The U.S. Marshals Service said Thursday it will auction roughly $18 million US in bitcoins seized last fall from Silk Road, a website that was effectively the eBay of illegal drugs.
The marshals said Thursday that they will auction the virtual "coins," consisting of sets of numbers entered in an online public ledger, via the web on June 27.
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Authorities say Silk Road generated more than $1 billion in illicit business from January 2011 to October 2013, when alleged operator Ross William Ulbricht was arrested in a public library in San Francisco. Ulbricht has pleaded not guilty. The website took commissions in bitcoins, which are hard to track.
The marshals are auctioning off 29,657 bitcoins in 10 blocks, which means buyers will need to pony up nearly $1.8 million each.
The bitcoins up for auction were contained in wallet files on the Silk Road servers and do not include the bitcoins contained on the computer hardware belonging to Silk Road owner Ross William Ulbricht, known online as "Dread Pirate Roberts."
The Marshals Service is keeping another 144,342 bitcoins, worth about $87 million at current rates, that were found on Ulbricht's computer. He's contesting their forfeiture.
Bitcoin prices fell about 6.74 per cent to $585.56 today, on the news, according to the digital currency exchange Coindesk.com.
Silk Road's closure was welcomed by Canadian bitcoin users, who said that the site had brought unwanted attention to the digital currency.
In the days following Ulbricht's arrest, the focus turned to how the shutdown of one of the most notorious bitcoin users would affect the reputation of the currency, one that has already been tarnished by its association with money laundering, tax evasion and other criminal activities.
Some speculated that the scandal might mark the start of the virtual currency's collapse. However, members of the Canadian bitcoin community felt that the shutdown of the site itself and the arrest of its owner were enough to repair the currency's tainted image.
Bitcoin users describe the currency as the first decentralized electronic currency that isn't controlled by any government or organization. Bitcoins can be purchased with traditional currency and traded anonymously for goods and services. There are no set transaction fees and the currency can be sent anywhere around the world in a similar fashion to the way electronic transfers are done in online banking but using bitcoin-specific digital addresses and encryption protocols.
The digital currency is generated by thousands of so-called miners. These are people who, working individually or in groups called "mining pools," use powerful computers to run software that solves a series of mathematical puzzles. Each time the miner solves the puzzle, they receive bitcoins, which they can trade for currency or otherwise put into circulation.
The Silk Road raid is not the first time bitcoins have attracted negative attention. In May 2013, competitive video game league E-Sports Entertainment League (ESEA) apologized to its users after admitting to harnessing their computer power to generate bitcoins without consent. The ESEA donated the $3,713 worth of bitcoins it mined to the American Cancer Society and matched that amount with an additional company donation.