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

The Hidden Reason Behind Bitcoin's Increasing Fees: Darknet MixersAs 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.

Darknet Mixers May Be Putting Pressure on Bitcoin's Fee Market
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. 

At News.Bitcoin.com all comments containing links are automatically held up for moderation in the Disqus system. That means an editor has to take a look at the comment to approve it. This is due to the many, repetitive, spam and scam links people post under our articles. We do not censor any comment content based on politics or personal opinions. So, please be patient. Your comment will be published.

  • John Moore

    The rising fees are are taking away from an average user that’s not mining or drug dealing, and tying up the network. It’s not practical to send $20 in bitcoin to load on my bitpay card, because I usually get hit with $3-$4 in fees. As if these horrible services, wait times, and transfer problems aren’t enough..they also have to tax the hell out of us. Making banks look like a better choice imo.

  • richardamullens

    The problem isn’t darknet mixers, it is the company Blockstream that has been tasked by its backers, so it seems, to destroy Bitcoin by refusing to countenance any increase in the block size.

    • Mike Myers

      No kidding. Then they offer to solve the problem with SegWit and side chains. Then they own your money. Good luck ever merging your coins back onto the main block chain. We need large blocks now.

      • MC Kuky

        Doesn’t that look like Problem – Reaction – Solution trick? Block size limit was introduced by the same parties that push for SegWit.

  • Dark Descent

    I don’t think this is a large part of the total amount of transactions on the network. That won’t matter very soon anyway. Tumblebit brings trustless anonymous transactions to all users of every cryptocurrency that chooses to apply it, thus making these mixers obsolete. Bitcoin will be the first. Breeze wallet which is planned for release at the end of this month, alongside HiddenWallet will provide users with this option utilizing the NTumblebit library. This library is made by one of the bitcoin core developers nicolas dorier.

  • If I run a store and see that I have customers routinely waiting in line for 20 minutes, I don’t jack up my prices, shrug my shoulders, and tell people who complain “well, it’s all those people coming in to buy beer.” I hire more cashiers and install more registers and checkout lanes.

    If the network congestion is coming from dark net markets and mixers, well, so what? The solution remains the same: Increase the block size.

    Bitcoin is running out of time. At some point, it comes down to this binary possibility:

    1) I can buy a coke and a hot dog at my local convenience store with a Bitcoin-based debit card or a phone or hardware wallet, with fees of 1-2% max and confirmation times of 30-60 seconds max, or

    2) Remember Bitcoin, the starter/experimental cryptocurrency that people used once upon a time before (insert cryptocurrency that does [1] here) came along?

    • concerndcitizen

      Time is up for bitcoin, things just aren’t going to wait and bitcoin will be left in the dust.

  • Transaction effort is not matched by Verification Effort. Exchanges should mine and run Bitcoin nodes as a mining pool mines its reward blocks when the network transaction time inflates. Miners take care of miners. Throwing more focus on targeted transaction block is what is going on, higher fees make a block more valuable and thus become higher priority for the miners as the reward is higher; same time to process and higher reward for a more valuable block. In some cases, when the block is full of similar fees and values the block becomes less difficult and thus more valuable because the time to reward is shorter. Some exchanges have caught on to this consolidation and some have figured how to rotate through Altcoins. I think the market should just mine more in every facet all the way down to vendors and retail. It would expand the transaction network instead of consolidate it as is the trend in current centralized mining expansions. Sure, the DNMs are going to take advantage of this current landscape and will definitely take advantage of the next transaction landscape. I hope a landscape solution is decentralized and distributed among all bitcoin users and holders. The Bitcoin Piggy Bank needs to be made like a balloon, as the transactions fill it the landscape of blockchain nodes and miners expand exponentially and densely distributed. A cup of coffee in seconds not minutes and hours and much more reliable over time and resilient from transaction volume will have to be the goal. It has to be a participation level increase as a solution.