A Trust Conundrum: The Influence of Third Party Mediations in Exchanges between Buyers and Sellers in Online Drug Markets

Abstract

Illegal online drug markets, known as cryptomarkets, are an ever growing phenomenon on the online web. But there are still many unanswered questions in what is currently known about the dynamics between the buyers, the sellers and the markets themselves. This paper explores the factors that influence the decision for sellers and buyers to trust one another, and for them to trust the cryptomarket. Earlier research has mostly focused on the dynamic between just the buyers and the sellers, whilst the role of the cryptomarkets themselves has been overlooked. To do so the paper looked at the use of escrow, a service offered by cryptomarkets to increase protection. We analysed data from the cryptomarket Alphabay on factors that contribute to the buyers’ and sellers’ use of escrow - choosing or posting escrow items. This paper focuses on price of items exchanged, reputation of buyers and sellers, and external cryptomarket scams. The last refers to the cryptomarkets absconding with buyers’ and sellers’ money in this paper. Results show that for sellers external scams by other cryptomarkets and the amount of money the drugs cost negatively influence their decision to post an item as escrow or not. For buyers results show that both sellers reputation and buyers reputation increase the likelihood of escrow being used, as well as price being a deciding factor to not use escrow. The outcomes show that buyers and sellers use third party mediation under different conditions, and whilst third party mediation is used frequently, institutional trust is less influential than expected.