Navigating the Dark Web: Understanding the Two Types of Markets and What "Exit Scams" Are?

Research done by Giacomo, P. P. (2017), states that currently, two distinct types of marketplaces operate on the dark web. The first type, known as cryptomarkets, gathers multiple “vendors” under the management of marketplace administrators who earn commissions on sales. Cryptomarkets offer third-party services, including a payment protection feature called “escrow”. Transactions within cryptomarkets involve the use of cryptocurrencies such as Bitcoin, utilizing dark wallets to ensure the security of both sellers and buyers. Payments are held in escrow by marketplace administrators, only being released to vendors after customers have received their purchases and expressed satisfaction (Giacomo, P. P., 2017). This process enhances customer trust and security.

Figures 1 & 2: Overview of payment using escrow service (Giacomo, P. P., 2017, pp.20).

However, one risk buyers in cryptomarkets face known as "exit scams" orchestrated by marketplace administrators. These scams involve administrators abruptly locking escrow services, vendor accounts, and customer accounts without prior notice and then shutting down the market, accumulating substantial amounts of virtual currencies such as Bitcoin and Litecoin (Giacomo, P. P., 2017). Below, you will find a report published by the European Monitoring Centre for Drugs and Drug Addiction (2019), illustrating the lifetime and reasons for the closure of major markets on the dark web between 2010 and 2020. We observe that the "exit scam" method appears to be very popular among them.

Figures 3 & 4: Illustration of the lifetime and reason for closure of over 100 dark web markets between 2010 and 2020 (EU Drug Markets Report., 2019, pp. 68-69)

Additionally, with exit scams on the rise, vendors must carefully consider their choice of preferred cryptomarket for selling. In such situations, vendors should utilize clear web resources to stay informed about the current marketplaces. Comparison chart metrics can help them assess the cost of the "vendor bond" (i.e., the charge for setting up a vendor account) and enable them to choose the right platform for selling (Giacomo, P. P., 2017).

The second category comprises vendor shops, also referred to as ”single-vendor markets”. In these shops, vendors sell directly to customers without utilizing the third-party services seen in cryptomarkets (Giacomo, P. P., 2017). This direct approach enables vendors to bypass commissions on their sales. Vendor shops often specialize in specific products or services, and it’s noteworthy that many vendor shop owners simultaneously engage in trading on cryptomarkets, allowing them to cater to different market segments with unique preferences and requirements (Giacomo, P. P., 2017).

Figure 5: A close look into a "vendor shop" focused on the sale of firearms (Giacomo, P. P., 2017, pp. 14)

Figure 6: Screenshot of the AlphaBay market specializing in sales across various categories (Giacomo, P.P., 2017, pp. 12)

References:

Giacomo, P. P. (2017). Behind the curtain: The illicit trade of firearms, explosives

and ammunition on the dark web. RAND. https://www.rand.org/pubs/research_reports/RR2091.html

EU Drug Markets Report. (2019) | www.emcdda.europa.eu. https://www.emcdda.europa.eu/publications/joint-publications/eu-drug-markets-report-2019_en