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Authors: Bauman, Timothy
Advisors: Felton, Ed
Department: Woodrow Wilson School
Class Year: 2013
Abstract: Over the past two years, anonymous online drug markets have grown considerably. A study from the first half of 2012 estimated that the Silk Road, one such site, sold about US$1.2 million worth of goods per month. This thesis describes the properties of the markets on the Silk Road and Black Market Reloaded, a similar site, and analyzes the effect of reputation on users’ behavior. Using data scraped from each site daily between November 2012 and March 2013, this thesis characterizes the activity on each site and updates the earlier study’s description of the Silk Road from early 2012. It also compares the Silk Road to Black Market Reloaded, from which the data was also scraped. The data shows that vendors on the Silk Road sell more than US$9.4 million worth of goods each month, and the site operator earns more than US$600,000 from commissions. These numbers are doubling every two and a half months. Black Market Reloaded is smaller, facilitating between US$300,000 and $400,000 of sales each month and collecting about US$15,000 per month for the site operator. Because the sites face unique challenges with scammers, these sites rely on reputation systems to enforce good behavior. A reputation system is a feature of a site that calculates numbers for users that correspond to their trustworthiness based on other users’ feedback. This thesis compares the reputation systems on the Silk Road and Black Market Reloaded. Because governments do not enforce transactions, there is an extra burden on the sites’ reputation systems. This thesis uses a game theoretic model of the sites’ reputation and escrow systems and shows that they increase the odds of cooperation. This thesis also finds that the Silk Road’s reputation system appears to be more effective in preventing scamming than Black Market Reloaded’s, so reputation has a weaker effect on a Silk Road seller’s prices and sales. This thesis discusses the expectation that the market for the Silk Road, Black Market Reloaded, and similar sites will continue to grow. Finally, this thesis proposes law enforcement strategies, although these strategies’ costs may outweigh the benefits.
Extent: 120 pages
Access Restrictions: Walk-in Access. This thesis can only be viewed on computer terminals at the Mudd Manuscript Library.
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Woodrow Wilson School, 1929-2016

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