Darknet Economy Slow to Grow Compared to Other ‘Illicit’ Areas of Crypto
The percentage of all cryptocurrency transactions considered to be ‘illicit’ declined to its lowest level yet in 2021, with the statistic being measured annually by blockchain analysts at Chainalysis. While the digital forensics experts note that crypto addresses associated with darknet markets and scams also “contribute significantly” to fund totals deemed illicit, darknet-related transactions rose less than 15% year-over-year, significantly under-pacing the other categories analyzed.
Transactions to cryptocurrency addresses identified as ‘illicit’ represented a slender 0.15% of all transaction volume last year, despite a rise in the number of darknet market and ransomware operators. This figure, though tiny compared to the overall volume of crypto transactions, still represents $14 billion in “illicit activity.” This poses a severe problem, according to Chainalysis, which believes the size of the number “creates huge impediments for continued adoption,” among other issues.
The categories of crime determined and tracked by Chainalysis include Stolen Funds, Scams, Ransomware, Cybercriminal Administrator, Fraud Shop, Darknet Market, and Child Abuse Material. Approximately $3.2 billion in crypto was stolen via various means in 2021, representing a 516% increase over 2020. About 72% of this amount was taken in different DeFi hacks.
Scamming revenue was the biggest single category, which rose to $7.8 billion in 2021. Over $2.8 billion of this came from rug pulls; most of which are former DeFi projects. The report also stressed the continued, widescale use of DeFi for money laundering purposes, which dwarfs all activity deemed illicit on the dark web by several fold.
Chainalysis notes that it is keeping track of “illicit addresses hold(ing) at least $10 billion worth of cryptocurrency” as of January 2022, with the “vast majority of this held by wallets associated with cryptocurrency theft.”
Despite this setback for the public’s perception of cryptocurrency, the report’s authors conclude that “crime is becoming a smaller and smaller part of the cryptocurrency ecosystem,” with widespread crypto adoption continuing to outpace the growth of darknet markets – a trend which has been in place since at least 2017.