Status Spill-Over in Cryptomarket for Illegal Goods

Abstract

Information technologies have transformed many aspects of social life, including how illegal goods are exchanged. Illegal online markets are now flourishing on various channels: the surface web (all websites accessible through a standard browser), the dark web (an encrypted internet network only accessible via anonymous browsers), and encrypted messaging applications installed on smartphones. These marketplaces take many forms, including simple web shops, chat rooms, forums, social media marketplaces, and platforms. This study focuses on the largest known darknet platform to date: AlphaBay. This cryptomarket operated from December 2014 until July 2017, when an international police operation shut it down. The dataset contains 6033 vendor profiles collected in January 2017. Using three generalized additive models (GAMs), we show that seller status positively affects sales, revenue, and sales through finalized early payment. Once sellers gain status on the platforms, they make more sales without a semi-institutionalized form of payment (e.g. escrow). On the other hand, buyers relying on status metrics as cognitive shortcuts tend to choose vendors even if they do not offer payment protection tools.