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.

The wallets that previously interacted with Hydra started transacting with OMG!OMG! wallets, and since then more than 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 drug 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 initial coin offering (ICO) of its own token in 2019, but that never happened.

In April 2022, the U.S. included Hydra’s crypto wallets into its sanctions list. 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 said that in the eight months since Hydra’s collapse, other darknet marketplaces received $820 million in crypto.

Since Hydra’s collapse its competitors have been fighting for dominance, which sometimes took extravagant forms: Vice reported that one drug marketplace, Kraken (not to be confused with the crypto exchange), parked a bus painted with its logo in the center of Moscow. It also put an advertisement on a building in Moscow; OMG!OMG! did the same.

In May, immediately after Hydra’s closure, OMG!OMG! grabbed over 50% of total market share although it later 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 at one time. 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 an entire market revenue decline, Chainalysis says. In 2021, total revenue of darknet shops (mostly drug dealing websites) was $2.6 billion; in 2022, it fell to $1.3 billion. Average daily market revenue 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 down by Russian authorities, also contributed to the overall decline. However, the drug shops' revenue 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, such as stolen personal data – their fortunes continued to go down. For example, Brain 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.