Advanced networking technologies have greatly fueled the growth of online digital markets. To facilitate the trading of illicit drugs, darknet marketplaces, or crypto markets, leverage encryption and anonymization technologies to hide the identity and geographical location of those engaging in drug transactions.
A recently published research paper utilizes economic sociology as a basic framework to formulate a better understanding of darknet marketplaces. The paper delves into how various economic actors promote coordination on darknet marketplaces when uncertainty exists regarding the value of drugs traded (the valuation problem), their profitability opportunities (the competition problem), and social uncertainties associated with executed transactions (the cooperation problem).
The paper relies on a digital ethnographic analysis to show that a unique social order is developed on darknet marketplaces with certain socio-technical practices. The study suggests that the valuation problem is overcome by informal institutional standardization. Also, it points out that the competition problem is solved via online competition taking place between vendors and various marketplace platforms. The study also shows that implementation of a platform based rating system helps build trust among transacting partners, who do not get to meet face-to-face, which mitigates the cooperation problem.
Platform based rating systems facilitate building trust between partners who do not know each other on a personal level. This aids in alleviating social uncertainties associated with market exchange and boosts cooperation. The study shows how the process of digitalization promotes the emergence of a novel social order on darknet drug markets. Digitalization promotes the geographical expansion of drug markets and mitigates local limitations associated with accessibility of illicit drugs, customers, and vendors. Consistent with the results of previous research studies, this study proves that darknet marketplaces provide more reliable market structures, when compared to conventional drug markets.
The study expands our understanding of the unique role of socio-technical practices in adapting with uncertainties associated with transacting on crypto markets. It also emphasizes the importance of including darknet drug markets within the economic sociology of drug markets via introduction of informal institutional practices that can overcome the aforementioned three coordination problems.
Via minimizing the uncertainty associated with the coordination problem, “stable worlds” are being developed, which represent a precondition for transactions across darknet drug markets. Nevertheless, similar markets usually need some form of uncertainty in order to be able to renew and expand. Value attributions can dramatically change as novel drugs emerge, profitable platforms can be threatened by newly established markets, and the risk of being busted persists despite technological advancements, institutional practices, conventions, social cultures, and social norms. Uncertainties are associated with external factors including disruptions associated with the sudden shutdown of certain marketplaces.
In darknet marketplaces, capitalist dynamics rely on encryption and anonymization technologies that allow users to cope with the uncertainties and risks associated with transacting on an anonymous platform. One of these technologies is decentralized markets, which offer buyers and sellers the opportunity to transact in the absence of an intermediary. As such, digitalization boosts growth across these markets. Capitalistic economic marketplaces require reduction in levels of uncertainty and a continuous process of renewal of uncertainty to grow.
Via implementing the theory of “transformative criminal innovation” on darknet marketplaces from the point of social order of modern capitalist markets, its ability to analyze the resilience of darknet drug marketplaces is also revealed. As such, disruptions induced by law enforcement agents, or voluntary shutdown may facilitate renewal of uncertainty, which is pivotal for establishing the capitalist dynamics of economic growth. Furthermore, anonymity of market users yields a paradox – opposite to traditional street drug markets, anonymity promotes the trading of high quality drugs while minimizing the risks of interventions by law enforcement agencies.
The emergence of darknet drug marketplaces are continuously challenging prohibition oriented policies of drug control. As such, policy responses at both national as well as international levels must take into account the unique structural growth features of anonymous darknet marketplaces and opportunities (such as harm reduction) and associated risks (such as accessibility and availability) accompanying this emergent phenomenon. Consequently, this paper provides a unique opportunity to analyze how darknet drug marketplaces can direct us to rethink the challenges associated with competition, valuation, cooperation, and anonymity.