are you holding?

Say you want to buy or sell some secondhand fashion online. To determine whether the platform you intend to use is legitimate, you might look to its payment system. How does the app ensure secure transactions? Both buyers and sellers are likely to be relieved when an app provides an escrow service—that is, when a buyer purchases an item, the app steps in to process the payment and safeguard both parties by securely holding the buyer’s payment. But things seem to work differently in cryptomarkets used by people trading in illegal drugs. A new paper by Filippo Andrei and colleagues in the European Sociological Review indicates that, when it comes to drug markets, escrow systems undermine rather than enhance trust.

With a dataset of auction listings and transactions from a cryptomarket between March 2015 and January 2017, the authors find that escrow is associated with reduced sales of drugs, quantified by the volume of sales per auction listing. The authors propose two possible mechanisms for this inversion. First, escrow is associated with increased prices, which may disincentivize buyers and lead to a preference for advance payment transactions. Second, escrow may backfire by crowding out trust between traders; analyzing user reviews, the authors found that feedback posted after advance payment transactions was more positive than feedback posted after escrow transactions.Despite the cryptomarket’s technological advances, these findings suggest that drug users’ communities rely on informal social control online as well as off.

Despite the cryptomarket’s technological advances, these findings suggest that drug users’ communities rely on informal social control online as well as off. Escrow, as a potentially incompatible control mechanism, ends up crowding out trusting and reciprocal behaviors between traders—a fact that may aid law enforcement agencies hoping to tackle the dark web’s illicit drug trade.