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05 October 2013

By Tim Fernholz

Silk Road collected 9.5 million bitcoin—and only 11.75 million exist

Silk Road, the illicit online marketplace that first brought bitcoin to notoriety in 2011, was shut down and its alleged founder was arrested. The criminal complaint revealed that the site had collected revenues of some 9.5 million bitcoin since 2011, the equivalent today of $1.2 billion in sales and $80 million in commissions for Ross Ulbricht, who allegedly ran the site under the moniker Dread Pirate Roberts.

What's crazy about that number is that today there are only about 11.75 million bitcoin in circulation. There were even fewer when Silk Road first began, the supply of bitcoin will steadily increase until there are 21 million in existence. That suggests a huge amount of bitcoin activity went through Silk Road, a reminder that the currency's primary use so far (besides as a speculative investment vehicle and point of departure for futuristic payment schemes) was buying illegal things online. Users could access Silk Road through Tor, software that anonymizes online activity, and order everything from marijuana and books to LSD and oxycontin, paying in bitcoin.

Obviously, this doesn't mean that 82% of bitcoin were used on Silk Road. Over the course of its existence, the Silk Road likely recycled its earnings back into the market in exchange for more broadly recognized and useful currencies. Ulbricht was arrested with just 26,000 bitcoin.

But it gives you a sense of how important Silk Road is to the bitcoin economy. The Federal Reserve currently estimates that there are $10,771 billion in circulation. For a single company to dominate the US dollar the way Silk Road does bitcoin, it would need to have earned $8,745 billion in revenue over the two and half year period, or $3,498 billion a year. To put that in perspective, the number one company in the Fortune Global 500, Dutch Shell, earned $481.7 billion last year, less than 5% of what it would take to equal Silk Road's position.

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