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U.S. Herbal Cannabis Sales on Cryptomarkets – A Research Study

Darknet marketplaces, or cryptomarkets, are online marketplaces where drug dealers sell various forms of illegal drugs. Cryptocurrencies and anonymizing technologies, especially the Tor network, are utilized by market participants to hide their identities and render it hard for law enforcement agencies to track them down. A group of researchers have recently published a paper that described how U.S. based herbal cannabis sellers and buyers are now using cryptomarkets to trade herbal cannabis.

Let’s take a look at some of the interesting data presented via this study:

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The structure of herbal cannabis cryptomarkets in the United States:

Herbal cannabis accounts for 21% of the total sales on darknet marketplaces representing around $3.1 million per month. The vendor’s country of origin is either unidentified or stated as a region (e.g. North America, Europe, Middle East) in 46% of all product listings on cryptomarkets. When the vendor’s country is advertised, two countries stand out: the U.S. accounting for 17% of all listings, and the U.K. representing 10%. The U.S. and the U.K. are the two most prominent countries in the trade of herbal cannabis on cryptomarkets. The U.S. is the country of origin of 35% of all herbal cannabis product listings, accounting for 50% of its total generated revenues.

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Table 1: Distribution of cryptomarket vendors

The aforementioned revenue data offer some insight regarding the U.S. role in the trading of herbal cannabis on darknet marketplaces. Table 1 outlines the importance of the U.S. by comparing the number of vendors of all products and herbal cannabis vendors originating from the U.S. with those originating from other parts of the world. The researchers managed to identify 3,846 vendors, 28% of which originated from the U.S. Herbal cannabis was offered by 24% of all vendors from the U.S. These vendors might have been selling other products too, but cannabis was the most important product offered by U.S. vendors according to the data obtained by the researchers.

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Table 2: Distribution of Listings, Transactions, and Revenue Generated by the Herbal Cannabis Products of American Vendors.

As shown by the numbers from Table 2, data obtained by the researchers showed that there were 3,615 herbal cannabis product listings offered by U.S. vendors. 50% of those vendors completed four transactions per month, of a total of 6,625 transactions completed by U.S. herbal cannabis vendors per month. The most successful U.S. herbal cannabis vendor made around $200,000 per month, while the median revenue of all U.S. herbal cannabis vendors averaged around $254.

Most herbal cannabis listings by U.S. vendors ranged in weight, in the 10-454 grams range. Over a third of all sales occurred in the 10-28 grams range. However, 57% of the revenues generated were represented by listings in the 28-454 grams range.

Implications of the data obtained by the study:

The data obtained by this paper denotes that only a small percentage of herbal cannabis sellers and buyers have started to shift to cryptomarkets. It is estimated that the yearly sales generated by U.S. cryptomarket herbal cannabis vendors average around $38 million. This is far less than the tens of billions of USD generated by the U.S. traditional herbal cannabis market.

There are many reasons that can justify why the U.S. herbal cannabis sales haven’t grown on cryptomarkets during the past six years. Lack of the technical skills needed to connect to the Tor network and buy bitcoins, represent one of the main reasons for the small volume of sales of U.S. herbal cannabis over cryptomarkets. Moreover, as herbal cannabis has to be shipped, there are usually a few days of delay between placing an order and its delivery to the customer, who might not be willing to wait for such a long time, before their drug is actually delivered.

Another explanation for the small volume of U.S. cannabis herbal sales on cryptomarkets is the high price of drugs on darknet marketplaces, when compared to their prices on the street. Many studies have revealed that the street prices of cannabis were between 10% and 43% lower than the price per gram offered on many cryptomarkets. Add to this the cost of shipping which increases the overall price buyers would have to pay for their cannabis.

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