Hydra: Lessons from the World’s Largest Darknet Market

25 Pages Posted: 22 Jul 2022 Last revised: 2 Feb 2023

See all articles by Priyanka Goonetilleke

Priyanka Goonetilleke

University of Pennsylvania, Department of Economics

Alex Knorre

Boston College; European University at St. Petersburg (EUSP); University of Pennsylvania - Department of Criminology

Artem Kuriksha

University of Pennsylvania - Department of Economics

Date Written: June 29, 2022

Abstract

We present a comprehensive description of Hydra, the largest darknet marketplace in the world until its shutdown in April 2022. This paper documents the main features of this online platform (such as user feedback, escrow, dispute resolution, and certification of drug quality) and quantitatively examines the scale and the structure of the marketplace. Using data scraped from the platform, we find that the marketplace appears to have been highly competitive, geographically covering 69% of the Russian population, and trading a wide variety of drugs. Hydra was also used for deals between producers and sellers, who traded wholesale quantities of drugs and precursors. The dead-drop delivery system utilized on Hydra was expensive, as the courier costs comprised a substantial proportion of the sale price of drugs on Hydra. Finally, by examining product feedback we find that despite evidence that reputation was of critical importance to the operation of the platform, user ratings were skewed towards the highest possible rating value. Hydra provides a unique counterfactual of a dominant marketplace that was allowed to grow for a long time before being shut down. By analyzing the case of Hydra, this study illustrates novel implications of the shut-down policies which governments typically use in response to illegal darknet marketplaces. The major cost of allowing a large marketplace to exist is an overall increase in the consumption of illegal drugs. However, this cost must be weighed against the potential benefits, including a higher quality of drugs due to reputation incentives, a decrease in potential violence due to the digitalization of the supply side, and the incentives for a large marketplace to self-regulate.

Keywords: Hydra, darknet, marketplace, illegal drugs

JEL Classification: K42, L86, L14, L15

Suggested Citation

Goonetilleke, Priyanka and Knorre, Aleksei and Kuriksha, Artem, Hydra: Lessons from the World’s Largest Darknet Market (June 29, 2022). Available at SSRN: https://ssrn.com/abstract=4161975 or http://dx.doi.org/10.2139/ssrn.4161975

Priyanka Goonetilleke

University of Pennsylvania, Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States

Aleksei Knorre (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

European University at St. Petersburg (EUSP) ( email )

3 Gagarinskaya Street
St. Petersburg, 191187
Russia

University of Pennsylvania - Department of Criminology ( email )

483 McNeil Building
Philadelphia, PA 19104
United States

Artem Kuriksha

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

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