Hydra: Lessons from the world's largest darknet market.

Research Summary: We present a comprehensive description of Hydra, the largest darknet marketplace in the world until its shutdown in April 2022. We document the main features of Hydra such as dead‐drop delivery, feedback and reputation system, escrow, and dispute resolution. Using data scraped from the platform, we quantitatively examine the scale and the structure of the marketplace. We find that it has been highly competitive, geographically covering at least 69% of the Russian population and trading a wide variety of drugs, while also allowing the wholesale trade of drugs and precursors. The dead‐drop delivery system used on Hydra was expensive, as the courier costs comprised a substantial proportion of the sale price of drugs on Hydra. We contribute to the research on drug cryptomarkets by studying an unprecedentedly large non‐Western marketplace that existed substantially longer than any other known darknet market. Policy Implications: The phenomenon of Hydra shows that shut‐down policies applied to darknet marketplaces have a large effect and implicitly shape the whole drug market. Without these policies, a pervasive digitalization of the drug trade can occur. The major cost of allowing marketplaces to grow is the probable increase in the consumption of illegal drugs due to convenience for consumers and facilitated cooperation between suppliers. This cost must be weighed against the potential benefits, including a higher quality of drugs, a decrease in potential violence, and the incentives for a large marketplace to self‐regulate. The case of Hydra also suggests the relevance of financial regulation to limit the growth of darknet marketplaces. [ABSTRACT FROM AUTHOR]