Darknet Revenues Fell After Hydra’s Shutdown: Chainalysis

Shutdown of the once dominant darknet marketplace Hydra in 2022 changed the market for drugs and other illicit goods. According to blockchain analytics firm Chainalysis, blockchain data shows many of the darknet vendors quickly switched from Hydra to another marketplace, OMG!OMG!, the firm said in a new report today.

The wallets that previously interacted with Hydra started transacting with OMG!OMG! wallets, and since then, more than a half of OMG!OMG! revenue would come from former Hydra clients, Chainalysis said. This might be a sign that Hydra operators have been involved in OMG!OMG!, too.

The two platforms also shared the same method of drugs delivery: buyers received geographic coordinates for the packages they bought, which had been hidden in parks and other locations in advance.

After Hydra

Hydra used to be the most successful marketplace for drugs, counterfeit documents, money laundering and other illegal goods and services in the world, although its users were mostly in Russia and neighboring countries. The platform offered crypto cash-out services and even announced an ICO of its own token in 2019, but that never happened.

In April 2022, the U.S. included Hydra’s crypto wallets into sanctions list and German law enforcement shut down the platform and seized 543 bitcoin in its wallets, worth about $25 million.

Several competitors picked up the slack after Hydra: OMG!OMG!, Blacksprut and Mega Darknet Market. All three used the same bunch of deposit addresses at a “high-risk exchange with a heavy presence in Russia,” Chainalsysis said.

Another blockchain intelligence firm, TRM Labs, earlier that in the eight months since Hydra’s collapse, other darknet marketplaces received $820 million in crypto.

After Hydra’s collapse, it’s competitors have been fighting for dominance, which sometimes took extravagant forms: Vice reported that one drug marketplace, Kraken, parked a bus with painted with its logo in the center of Moscow. It also projected it advertisement on a building in Moscow, and OMG!OMG! did the same.

In May, immediately after Hydra’s closure, OMG!OMG! grabbed over 50% of total market share, but later, it suffered a distributed denial of service (DDoS) attack and lost its dominant position to Mega Darknet Market and Blacksprut, Chainalysis says. Blacksprut was also attacked later. There are known cases of darknet platforms attacking each other with the help of hired hackers, such as the KillNet group, Vice reported.

Revenues down

The downfall of Hydra led to the entire market revenue decline, Chainalysis says. If in 2021, total revenue of darknet shops (mostly drug dealing websites) was $2.6 billion, in 2022, it fell down to $1.3 billion. Average daily revenue of the market fell from $4.2 million before Hydra’s closure to $447,000 immediately after, Chainalysis says.

Closure of another drug marketplace, Bypass Shop, which has been reportedly shut dow by Russian authorities, also contributed to the overall decline. However, revenue of the drug shops has been slowly recovering since the second half of 2022, Chainlaysis wrote.

That was not the case for websites selling illicit goods other than drugs, for example, stolen personal data – their fortunes continued to go down. For example, Brian Dumps, was the biggest shop for stolen banking data in 2022, but for unknown reasons, its revenue fell almost to zero in October, Chainalysis said.