Rewarding Honesty: An Incentive Mechanism to Promote Trust in Blockchain-Based E-commerce

Abstract

Building trust is a difficult task among strangers over a network. This is because fraud happens when the temptation to cheat becomes greater than the rewards of staying honest. The enormous growth of e-commerce has resulted in cheating and fraud becoming increasingly important issues. Advocates for blockchains argue that this new technology can effectively eliminate misconduct and promote trust among participants. However, recent field experimental studies show that fraud still exists in the blockchain-based marketplace. This article suggests a new design for the arbitration process. A trusted third party is given the right to resolve disputes and reward blockchain cryptographic tokens to honest users. We show that the optimal strategies of individual users involve delivering quality items as described and leaving honest reviews about purchased items.