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  2. Tales from the dark side
  1. News
  2. Tales from the dark side
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Tales from the dark side

Fri, 23rd November 2018

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The Dark Web may be a hotbed of criminal activity but it’s also home to a host of successful marketplace practices

The Dark Web is an unknown entity to many, but one thing experts do know is that the markets held within it can be immense. While the black markets can’t necessarily be quantified in terms of items sold and revenues made, Felipe Thomaz, Associate Professor of Marketing, Saïd Business School, estimates that it handles transactions worth between US$800 and US$900 billion each year.

And while the common view may be that this is exclusively an illegal economy, Professor Thomaz points out that this isn’t the case. ‘The perception is that the Dark Web is threatening and that only bad things happen there. In fact, it incorporates an interesting set of technologies of which the illegal part is likely to be very small. It’s a whole set of privacy tools and much of what is on there is legitimate,’ he explains.


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Abstract blue lights
Abstract blue lights

Many Dark Web users see it as primarily a way to freely share their views, ensure privacy of their data and gain protection from snooping and tracking. And while it uses sophisticated technologies such as Virtual Private Networks, anonymous web browsing technology, encryption and cryptocurrencies, it very much acts like the World Wide Web of yesteryear – when privacy and protection wasn’t considered so necessary and businesses and governments did not have the means to exploit data for their own benefit. The fact that legitimate companies like Facebook and ProPublica maintain a presence in the Dark Web is testament to this.

That’s not to say there is not a lot of illegal activity in the space, such as the promotion of violence, assassination markets, human trafficking, child pornography and the trade of weapons, along with depositories for hacked data, as Professor Thomaz admits. To focus only on the positive, ignores a vast underworld of trade, and resulting capital flows. Nonetheless, there are so many elements of marketplaces within the Dark Web that work so efficiently that it is worth trying to better understand how and why these work – and whether or not these can transform legal marketplaces as we know them today.

Starting point

Thomaz’s study into a new breed of a Dark Net Market (DNM), aims to show that these are inherently different from legal marketplaces such as Amazon or eBay. The team had to start from scratch – researching how these markets were structured and how people interacted, comparing these interactions to standard practices.

One of the team’s first findings was that unlike the classic “six degrees of separation” concept – which suggests that any two people on Earth are six or fewer acquaintance links apart – users of DNMs only have two degrees of separation.

‘So you’re going through one other person to access anything else on the marketplace, which makes them insanely efficient,’ explains Professor Thomaz. ‘Whatever you want to find, you are two steps away from it, as opposed to having to work, search, ask and converse – it’s shocking how efficient they are, much more efficient than legal marketplaces.’

Reflection in glasses of person looking at screen

One of the reasons for this efficiency is driven by the fact that there are no subcommunities – whereas for the likes of eBay and Amazon, there can be as many as 200 communities relevant to solving a single problem.

Professor Thomaz draws a comparison to a high school community, in which a lot of people make up the community but there are subgroups of people that naturally spend time together. In contrast: ‘In the black market, you have one giant group. Whether the size of the black market is 2,000 people or 150,000, they still behave as one entity; it looks very alien when you map it out, and non-social or non-human,’ he says.

So why are there no subcommunities?

Well, all members of the DNM – vendors and buyers – are aiming to manage their personal exposure to risk. This is because they could easily be scammed; and unlike in legal entities where an individual can go to law enforcement or a marketplace moderator – there is no recourse on the Dark Web. As a consequence, users try to find out if a person is legitimate by engaging with the community – but the more they do so, the more likely it is that they make themselves visible to the authorities. And as you’re engaged in illegal activities this would come at a huge cost.

The team found that the DNM community is more integrated and engaged than the legal communities

Professor Thomaz and his team concluded that the only way to resolve this tension is to organise a community into a hub and spoke system, through which one person absorbs all of the risks of the system.

‘They’re connected to everybody, they provide you with all of the information you want, and you get lost in 
a sea of nobodies – this is what we observed. The market leaders are the ones that absorb the entire community’s risk and allow it to function, and in turn they can point you in the right direction swiftly and inform you more easily – the privacy leads to better communication and efficiency,’ he states.

woman in server room
woman in server room

This extraordinary level of connectivity is arranged in line with a star-network pattern; where a unique node in the centre connects all other network members. Amazon and eBay, by contrast, fell more in line with the “six degrees of separation” formation.

The team found that the DNM community is more integrated and engaged than the legal communities and this is perhaps why it operates more efficiently. Even under the threat of law enforcement activity, engagement levels superseded Amazon and approached the very high levels observed on the eBay community.

Privacy dividend

What this suggests – and what brands and marketeers could take on board – is that providing greater privacy for individuals can create a greater sense of community. This also could help with customer retention.

‘There’s a tendency for people to join systems in threes. For example, if you joined a gym with two friends and they later left you would lose a lot of motivation to continue, but with this sort of digital structure you never have that going in, and you’re always supported regardless of people exiting,’ Professor Thomaz suggests.

However, he questions whether certain networks, such as Facebook, would be as enjoyable if they were structured similarly to a DNM because there is often a desire for closed, local friendships rather than a more global, centralised and anonymised community.

Whatever you want to find, you are two steps away from it, as opposed to having to work, search, ask and converse

Nevertheless, as consumers become more attuned to the idea of protecting their digital footprints, there is a case for using similar software and algorithms as the DNM, which can encourage privacy while validating trust in a vendor or a buyer. Perhaps it is time for legal marketplaces to take on board community management through a central layer, using the star-network pattern as a basis to work.

‘We don’t yet know if it can work for other marketplaces,’ states Professor Thomaz. ‘However, we know it works for DNMs, and it would be interesting to try small-scale experiments to see if people prefer their privacy to be better managed and if technological advancements can be made.’

Words by Sooraj Shah

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