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The Russian market, which sells everything from drugs and confidential data to fake documents and counterfeit banknotes, is growing at an excessive pace. Back in 2016, the volume of transactions on Hydra was $9.4 million. In 2020, according to Flashpoint and Chainalysis research, the number of transactions on the marketplace totaled $1.37 billion.
Simple math reveals that over the past 4 years, users have begun to spend 150 times more money on Hydra’s goods, most of which is drugs. So what drove the rise of the marketplace, and how do cryptocurrencies help maintain users’ anonymity? Let’s dive deeper into this topic.
Hydra has been made to look like Amazon to make it easier for users to navigate
How Hydra grew
The Darknet has long ago become a convenient and relatively safe place to trade illegal substances, personal information, and other goods that cannot be found on the open Internet. However, law enforcement agencies still managed to close such shadow markets for drug trafficking as RAMP, Silk Road, and Maza.
This contributed to a high flow of users to the Hydra marketplace, operating since 2015. After the closure of RAMP – a Russian anonymous marketplace – in 2017, about 23 thousand new visitors were registered on the site in a month. Now the average number of unique users per month is about 20 thousand.
As the international police continue to fight drug trafficking on the Darknet, the number of new users of Hydra continues to grow exponentially. So in 2019, as a result of a joint operation by the police of Germany, the Netherlands, the UK, and US government agencies, the second largest illegal market on the Darknet, Wall Street Market, was closed. This helped to de-anonymize the criminal darknet market and other sites, including DarkMarket with more than 500,000 users. In January 2021, Europol closed it too. As a result of the arrests, more than $6.5 million were seized in cash and cryptocurrency.
What makes Hydra popular
Eastern Europe, where Hydra is primarily used, is the first largest region for darknet markets. Hydra mainly operates as a drug market, but fake passports, stolen credit cards, and counterfeit currency are also available, making it similar to its predecessor, the already closed marketplace Silk Road.
According to statistics from Chainalysis, Hydra is the sixth largest cryptocurrency platform in Eastern Europe
The rest of Europe and North America are the second and third most popular for darknet sites’ usage. When the heads of the criminal marketplaces in the above-mentioned regions were “cut off,” Hydra had grown even more of them.
The Hydra marketplace now dominates the Darknet, which is not only due to the closure of other markets. The website’s stability can be so strong due to the cooperation with the Russian intelligence services, experts say. Otherwise, it could have been closed a long time ago like other websites using DDoS attacks. Also, Hydra is so popular among users because of its rather inventive approach to product delivery.
As noted in the Chainalysis report, “cladmen”, or drug couriers, leave goods in hard-to-reach but public places. If in the United States, mail can be used to deliver parcels with prohibited goods due to its reliability, the Russian postal system is unreliable for such shipments. There is no physical exchange at all: the seller receives payment in cryptocurrency, making it difficult to track the money’s path, and the client picks up the goods in a public place.
The peculiarity of the platform is that sellers are not encouraged here, as is usually the case in other platforms. For example, they must have more than 50 completed transactions to withdraw money, and the account must always have at least $10,000. This guarantees the reliability and verification of sellers, and user accounts are protected from capture.
Using Cryptocurrencies on the Darknet
According to Greek mythology, to survive, Hydra adapted to the danger so much that it was impossible to defeat it: in place of each severed head, two new ones grew. The creators of the marketplace clearly understand the principle of survival of such organizations and come up with more and more ways to continue their work, rooting in the very depths of the Darknet. And here, cryptocurrency comes in handy.
Since 2018, to withdraw funds, sellers have converted cryptocurrency into Russian rubles through exchanges and electronic wallets Qiwi or YuMoney. However, the underlying blockchain technology and cryptocurrency exchange is built on transparency, and therefore, it has become increasingly difficult for Hydra users to maintain anonymity. Regulators of technology and new ways of tracking transactions make cryptocurrencies less decentralized and a cryptocurrency wallet more traceable, which means that information about the recipients can still be obtained.
There were also reports of an interesting way to exchange cryptocurrency from Hydra for fiat money. The treasures that we mentioned above refer not only to the delivery of goods but also to the exchange of payment. The service looks like this: the cash seller buries the money in a vacuum package 5-20 cm underground and informs the buyer of the coordinates of the treasure. The marketplace takes a fairly high commission for this service – 7% of the amount exchanged.
The Future of Hydra
$125 million – this is the turnover of the weekly transactions of the largest darknet website Hydra. The ambitions of its owners do not continue to subside: in 2019, they announced the placement of an ICO to fund their international expansion, software development, and the creation of their own infrastructure. They were going to put up for sale 49% of the project share, which would amount to 1,470,000 tokens. However, the Covid-19 pandemic cooled the platform’s enthusiasm a little and put the idea on hold.
Founders of Hydra want to launch a new multilingual marketplace, Eternos, and an alternative to TOR – AspaNET. They announced that the new platform would be based on Hydra, but with additional features: anonymous browser, encrypted messages, built-in cryptocurrency exchange, and OTC market.
Needless to say, anyone who takes part in the ICO will risk being prosecuted for financing criminal activities. “The most illegal token sale to date” is how Brave New Coin described what was happening. It is difficult to disagree.
An uninvolved observer who is interested in watching the unfolding story of a criminal, but gripping project Hydra, clearly can ask the question – will the marketplace be able to enter the western regions?
Over the past 6 years, the platform has continued to grow both financially and infrastructurally. History shows that the larger the project becomes, the more difficult it is to manage. The specificity of Hydra lies precisely in the category of prohibited goods that are sold there.
And this leads to a logical conclusion – Hydra’s exit from Russia remains as much a matter of time as the duration of this platform’s operation.