The Hidden Reason Behind Bitcoin’s Increasing Fees: Darknet Mixers

Just recently a darknet marketplace (DNM) vendor who details he’s been involved with the bitcoin industry for five years, says the rising fee market is caused by marketplace mixers that process multiple transactions at a time. The vendor details that DNM sales using these mixers are forcing him and many others to pay for 50 transactions at a time at ten times the cost, to cover their tracks.

Also read: Hedge Funds Are Quietly Investing in Bitcoin   

As Global Bitcoin Exchanges Suffer From Increased Use — Darknet Marketplaces Are Also Busier Than Ever

As much as people don’t like to talk about it, bitcoin has been used widely across DNMs across the deep web for years. Many people believe the lion’s share of bitcoin transactions come from DNM sales. Since the inception of the first DNM — the Silk Road — illicit narcotic sales have increased exponentially. Furthermore, two years after the sentencing of the Silk Road operator there are more online marketplaces located on the deep web than ever before. Over the past year, these markets have been extremely busy as bitcoin’s value has skyrocketed and many of the top underground market users have reported on experiencing big issues with withdrawals.

According to many forum posts, a lot of people have been having problems withdrawing from the leading DNM Alpha Bay. Additionally, there have been congestion issues over the past month on other popular markets such as Dream, Valhalla, and Hansa.

“Add me to the long list of people who can’t get their funds out of Alpha Bay,” explains a DNM consumer on Reddit. “I have been trying to withdraw a couple of hundred dollars worth of BTC for several weeks now. I go the transfer page, fill in all of the information, but after I submit the transaction, the page refreshes like the transaction has gone through, but when the page is done refreshing, it’s like I never submitted a transaction.”

Fee Pressure Stemming From Darknet Markets

According to one particular DNM vendor, he believes the super high fees lately are attributed to black market sales. Nobody seems to understand the rising fee market is coming from that “invisible” web.

Drugs, drugs, and more drugs — None of you are recognizing that most of the fee pressure comes from darknet markets; most especially from DNMs like Alpha Bay that has a built in mixer and causes 20-50 + transactions

The vendor who deals with cannabis sales details that in his opinion DNMs are “responsible for the lion’s share of bitcoin transactions daily.” According to him, there are hundreds of thousands of transactions coming from DNMs daily, rated around 550-600 satoshis. The obvious reason for this he explains is so “drug addicts can get their shit as fast as possible.” Many of the top DNMs found on the deep web have their own mixing services for customers who want to cover their tracks. The tumblers used on Alpha Bay and other DNMs continuously split transfers into multiple transactions at a time, which could quite possibly be adding more strain to the bitcoin network’s throughput.

An example of 16.1 BTC being mixed into multiple outputs.

The cannabis dealer states the bitcoin network fee estimation is “way off the radar” these days, mainly because DNMs are catering to addicts who want their products shipped as soon as possible.

DNM Sales Still Account for a Great Majority of Bitcoin Transfers

There is no doubt that DNMs are getting used far more than they were back in 2013, and back then the underground sales attributed to a vast majority of bitcoin transfers. The vendor’s theory may be more truthful than a lot of people would like to admit, as much of the focus these days has been on mainstream adoption. The likelihood of the fee market and network congestion rising due to more DNM usage is quite probable even though the discussion is not so favorable to everyone.

What do you think about DNM use boosting the fee market and adding to the network congestion? Let us know what you think in the comments below.

Images via Shutterstock, Pixabay, and Expressvpn. 

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