools are bought and sold, demonstrated surprising staying power in 2023. A new report from blockchain analytics firm Chainalysis sheds light on how these underground markets rebounded financially last year, even as law enforcement continued efforts to investigate and shut them down.
Top Darknet Markets
Darknet markets saw a rebound in revenue in 2023 after a decline in 2022 following the closure of the dominant Hydra Marketplace. While no single market has matched Hydra’s success, total darknet market revenue rose to $1.7 billion in 2023.
The top darknet markets in 2023 by crypto inflows were:
- Mega Darknet Market – over $500 million
- Kraken Market – gained prominence among Russian markets
- Blacksprut
- OMG!OMG!
Blacksprut and OMG!OMG! in particular jockeyed for position in the wake of Hydra’s closure and remain top players.
Darknet Market Revenues
Darknet market revenues rebounded in 2023 but have not returned to 2021 levels:
| Year | Revenue |
|---|---|
| 2021 | > $1.7B |
| 2022 | < $1.7B (Hydra closed) |
| 2023 | $1.7B |
The report notes that “while values haven’t risen back to 2021 levels, darknet market revenue has slightly rebounded since Hydra’s closure in 2022.”
Darknet Market Dominance
The battle for darknet market dominance that began after Hydra’s 2022 shutdown continued into 2023. However, the report states that “no other market has since matched Hydra’s financial success.”
At its peak, Hydra captured over 90% of all darknet market revenue. The landscape is now more fragmented, with Mega Darknet Market leading with over $500 million in inflows in 2023, followed by strong showings from Kraken Market, Blacksprut and OMG!OMG!.
Operational Trends
Some key operational trends among darknet markets in 2023:
- Increased use of crypto payment processors integrated via APIs for improved efficiency and security
- Continued prominence of Bitcoin as the cryptocurrency of choice for darknet sales, despite overall trends towards stablecoins for other illicit activities
- Rebound in total revenues despite the lack of a single dominant market on the scale of Hydra
The report theorizes that the lack of a Hydra-like giant could be due to “role specialization” among markets.
Rather than one market capturing most activity, the ecosystem now consists of multiple strong players fulfilling different niches and roles.
Outlook
While darknet markets rebounded financially in 2023, their total share of illicit cryptocurrency activity remains small compared to things like transactions with sanctioned entities.
However, the resilience of the darknet market ecosystem, despite major law enforcement disruptions like Hydra’s closure, suggests darknet markets will likely remain a persistent if small part of the cryptocurrency crime landscape. Continued innovation in areas like payment processing shows threat actors remain committed to the darknet market model. The lack of a single dominant market could make disruption more challenging for law enforcement, as there is no longer one big target to focus on. But it may also keep the overall darknet market ecosystem smaller than the Hydra era, as no single player can match its scale and network effects. Ultimately, the 2023 darknet market trends demonstrate the importance of continued efforts to investigate and disrupt these illicit marketplaces, as they have proven surprisingly resilient. But the data also underscores that darknet markets are just one part of a much larger cryptocurrency crime challenge.
