Legal marketplaces are governed by federal state law, and market participants hold the right to resort to legal recourse whenever they might be faced with fraudulent behavior. Law enforcement promotes insurance, stability and transparency of commerce taking place across legal markets. Interestingly enough, illegal markets have to somehow emulate the main approaches adopted by legal markets to become successful and efficient.
A recently published thesis analyzed the structure of illegal darknet markets and the reasons underlying their success, using the [now seized] AlphaBay marketplace as an example of currently successful markets on the darknet.
An Overview of Regulation and Enforcement on AlphaBay:
The study delved into the structural characteristics and the system of enforcement on the Darknet marketplace AlphaBay and proved that this form of illegal markets largely rely on reputation, mutual trust and regulation as basic elements of success. Across a basically anonymous and private platform, such as a Tor marketplace, trust is indispensable for both vendors and customers. The analysis performed via the thesis concluded that the level of trustworthiness on Alphabay is determined via a formal feedback system that reflects vendor trust levels. Furthermore, informal reputation systems also contribute to the process of quantification of the level of trustworthiness.
Reputation and trust are closely related, as market participants cannot have one without having the other, i.e. you cannot be trustworthy without having a good reputation and you cannot build a good reputation without being trustworthy. This is a pivotal issue because previous studies concluded that law enforcement agencies can destroy darknet marketplaces if they can successfully disrupt the system of evaluation of reputation and trustworthiness level of market participants.
The regulation system implemented on AlphaBay reflects that the administrators of the marketplace work on mitigating problems resulting from incoordination. This system promotes market stability and order. Via enforcing rules, hiring workers, and putting punishment mechanisms into action on market participants who broke the rules, AlphaBay administrators exhibited efficiency and professionalism in regulating the marketplace. On the other hand, AlphaBay gave the market participants the option to enforce their very own regulation mechanisms via blacklisting dishonest market participants, filing reports of scam attempts and publicly exposing fraudulent actors with proven dishonest intentions (e.g. through the feedback system, or via posting a thread on the forum).
The findings of this thesis came congruent with the results of other studies that also concluded that illegal marketplaces on the deep web are rapidly growing and becoming more efficient and sophisticated. By the time it shut down, AlphaBay had been the biggest, busiest and longest living darknet marketplace, so its structural features are likely to be taken as a successful blueprint for emerging darknet marketplaces.
The Market Culture of AlphaBay:
Apart from the structural characteristics of AlphaBay, the thesis also delved into examining the unique market culture of this darknet marketplace in an attempt to acquire a deep understanding of the complex relationships that existed between various market participants and the specific beliefs and norms mostly valued by them. This was achieved via analysis of the effect of hacker culture on AlphaBay’s market culture, which yielded several interesting results.
Market participants were continuously examining the behavior and language of other market participants to mark them as insiders or outsiders of their familiar community of market participants. This is something that always happens in various forms of illegal markets, whether online or offline, as the potential of being busted by law enforcement agencies represents a constant risk. The thesis determined that market participants were evaluated on the basis of their technical skills which is a basic element of the hacker culture.
Masculinity and flaming were also found to be among the basic elements of the culture of illegal online marketplaces such as AlphaBay. The unique anonymous environment of AlphaBay perpetuates masculinity. Masculine tendencies could be shown via the used language (e.g. prevalence of usage of male pronouns). Flaming is apparent via showing off of masculinity by using misogynistic language. In legal markets, flaming is mostly disliked and can lead to reduced trustworthiness, yet on AlphaBay it was a part of the market culture, that reflected how market participants responded to a situation that they perceived as being unfair or inappropriate.