Silk Road as a Self-Regulating Black Market
The last place you might expect to find a singular cultural dedication to high quality products and killer customer service is the digital den of drug-dealers known as Silk Road. The Deep Web black market is among the farthest from the reach of the state. It facilitates an estimated $30 million worth of illegal transactions each year, with impunity, using the concealing tools and ethos of the cypherpunks. It is Chuck Schumer’s worst nightmare. It is also a great case study of a self-regulating black market in action.
It is remarkable that Silk Road was able to overcome its significant coordination challenges to begin with. While traditional black markets rely on intricate in-person trust networks to survive outside of the law, Silk Road is founded on pseudonymity. Merchants know that their property rights will be respected by no formal court. Customers know they can get easily ripped off by an anonymous online dealer, to say nothing of the mysterious chemicals that may lurk in their purchases. Both must initially engage in an iterated dance of blind trust: that neither is a police officer, that promises will be kept, and that neither will snitch. A game theorist might declare this solution concept untenable from the start.
Somehow, Silk Road overcame the odds. Whether due to a strong shared belief in the benefits of peaceful voluntary exchange or for the mere sake of filthy lucre, the community overcame Metcalfe’s dreaded corollary and developed credible trust mechanisms. Some of these perform functions that are widely thought to be only possible through government.
The market’s popular nickname, the “Amazon of illegal drugs,” is apt; Silk Road’s feedback mechanisms and customer services rival that of its more polite relative. Like on Amazon, merchants on Silk Road are subject to constant feedback and ratings from their customers. The standards are as high as the stakes: An improperly packaged shipment from Amazon might be an inconvenience, but on Silk Road they could spell an indictment. Product quality of everything from boutique strands of marijuana to, yes, black tar heroin, is meticulously conveyed in the comment sections of each merchant’s page. Merchants compete for the best ratings and feedback by providing stellar products and delivery to their customers; to fall behind your competitors’ rankings is to succumb to the downward spiral of digital sketchiness and dwindling sales. On Silk Road, service and integrity pay handsomely.
Continued -
http://theumlaut.com/2013/08/13/silk-road-as-a-self-regulating-black-market/