Geography of Darknet Markets and the “Last Mile” Concept
As of today, the global drug market turnover is estimated at around $321 billion per year. Typically, all drugs move through complex and lengthy supply chains before reaching their final destination. However, the emergence of various psychoactive substance (PAS) platforms on the darknet has begun to change this concept and the routes of product movement. Although recent studies have shown that cryptomarkets are small-scale compared to the global drug industry, there are now many signs indicating the accelerated growth of these darknet markets and their role in global drug logistics.
Geography of Darknet Markets
A recently published article presented a rather interesting study that assessed the economic geography of PAS cryptomarkets from a comprehensive empirical perspective. The researchers focused on the supply chains that support these online markets. The study examined trading activity on darknet markets as well as logistics, analyzing the supply chains of three common plant-based drugs: cocaine, cannabis, and opiates.
The research was based on data collected from the trading history of the four largest cryptomarkets operating in 2017. The data included about 1.5 million transactions, accounting for approximately 80% of all darknet deals in 2017.
The study concluded that illegal trade on the darknet is mainly limited to a small number of countries: 70% of all drug shops listed on darknet platforms are concentrated in five countries—the United States, Australia, the United Kingdom, the Netherlands, and Germany.
The researchers also made an interesting observation: cannabis and cocaine trading on cryptomarkets peaks in countries with the highest number of consumers of these drugs, not in the countries where they are produced. While producers of cocaine and cannabis do sell their products on darknet markets, the vast majority of listings are created by wholesale dealers who are closer to the customers and buy in huge quantities, flooding the platforms with offers to buy Colombian cocaine or California buds, and sometimes even more exotic products.
However, this relationship does not apply to opiates, as opiate trading on the darknet is distributed among countries that differ from those associated with the production and consumption of these drugs, as shown in Figure 1 below.
Although opiates are mainly consumed by users in Asia, the Middle East, and Russia, the main volumes of opiate trade on the darknet are linked to the countries mentioned above (the US, Australia, the UK, the Netherlands, and Germany).
Comment by Pavluu:
By the way, it’s worth noting that a large number of consumers are concentrated, for example, in the UK, particularly in Scotland.
Note by Pavluu: Production – production, Darknet Trade – darknet trade, Consumption – consumption
The study’s results also showed that the transportation of all types of drugs from the main production sites occurs less frequently than we might imagine. This also proves that most cryptocurrency transactions (PAS purchases) usually take place in regions with the highest percentage of consumers; in other words, darknet trade happens on a regional or local scale, not a global one.
The results indicate that PAS dealers on the darknet focus on the so-called “last mile”—the point closest to the regions of consumption. Thus, cryptomarkets do not replace existing supply chains; they modify them by concentrating large quantities of goods in regions where these goods are not produced. Nevertheless, all markets still depend on classic drug producers located in Asia, Mexico, the US, Afghanistan, and Colombia, and are forced to use traditional, proven delivery routes, only modifying them at the last mile.
Therefore, it can be confidently stated that the emergence of darknet markets has slightly changed the entire drug trafficking landscape—now its direction is more precise, as the appearance of many dealers allows you to buy anything in places with the highest demand. This also affects the price of goods, as in places with the highest demand, prices are usually higher. This is due to the costs of storing large batches and delivering to the end consumer by wholesale dealers, rather than by producers, whose prices are naturally lower.