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A  State  of  Trust  without  the  State:  The  Political  Economy  of  Pseudonymity  and  Cybercrime    Henry  Farrell    Draft  paper  –  please  don’t  cite  or  circulate  without  permission      

There’s  a  significant  and  interesting  disagreement  between  Margaret  Levi  

and  Russell  Hardin  on  the  relationship  between  trust  and  the  state.  In  a  key  early  

book  chapter  written  for  the  Russell  Sage  project  on  trust,  Levi  (1998)  argues  

against  scholars  who  suggest  that  the  state  somehow  drives  out  trust.  Here,  she  

suggests  that  while  the  state  often  “reduce[s]  the  need  for  citizens  to  trust  each  

other,”  it  also  “may  facilitate  trust  by  solving  the  essential  information,  monitoring  

and  enforcement  problems”  (p.84)  In  this  account,  the  most  important  attributes  of  

the  state  in  creating  interpersonal  trust  “would  seem  to  be  the  capacity  to  monitor  

laws,  bring  sanctions  against  lawbreakers,  and  provide  information  and  guarantees  

about  those  seeking  to  be  trusted”  (p.85).  Even  more  importantly,  governmental  

actors  can  inspire  trust  through  appearing  to  place  principle  over  short  term  self  

interest,  through  fair  and  impartial  procedures,  and  through  contingent  consent.  

Levi  here  makes  the  major  claims  that  states  can  foster  trust  between  their  citizens  

and  inspire  trust  in  themselves.  

Russell  Hardin  (1998)  takes  a  very  different  view.  He  argues  that  we  do  not  –  

and  cannot  –  know  enough  about  the  government  to  trust  it.1  Our  understanding  of  

government  officials’  incentives  is  far  too  limited  for  us  to  be  able  to  say  that  we  

trust  them.  Since  few  people  understand  how  government  operates,  general  social  

                                                                                                               1  See  Byrne  et  al.  (1977)  for  a  strongly  dissenting  perspective.  

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acceptance  of  government’s  social  legitimacy  cannot  be  categorized  as  a  form  of  

trust,  since  it  is  not  based  in  reasoning  over  knowledge.  The  capstone  volume  of  the  

Russell  Sage  project,  co-­‐authored  by  Hardin  and  Levi,  as  well  as  Karen  Cook  (2005),  

goes  on  to  argue  that  the  state  makes  trust  semi-­‐irrelevant  among  citizens.  On  their  

view,  “trust  is  no  longer  the  central  pillar  of  our  social  order,  and  it  may  not  even  be  

very  important  in  most  of  our  cooperative  exchanges”  (p.1).  As  societies  become  

more  complex,  we  rely  less  on  interpersonal  relationships  and  trust,  and  more  on  

impersonal  institutions.  Trust  becomes  a  complement,  and  perhaps  a  kind  of  social  

lubricant,  but  it  plays,  at  best,  a  secondary  role.    

The  tensions  over  trust,  the  state  and  large  impersonal  institutions  play  out  

in  interesting  ways  on  the  Internet,  perhaps  the  largest  scale  infrastructure  for  

complex  exchange  and  interdependence  that  advanced  industrialized  societies  have  

ever  created.  The  Internet  plays  a  fundamental  role  in  supporting  social,  political  

and  economic  activities.  Yet  it  does  so  in  complicated  ways.    

On  the  one  hand,  many  forms  of  social  interaction  on  the  Internet  are  

supported  by  the  usual  array  of  vast  indifferent  forces  that  constitute  modern  

society.  For  example,  when  we  transact  with  Amazon,  or  even  with  traders  on  eBay,  

we  do  so  in  the  knowledge  that  our  partners  in  exchange  are  governed  by  incentives  

of  both  law  and  corporate  reputation.    

However,  the  Internet  also  supports  a  wide  variety  of  more  intimate  forms  of  

exchange,  in  which,  arguably,  personal  trust  is  implicated.  We  may  never  meet  

someone  with  whom  we  are  engaged,  or  even  know  their  real  name.  Even  so,  we  

may  come  to  trust  them  in  a  real  if  limited  sense.  We  can  make  judgments  from  our  

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repeated  interactions  about  the  degree  to  which  their  interests  encapsulate  our  

own,  and  their  likely  propensity  to  deal  with  us  honestly  in  the  future.  

Complicated  forms  of  trust  exchange,  which  combine  long  run  pseudonymity  

(an  invented  name  or  identity  maintained  consistently  across  a  series  of  

transactions),  and  both  costly  and  costless  efforts  to  signal  trustworthiness,  play  an  

important  role  among  criminals  on  the  Internet.  Criminals  cannot  usually  rely  on  the  

large  scale  impersonal  forces  summoned  and  maintained  by  the  state  in  order  to  

underpin  their  transactions.  Yet,  as  Diego  Gambetta  (1996,  2009)  and  others  have  

pointed  out,  they  are  typically  equally  incapable  of  appealing  to  personal  character  

as  a  source  of  trustworthiness.  Most  criminals  make  a  significant  part  of  their  

livelihoods  through  behaving  in  untrustworthy  ways  –  they  are  a  self-­‐selecting  

group  that  is  much  less  likely  to  be  trustworthy  than  even  randomly  chosen  

individuals.  Finally,  online  criminals  cannot  leverage  more  intimate  connections  

such  as  locality  and  family  as  a  source  of  trustworthiness,  in  the  ways  that  their  

offline  brethren  can,  without  forgoing  the  most  valuable  benefit  of  the  Internet  –  

that  it  can  vastly  increase  the  supply  of  potential  interlocutors  and  partners  for  

exchange.  

Thus,  online  criminal  behavior  can  be  seen  as  a  very  useful  laboratory  for  

whether  and  when  a  ‘state  of  trust’  can  develop  without  a  fully  fledged  state.  It  tests  

whether  trust  can  emerge  under  exigent  conditions,  where  neither  proper  state  

institutions,  nor  expectations  about  personal  character,  nor  intimate  social  

networks  can  provide  any  backstop.  By  examining  how  and  whether  trust  emerges,  

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we  can  begin  to  think  more  clearly  about  the  role  of  trust  in  supporting  a  social  

order.    

On  the  one  hand,  if  trust  can  emerge  at  all  from  so  unpromising  a  set  of  initial  

conditions,  it  suggests  that  trust  is  still  relevant,  and  sometimes  primary,  even  in  

networks  that  would  seem  better  fitted  to  impersonal  exchange.  On  the  other,  it  

allows  us  to  think  more  clearly  about  the  minimal  set  of  characteristics  that  an  

order-­‐providing  entity  (such  as  a  state)  has  to  provide  in  order  to  sustain  trust  

among  a  significant  number  of  actors.    

As  I  discuss  below,  criminals  have  tended  to  adopt  a  Hobbesian  solution  to  

the  problems  of  online  trust  by  outsourcing  the  policing  of  trust  relations  to  a  third  

party.  However,  these  third  parties  themselves  can  potentially  be  untrustworthy.  

Trust  among  criminals  –  when  it  happens  –  happens  without  the  state,  since  

criminals  cannot  rely  on  state  enforcement.  Yet  the  mechanisms  that  they  do  rely  on  

resemble  radically  stripped  down  and  highly  limited  versions  of  the  Hobbesian  

state.  They  thus  provide  a  kind  of  miniature  world  in  which  we  can  study  the  

relationship  between  the  state  and  authority  more  closely.  

  In  this  essay,  I  first  describe  in  greater  specifics  the  role  of  online  criminality,  

detailing  a  fundamental  problem  of  trust  that  plagues  many  criminals  on  the  

Internet.  I  then  go  on  to  examine  the  ways  in  which  criminals  have  tried  to  

overcome  these  problems,  building  communities  and  even  institutions  that  

approximate  to  some  of  the  state  functions  identified  in  Levi’s  work.  I  conclude  by  

suggesting  that  these  communities  provide  evidence  for  Levi’s  contentions,  and  

against  Hardin’s,  in  a  rather  unexpected  environment.  The  most  promising  source  of  

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honor  among  thieves  (or,  at  least,  drug  dealers  and  their  clients),  appears  to  be  a  set  

of  institutional  arrangements  which,  if  you  squint  a  little,  resemble  a  stripped  down  

state.  

 

Trust  and  Online  Criminality  

 

Criminal  activity  is  likely  very  common  on  the  Internet,  but  is  for  obvious  reasons  

difficult  to  measure.  The  debate  about  online  criminals  has  been  characterized  more  

by  lurid  speculation  than  by  serious  research.  Not  only  do  journalists  have  the  usual  

incentives  to  portray  the  risks  in  the  most  frightening  manner  possible,  but  neither  

the  criminals  themselves,  nor  those  who  work  against  them,  have  much  incentive  to  

provide  better  information.  Clearly,  criminals  themselves  have  good  incentive  to  

keep  a  low  profile.  Yet  online  security  firms,  who  have  more  data  than  most  about  

the  true  extent  of  the  threat  of  online  criminals,  have  an  obvious  incentive  to  

exaggerate  the  risk  so  as  to  get  more  customers.  

  This  is  unfortunate.  What  evidence  we  do  have  suggests  that  there  is  a  lot  

there  to  study.  Tyler  Moore,  Richard  Clayton  and  Ross  Anderson,  in  a  widely  cited  

overview  article,  suggest  that  online  criminal  networks  have  succeeded  in  

recreating  many  of  the  advantages  of  the  division  of  labor  on  a  very  wide  scale.  For  

example,  in  online  credit  card  fraud,  hackers  work  to  secure  large  databases  of  

stolen  credit  card  numbers  illicitly,  selling  them  in  bulk  packages  to  brokers,  who  in  

turn  break  up  these  packages  and  sell  them  to  cashiers,  who  recruit  (sometimes  

unwitting)  mules  to  send  on  goods  bought  with  the  cards.  

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  So  many,  so  various,  and  so  complex  a  set  of  organized  activities  raises  many  

research  questions.  This  paper  focuses  on  one  such  question:  what  is  the  

relationship  between  pseudonymity  and  trust  among  lawbreakers  on  the  Internet?  

Some  forms  of  criminality  (e.g.  spam)  do  not  necessarily  directly  implicate  

trust.  Many  spammers  prey  on  our  trust,  but  others  may  sincerely  want  to  sell  us  

products  that  we  do  not  want;  the  distinction  between  legitimate  commercial  email  

and  obnoxious  spam  is  notoriously  difficult  to  fix.    

Others  parasitize  or  predate  upon  the  forms  of  impersonal  exchange  that  the  

Internet  has  facilitated,  seeking  to  crack  servers  or  fool  individuals  so  as  to  gain  

access  to  personal  information  that  can  be  used  e.g.  to  gain  access  to  their  bank  

accounts.  Here,  there  are  problems  of  trust  but  they  are  one-­‐sided;  I,  as  a  scammer,  

try  to  fool  you  into  believing  that  I  have  access  to  the  hidden  funds  of  a  deposed  

Nigerian  dictator,  in  order  to  persuade  you  to  provide  me  your  financial  details,  and,  

perhaps,  money  to  lubricate  the  process  of  getting  access  to  his  bank  account.  

Successful  conmen  are  artists  of  the  manipulation  of  trust.    

Others  yet  involve  forms  of  exchange  that  are  outlawed  (e.g.  exchange  of  

hacked  credit  card  numbers;  the  buying  and  selling  of  illegal  drugs)  but  potentially  

of  value  to  both  transacting  parties.  Here,  the  problem  of  trust  is  two  sided,  and  

more  potentially  interesting,  since  both  parties  to  a  potential  transaction  will  want  

the  transaction  to  take  place,  but  will  fear  deception  by  the  other  party.  This  means  

that  they  have  some  common  incentive  to  build  arrangements  that  will  facilitate  the  

transaction.  Con  artists  and  their  victims  have  incentives  that  are  ultimately  

incompatible  –  the  one  wants  to  cheat,  the  other  not  to  be  cheated.  Yet  many  

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transactors,  although  they  may  reasonably  fear  being  cheated,  want  to  arrive  at  a  

mutually  acceptable  arrangement  that  might  foster  trustworthy  behavior.  The  

problem  for  these  transactors  is  precisely  how  to  eliminate  the  risk  of  cheating  on  

both  sides.  

These  difficulties  are  specific  examples  of  a  broader  set  of  problems.  As  Diego  

Gambetta  (e.g.  1996,  2009)  has  argued  across  a  variety  of  books  and  articles,  

criminals  have  difficulty  both  in  identifying  each  other  and  in  communicating  

credibly  with  each  other.  The  Sicilian  Mafia  and  its  American  offshoot  have  evolved  

an  elaborate  series  of  mechanisms  for  identifying  whether  someone  is  a  member,  

although  these  mechanisms  can  be  gamed  (ibid).  More  broadly:  

 

Criminals  are  constantly  afraid  of  being  duped,  while  at  the  same  time  they  

are  busy  duping  others.  They  worry  not  only  about  the  real  identity,  

trustworthiness,  or  loyalty  of  their  partners  but  also  about  whether  their  

partners  are  truthful  when  claiming  to  have  interests  and  constraints  aligned  

with  theirs  (p.xvii,  Gambetta  2009).  

 

 

Such  concerns  are  described  in  less  elegant  terms  by  a  frustrated  commenter  on  the  

“Hidden  Wiki,”  a  site  that  lists  addresses  for  both  licit  and  illicit  TOR  Hidden  

Services  (see  below  for  discussion  of  what  TOR  Hidden  Services  are).  

 

I  have  been  scammed  more  than  twice  now  by  assholes  who  say  they’re  legit  when  I  say  I  want  to  purchase  stolen  credit  cards.  I  want  to  do  tons  of  

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business  but  I  DO  NOT  want  to  be  scammed.  I  wish  there  were  people  who  were  honest  crooks.  If  anyone  could  help  me  out  that  would  be  awesome!  I  just  want  to  buy  one  at  first  so  I  know  the  seller  is  legit  and  honest.2    

The  anonymous  commenter’s  desire  to  meet  ‘honest  crooks’  nicely  illustrates  

problems  of  trust  among  criminals  on  the  Internet.  It  is  hard  for  a  buyer  to  ensure  

that  she  will  not  be  ripped  off.  If  she  hands  over  the  money  before  receiving  the  

goods,  the  seller  may  disappear,  or  provide  her  with  expired  credit  card  numbers  

(stolen  credit  card  numbers  quickly  lose  their  value).  The  vendor  faces  the  same  

problem  in  reverse  –  if  she  provides  the  goods  before  receiving  the  money,  she  will  

likely  never  see  the  money.  Each  faces  the  strategic  problem  and  dismal  equilibrium  

identified  in  Partha  Dasgupta’s  (2000)  trust  game;  each,  consequently  has  good  

reason  not  to  play  in  the  first  place.  

This  problem  is  exacerbated  by  a  feature  of  the  Internet  that  is  otherwise  of  

enormous  advantage  to  criminals  in  other  ways.  If  criminals  are  technically  adept,  

they  can  often  preserve  a  higher  degree  of  anonymity  than  they  could  in  physical  

interactions  (although  even  very  technically  adept  users  can  make  compromising  

mistakes  if  they  are  not  careful).  

This,  obviously,  can  benefit  them  greatly.  Criminals  do  not  want  to  be  

entrapped  or  otherwise  identified  by  law  enforcement.  Yet  it  also  creates  a  far  

greater  burden  for  trust  among  criminals.  If  you  do  not  know  whom  you  are  dealing  

with  in  a  transaction,  it  makes  it  far  harder  to  trust  your  interlocutor.  On  the  one  

hand,  the  Internet  makes  it  easier  to  conceal  your  identity  e.g.  if  you  are  buying  or  

                                                                                                               2  See  http://www.thehiddenwiki.net/tor-­‐links-­‐directory/name/tor-­‐carding-­‐forums/  (checked  September  18,  2014).  

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selling  illicit  goods  or  services,  so  that  you  are  less  likely  to  be  caught  and  convicted.  

New  technologies  (described  in  the  next  section)  can  greatly  facilitate  anonymity.  

On  the  other,  anonymity  makes  it  harder  to  carry  out  successful  economic  

exchanges.  It  lowers  the  cost  –  perhaps  dramatically  –  of  cheating  buyers  if  you  are  a  

seller,  and  cheating  sellers  if  you  are  a  buyer.  

The  partial  solution  that  many  criminals  have  adopted  is  pseudonymity.3  If  

you  maintain  a  pseudonymous  identity  for  a  period  of  time,  you  may  demonstrate  a  

pattern  of  behavior  that  suggests  that  you  are  trustworthy.  As  your  pseudonymous  

identity  becomes  identified  with  trustworthy  behavior,  it  becomes  more  valuable.  A  

trustworthy  pseudonym,  in  this  context,  plays  much  the  same  role  as  a  corporate  

identity  can  in  David  Kreps’  (1990)  work  on  corporate  reputation.  It  becomes  a  

marker  that  may  be  associated  with  expectations  that  those  bearing  the  marker  will  

behave  in  a  trustworthy  way  in  situations  that  are  impossible  to  anticipate  perfectly  

ex  ante.    

It  is  even  possible,  as  with  corporate  identity,  that  a  valuable  pseudonym  can  

be  passed  on  to  a  new  individual.  The  individual  running  the  illegal  online  Silk  Road  

marketplace  called  himself  the  Dread  Pirate  Roberts,  referring  to  a  character  with  a                                                                                                                  3  Of  course  there  are  many  excellent  reasons  why  one  might  want  to  maintain  a  pseudonym  apart  from  the  desire  to  engage  in  illegal  conduct.  For  example,  many  women  find  themselves  systematically  harassed  if  they  say  unpopular  things  on  the  Internet;  they  might  reasonably  wish  to  maintain  a  gendered  or  non-­‐gendered  pseudonymous  identity  so  that  they  can  maintain  a  consistent  role  in  conversation  while  making  it  difficult  for  harassers  to  figure  out  who  they  were.  As  per  Richard  Sennett’s  arguments  about  eighteenth  century  coffee  houses,  pseudonymous  or  anonymous  identities  may  also  allow  forms  of  play  with  identity  that  would  not  be  possible  were  individuals  named.  More  succinctly;  my  intention  is  not  to  tar  pseudonymity  by  association  with  criminal  activity  so  much  as  to  suggest  that  criminals,  like  many  other  classes  of  individuals  with  very  different  motivations,  may  wish  to  maintain  pseudonymous  identities.  

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serial  identity  from  the  cult  movie,  The  Princess  Bride,  and  also  claiming  that  he  was  

not  himself  the  original  Dread  Pirate  Roberts,  and  would  in  time  he  would  sell  or  

pass  on  the  title  to  someone  else.4  These  claims  may  have  been  untrue  –  federal  

prosecutors  claim  that  they  have  identified  one  individual  who  both  created  and  

held  onto  the  identity.  However,  after  his  arrest  the  Silk  Road  was  recreated  under  a  

new  individual,  who  claimed  the  same  title,  clearly  seeing  it  as  a  valuable  one.  The  

trustworthiness  adheres  to  the  pseudonym  rather  than  to  the  individual,  and  to  the  

extent  that  a  reputation  for  trustworthiness  provides  a  valuable  income  stream  

stretching  into  the  future,  it  may  itself  serve  to  anchor  trust  relationships,  by  giving  

the  possessor  of  the  pseudonym  incentive  to  be  trustworthy.  

Of  course,  Internet  based  pseudonyms  have  their  own  problems.  On  their  

own,  they  are  costless  signals.  Without  some  external  structure  of  validation,  

anyone  can  claim  to  be  the  Dread  Pirate  Roberts,  and  it  will  be  impossible  to  

distinguish  the  real  Pirate  from  his  imitators.      

                                                                                                               4  The  title  was  likely  chosen  specifically  so  as  to  suggest  that  the  role  could  be  transmitted  to  others.  In  the  script  for  The  Princess  Bride,  Westley  discusses  the  role  of  the  Dread  Pirate  Roberts  as  follows:  “Roberts  and  I  eventually  became  friends.  And  then  it  happened.  Well,  Roberts  had  grown  so  rich,  he  wanted  to  retire.  So  he  took  me  to  his  cabin,  and  told  me  his  secret.  “I  am  not  the  Dread  Pirate  Roberts”,  he  said.  “My  name  is  Ryan.  I  inherited  the  ship  from  the  previous  Dread  Pirate  Roberts,  just  as  you  will  inherit  it  from  me.  The  man  I  inherited  it  from  was  not  the  real  Dread  Pirate  Roberts  either.  His  name  was  Cummerbund.  The  real  Roberts  has  been  retired  fifteen  years  and  living  like  a  king  in  Patagonia.”  …  Then  he  explained  that  the  name  was  the  important  thing  for  inspiring  the  necessary  fear.  You  see,  no  one  would  surrender  to  the  Dread  Pirate  Westley.  So  we  sailed  ashore,  took  on  an  entirely  new  crew,  and  he  stayed  aboard  for  a  while  as  first  mate,  all  the  time  calling  me  Roberts.  Once  the  crew  believed,  he  left  the  ship,  and  I  have  been  Roberts  ever  since.  Except  now  that  we’re  together,  I  shall  retire  and  hand  the  name  over  to  someone  else.  Is  everything  clear  to  you?”    

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Other  problems  abound.  The  anonymous  commenter  cited  above  suggests  

that  she  wants  to  test  the  quality  of  the  goods  first,  by  buying  a  single  credit  card,  

before  committing  further.  While  this  may  weed  out  casual  con  artists  (who  will  not  

have  any  valid  credit  cards),  it  will  do  little  to  deter  more  sophisticated  scammers,  

who  may  deal  fair  at  first  in  order  better  to  gull  the  buyer  into  making  a  larger  

commitment  downstream.  Finally,  when  the  commenter  also  suggests  that  she  

would  like  an  introduction  to  someone  who  will  not  rip  her  off,  she  is  not  displaying  

any  very  great  understanding  of  the  incentive  structures.  Since  the  people  providing  

her  with  recommendations  are  themselves  anonymous  or  pseudonymous,  there  is  

nothing  to  stop  a  scammer  recommending  herself  as  a  trustworthy  business  

partner.    

In  short,  exactly  the  features  that  recommend  online  interactions  to  criminals  

make  it  even  more  difficult  for  them  to  trust  each  other.  The  Internet  makes  it  easy  

to  be  anonymous,  or  pseudonymous,  concealing  one’s  identity  from  law  

enforcement.  But  just  these  same  features  make  it  easy  to  scam  other  criminals,  

manufacturing  and  discarding  identities  as  needed  in  order  to  rip  them  off,  without  

any  very  great  likelihood  of  retaliation.  

   

 

New  tools  for  exchange  on  the  Internet  

 

Many  early  prominent  boosters  of  the  Internet  were  libertarians,  convinced  that  it  

provided  an  alternative  means  of  social  organization  that  would,  over  time,  

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undermine  the  state.  Early  believers  emphasized  the  way  in  which  the  Internet  had  

no  central  node  that  e.g.  a  government  could  seize  to  control  communication,  but  

instead  was  a  ‘distributed  network,’  which  provided  a  proliferation  of  multiply  

redundant  routes  through  which  information  could  move  from  one  point  to  another.  

In  the  words  of  one  frequently  repeated  aphorism,  the  Internet  “interpreted  

censorship  as  damage,  and  routed  around  it.”    

However,  these  grand  pronunciations  turned  out  to  be  wildly  over-­‐

optimistic.  In  fact,  governments  have  been  able  to  successfully  identify  a  variety  of  

weak  points  in  the  Internet,  and  employ  censorship  technologies  exploiting  them  to  

e.g.  crack  down  on  political  and  religious  dissidents  (Deibert  ed.  2008).  

Furthermore,  claims  that  the  Internet  was  a  true  distributed  network  turned  out  to  

be  incorrect,  making  the  Internet  significantly  more  vulnerable  to  censorship.  

Finally,  mainstream  online  payment  technologies  involve  banks  and  credit  card  

issuers,  and  are  far  more  vulnerable  to  state  oversight  and  investigation,  thwarting  

many  criminal  networks.    For  example,  when  authorities  have  been  able  to  take  over  

pedophile  websites,  they  have  often  been  able  to  use  credit  card  payment  histories  

to  identify  and  prosecute  the  sites’  members  across  multiple  jurisdictions.  

  Some  so-­‐called  ‘cypherpunks’  advocated  more  far  reaching  ways  of  building  

exchange  networks  that  could  evade  the  surveillance  of  the  state,  and  over  time  

corrode  it.  The  mathematician  and  activist  David  Chaum  proposed  so-­‐called  ‘mix  

networks,’  which  would  combine  strong  public  key  encryption  and  carefully  

designed  protocols,  allowing  people  to  exchange  information  in  ways  that  made  it  

extremely  hard  to  work  out  who  was  talking  to  who.  Chaum  and  others  also  sought  

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to  use  encryption  to  develop  cybercurrencies,  which  would  again  use  encryption  to  

make  it  hard  to  work  out  who  was  paying  who.    

Cypherpunks  hoped  that  these  and  other  technologies  would  weaken  and  

perhaps  destroy  the  state,  as  its  fiscal  base  dissolved  into  a  plethora  of  untraceable  

transactions.  They  recognized  that  these  technologies  could  be  used  for  malign  

purposes  –  one  notorious  paper  proposed  the  creation  of  an  anonymized  market  in  

assassinations,  but  saw  this  either  as  the  necessary  price  of  freedom,  or  as  

potentially  beneficial  (if  e.g.  the  people  assassinated  were  high  government  

officials).    

These  sweeping  prognostications  have  not  come  to  pass,  nor  are  likely  to.  

However,  they  did  lead  to  two  broadly  deployed  technologies,  which  have  been  used  

by  actors  interested  in  avoiding  government  attention.5  Chaum’s  “Mix  Network”  is  a  

direct  ancestor  of  TOR  (‘The  Onion  Router’)  a  widely  used  system  piggybacking  on  

the  Internet  that  provides  a  far  greater  degree  of  anonymity  than  conventional  

Internet  protocols.  In  particular,  Tor  allows  users  to  access  ‘Hidden  Services’  –  sites  

that  are  completely  invisible  to  users  who  have  not  installed  specific  browser  

software,  are  unreachable  unless  you  already  have  the  address,  and  are  effectively  

nearly  impossible  to  trace  unless  the  site  owner  makes  a  technical  error.6  

                                                                                                               5  The  claims  made  in  this  paper  are  sufficiently  broad  that  they  do  not  require  a  detailed  description  of  the  specifics  of  these  technologies.  For  an  introduction  to  TOR’s  Hidden  Networks  service,  see  https://www.torproject.org/docs/hidden-­‐services.html.en.  For  a  useful  and  user  friendly  discussion  of  Bitcoin,  see  Michael  Nielsen’s  primer  at  http://www.michaelnielsen.org/ddi/how-­‐the-­‐bitcoin-­‐protocol-­‐actually-­‐works/.    6  Documents  leaked  by  Edward  Snowden  suggest  that  even  national  intelligence  agencies  have  enormous  difficulties  in  cracking  TOR.  The  FBI  claims  that  the  “Silk  Road”  website,  which  will  be  discussed  in  the  main  part  of  the  paper,  was  made  

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Chaum’s  and  others’  proposals  for  digital  currencies  based  on  encryption  

foreshadowed  the  creation  of  Bitcoin  –  a  distributed  currency  that  has  enjoyed  

enormous  publicity  and  significant  growth  in  acceptance  over  the  last  eighteen  

months.  While  it  is  not  completely  impossible  to  trace  Bitcoin  transactions  (the  

protocol  relies  on  a  publicly  shared  ‘blockchain’  recording  all  transactions),  it  is  

difficult  and  inconvenient.  Furthermore,  there  are  ways  in  which  transactors  can  

‘mix’  Bitcoin  transactions  together,  making  it  harder  to  distinguish  them  from  each  

other.  

These  two  technologies  have  a  very  wide  variety  of  legitimate  uses.  For  

example,  the  TOR  network  was  used  by  dissidents  to  access  websites  during  the  

Arab  Spring.  Bitcoin  is  not  a  generally  recognized  currency,  but  is  accepted  by  many  

legitimate  businesses  for  a  variety  of  transactions.  Even  so,  these  technologies  are  

obviously  attractive  to  some  criminals.  Few  lawbreakers  want  to  be  caught.  Just  as  

TOR  helps  dissidents  communicate  in  a  clandestine  fashion,  it  helps  criminals  to  

communicate  with  each  other  so  as  to  find  vendors,  customers  and  partners.  Bitcoin  

allows  criminals  to  exchange  money  using  a  system  that  is  far  more  opaque  than  the  

conventional  financial  system  (which  may  flag  unusual  movements,  report  

suspicious  transactions  under  ‘know  your  customer’  laws,  or  provide  aggregate  data  

to  law  enforcement  authorities  for  analysis).  

Even  if  these  technologies  help  criminals  avoid  law  enforcement,  they  do  

little  to  make  it  easier  for  criminals  to  trust  each  other,  and  may  indeed  make  it  

                                                                                                                                                                                                                                                                                                                                         vulnerable  by  a  configuration  error.  However,  technically  minded  critics  have  suggested  that  there  are  inconsistencies  in  the  FBI’s  account,  and  that  it  may  be  engaged  in  “parallel  construction”  to  conceal  the  actual  methodologies  involved.  

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harder.    They  promote  anonymity  or  pseudonymity  at  the  expense  of  accountability.  

Tor  Hidden  Services  allow  individuals  to  set  up  exchanges  that  are  more  difficult  for  

law  enforcement  to  track,  but  also  make  it  hard  for  individuals  who  feel  they  have  

been  cheated  to  find  recourse.  Unless  they  have  specific  personal  information,  they  

will  find  it  hard  to  track  down  cheaters  offline.  Similarly,  Bitcoin  provides  a  

distributed  and  difficult-­‐to-­‐track  currency  that  supports  payments,  but  one  that  is  

vulnerable  to  fraud  –  once  Bitcoins  have  been  transferred,  like  cash,  they  are  very  

nearly  untraceable.  

The  problems  described  in  this  and  the  previous  section  create  a  major  

challenge  for  criminals  seeking  to  make  use  of  the  Internet.  Specifically,  they  create  

a  need  to  build  mechanisms  of  accountability  and  identification.  If  a  criminal  wishes  

to  gain  trust  from  others,  she  will  be  well  advised  to  somehow  make  herself  

accountable  to  them.  As  Thomas  Schelling  notes  (1960),  the  right  to  be  sued  is  a  

very  valuable  one.  Criminals,  who  cannot  be  sued  in  ordinary  legal  processes,  have  a  

strong  incentive  to  come  up  with  some  proxy.  If  she  furthermore  wants  to  take  

advantage  of  pseudonymity  to  build  a  long  term  reputation  for  reliability,  she  will  

need  to  somehow  to  prevent  others  from  using  her  pseudonym  to  cheat  the  gullible  

and  trashing  her  reputation.    

Sometimes,  it  will  be  possible  to  develop  these  mechanisms  offline.  There  is  

far  less  good  research  than  one  would  like  on  the  relationship  between  offline  and  

online  criminal  networks.  However,  one  reason  why  they  might  merge  is  that  online  

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criminals  can  benefit  from  the  accountability  provided  by  the  offline  network  to  

facilitate  engaging  in  certain  kinds  of  sophisticated  transactions.7    

Sometimes,  it  may  make  better  sense  to  create  online  mechanisms  for  

underpinning  trust  and  accountability.    I  turn  to  this  in  the  next  section.  

 

Creating  Order  Without  a  Full  State  

 

The  most  obvious  solution  to  the  problem  of  trust  on  the  Internet  is  to  join  or  

create  some  kind  of  community.  As  scholars  such  as  Michael  Taylor  (1987)  have  

observed,  communities  provide  a  space  for  multi-­‐faceted  transactions  in  which  

people  can  get  to  know  each  other  over  time,  and  hence  potentially  solve  the  

problems  of  anarchy.  Well  working  communities  enforce  honest  behavior  through  

decentralized  mechanisms.  Everyone  is  aware  of  the  norms  governing  the  

community,  and  upholds  them.  People  who  do  not  conform  to  these  norms  are  

punished,  or  actively  shunned  or  driven  away.  

However,  Taylor’s  anarchic  communities  only  offer  a  highly  imperfect  

solution  to  online  criminals  trying  to  solve  the  problem  of  trust.  First,  they  scale  

badly.  As  game  theoretic  models  demonstrate,  organizations  with  centralized  

enforcement  are  able  to  enforce  honesty  over  much  larger  populations  than  

                                                                                                               7  Of  course  this  is  not  the  only  possible  reason.  It  may  also  be  that  offline  criminal  organizations  can  use  their  notoriously  effective  powers  of  persuasion  to  encourage  online  criminals  with  lucrative  businesses  to  come  under  their  protection.  It  may  also  be  that  offline  criminal  networks  have  better  opportunities  to  provide  political  protection,  especially  in  countries  like  Ukraine  and  Russia,  where  the  distinction  between  gangsters  and  legitimate  businessmen  with  strong  state  connections  is  often  less  distinct  than  one  might  like.  

  17  

communities  that  rely  on  purely  decentralized  enforcement  (Calvert  1995).  Second,  

they  assume  a  relatively  static  population  of  actors.  If  people  are  free  to  pretend  to  

be  other  people  within  the  community,  or  to  leave  the  community  under  one  

identity  and  rejoin  under  another  or  to  maintain  multiple  independent  and  

apparently  unconnected  identities  within  the  community,  then  community  

enforcement  becomes  far  easier  to  game,  and  far  more  difficult  to  enforce.  

Criminals  have  created  communities  online,  but  typically  have  tried  to  

combine  elements  of  community  enforcement  with  elements  of  hierarchy.  The  most  

obvious  –  and  most  crucial  –  way  in  which  hierarchy  structures  community  is  

through  assigning  (and  to  some  limited  extent  policing)  identities.  For  example,  

Afroz  et  alia  use  data  dumps  (presumably  generated  by  hostile  actors)  to  examine  

five  shady  online  communities.  These  communities  were  involved  in  very  different  

activities,  ranging  from  generic  online  crime  and  malfeasance,  through  ‘black  hat’  

search  engine  optimization  (which  is  not  illegal,  but  liable  to  get  perpetrators  

punished  severely  by  search  engines  if  detected),  credit  card  fraud  and  exchanging  

pirated  movies.  Despite  this,  all  five  shared  similar  forms  of  organization.  

Afroz  et  al.  identify  each  community  as  having  a  very  small  group  of  

administrators,  who  were  often  founders  of  the  community  or  their  very  close  allies.  

These  administrators  appointed  moderators  who  carried  out  many  day  to  day  

administrative  tasks,  helped  by  a  variety  of  tools  aimed  e.g.  at  detecting  multiple  

accounts.    Ordinary  members  also  played  a  role  in  reporting  bad  behavior  –  they  

could  tag  inappropriate  content,  and  affect  other  users’  reputations  by  providing  

positive  or  negative  feedback  that  moved  the  latter’s  reputation  score  up  or  down.    

  18  

Some  forums  maintained  specific  lists  of  identified  bad  actors  with  evidence  of  their  

bad  behavior;  one  also  had  an  elite  zone,  where  only  those  with  a  high  reputation  

were  allowed  to  trade.  Moderators  also  have  the  power  to  ban  identified  bad  actors.  

In  addition,  specialized  actors  evaluated  the  qualities  of  the  goods  on  offer  in  

commercial  forums  in  exchange  for  a  percentage  of  the  profits.  

In  large  part,  these  similarities  between  different  criminal  communities  are  

the  result  of  software  code:  the  founders  of  these  communities  run  recognizable  

cousins  of  common  online  community  building  software  packages.  They  hence  

resemble  not  only  each  other,  but  legitimate  online  communities  such  as  Wikileaks,  

Slashdot  and  MetaFilter.    

However,  these  communities  have  turned  these  generic  tools  towards  the  

specific  problems  of  trust  among  criminals.  Rather  than  simply  trying  to  ensure  that  

contributors  are  e.g.  reasonably  polite  and  substantive,  these  tools  are  used  to  

provide  information  about  criminals’  reputations,  as  buyers,  sellers,  or  members  of  

a  diffuse  community.  This,  in  turn  gives  criminals  some  incentive  to  behave  

honestly,  so  as  not  to  endanger  their  reputation,  and  hence  their  ability  to  trade  with  

others  in  the  future.  Reputation  becomes  valuable,  because  it  is  attached  to  a  

community,  and  certified  through  mechanisms  such  as  password  protection  that  

make  it  difficult  for  one  actor  to  simulate  the  identity  of  another.  And  because  it  is  

valuable,  it  can  act  as  a  partial  anchor  for  honest  behavior.  

To  some  extent,  these  communities  run  themselves  –  users  comment  on  each  

other  and  rate  each  other  for  honesty.  Yet  they  only  work  because  of  software  which  

has  hierarchical  elements  designed  in,  granting  an  extraordinary  degree  of  authority  

  19  

to  the  community’s  administrators,  and  those  to  whom  the  administrators  have  

delegated  authority.  Without  this  authority  (and  indeed  the  ability  of  the  

administrators  to  tweak  elements  of  the  system  in  response  to  perceived  failures),  it  

is  highly  unlikely  that  these  communities  would  work  at  all.  As  Yip  et  al.  (2013)  

hypothesize  in  their  study  of  online  marketplaces  for  stolen  credit  card  numbers:  

 

the  inherent  hierarchical  management  structure  and  network  boundary  offered  by  forums  greatly  assists  cybercriminals  in  implementing  a  well  coordinated  management  system  for  monitoring  and  regulating  behavior  in  the  underground  market.8    

Criminals  who  participate  in  these  communities  have  thus  made  a  semi-­‐

Hobbesian  choice.  They  have  effectively  agreed  to  hand  over  ultimate  control  over  

their  interactions  within  the  community  to  figures  who  have  absolute  authority  over  

how  the  community  is  run,  and  indeed  whether  it  exists  at  all.  Furthermore,  they  

have  made  this  choice  in  the  likely  belief  that  unchallengeable  authority  is  superior  

to  the  alternative  of  taking  their  chances  through  engaging  in  one-­‐to-­‐one  exchanges  

without  any  outside  power  of  policing.  

This  is  not  to  say  that  they  have  no  bargaining  weight  whatsoever.  Unlike  the  

citizens  of  Hobbes’  commonwealth,  they  always  have  the  possibility  of  exit,  which  

both  allows  them  to  terminate  anything  that  looks  too  much  like  systematic  long  

term  exploitation,  and  to  threaten  escape  if  they  feel  that  the  administrators  are  

abusing  their  authority.  Yet,  as  the  next  section  will  discuss,  they  can  still  be  highly  

vulnerable.  

                                                                                                               8  P.  3,  Yip  et  al.  (2013).  

  20  

Perhaps  the  best  public  example  of  such  a  forum  is  the  previously  mentioned  

Silk  Road,  a  notorious  market  for  drugs  and  other  illegal  commodities,  which  was  

closed  down  in  September  2013  after  its  chief  administrator,  the  eponymous  Dread  

Pirate  Roberts,  was  identified  by  federal  law  enforcement  officials  as  Ross  Ulbricht,  

a  San  Francisco  based  libertarian  and  hacker.  In  its  heyday,  Silk  Road  was  highly  

sophisticated,  using  Tor  Hidden  Services,  Bitcoin  and  Bitcoin  ‘mixing’  facilities  to  

make  it  hard  for  law  enforcement  officials  to  track  down  the  site’s  owner  and  users.  

It  appears  to  have  facilitated  drugs  transactions  on  a  very  large  scale;  when  Ulbricht  

was  arrested,  he  allegedly  held  tens  of  millions  of  dollars  worth  of  Bitcoin  on  his  

computer,  earned  through  facilitating  transactions.  9  

Security  weaknesses  allowed  Nicolas  Christin,  a  Carnegie  Mellon  based  

computer  scientist  to  monitor  activities  on  the  Silk  Road  for  several  months,  and  to  

gather  together  a  detailed  database  of  transactions.  The  forum,  like  those  previously  

described,  provided  community  and  hierarchical  mechanisms  intended  to  underpin  

honest  transactions  between  people  looking  to  buy  and  sell  a  variety  of  illegal  and  

legal  commodities,  most  commonly  drugs.  However,  Silk  Road  went  significantly  

further  –  it  provided  an  escrow  service  for  buyers  and  sellers.  People  looking  to  buy  

commodities  via  Silk  Road  would  transfer  money  to  Silk  Road’s  escrow  account.  Silk  

Road  would  then  communicate  the  fact  that  the  money  had  been  received  to  the  

seller.  Once  both  buyer  and  seller  were  happy  that  the  deal  had  gone  through  as  it  

should,  the  money  in  escrow  would  be  sent,  minus  commission,  to  the  seller.    

                                                                                                               9  Fluctuations  in  the  value  of  Bitcoin,  which  is  highly  unstable  as  a  store  of  value,  make  it  difficult  to  provide  an  exact  figure.  

  21  

A  trustworthy  escrow  mechanism  clearly  greatly  eases  problems  of  trust  and  

trustworthiness  between  buyers  and  sellers.  So  long  as  both  trust  the  escrow,  there  

is  far  less  incentive  to  cheat,  since  the  cheated  party  can  either  refuse  to  pay  (if  she  

is  the  buyer  and  has  not  gotten  the  good  as  promised)  or  refuse  to  send  the  good  (if  

she  is  the  seller  and  the  money  has  not  been  placed  in  escrow).  Feedback  on  

transactions  suggests  that  this  mechanism  was  highly  successful  –  Christin  finds  

that  97.8%  of  feedback  on  consummated  transactions  was  positive.  While  this  likely  

exaggerates  people’s  happiness  with  the  service,  it  suggests  that  incidents  of  fraud  

were  relatively  rare.    

However,  well  established  vendors  with  high  reputations  were  able  to  

demand  that  buyers  settled  early  with  them.  This  created  the  possibility  of  long  con  

attacks,  in  which  fraudulent  vendors  establish  a  good  reputation,  and  then  cash  out  

by  cheating  all  their  customers  simultaneously  and  disappearing.    Christin  records  

one  apparent  incident  of  a  “whitewashing”  strategy,  in  which  a  well  established  

vendor  declared  a  substantial  discount  for  people  ordering  marijuana  on  “Pot  Day,”  

attracted  an  unusually  large  amount  of  customers,  and  then  absconded  with  their  

money.  Of  course,  there  is  a  second  and  more  systematic  risk  associated  with  

escrow  accounts.  They  do  not  so  much  solve  the  problem  of  trust  as  transfer  it  from  

the  parties  to  the  transaction  to  the  actor  (typically  the  site  administrator)  who  runs  

the  escrow  system.  

In  conclusion,  there  is  evidence  that  criminals  can  trust  each  other  online  –  

so  long  as  their  transactions  take  place  in  the  context  of  a  community  where  they  

can  build  up  long  term  pseudonymous  identities  and  use  these  identities  to  anchor  

  22  

trust  relationships.  However,  joining  such  a  community  requires  a  semi-­‐Hobbesian  

tradeoff.  If  a  criminal  uses  the  community’s  automated  and  social  systems  to  

validate  and  protect  her  pseudonymous  identity,  she  is  also,  necessarily,  placing  her  

assets  at  risk.  Her  ability  to  maintain  this  identity  depends  on  the  continued  good  

will  of  the  community’s  administrators.  If  she  makes  use  e.g.  of  an  escrow  system  

run  by  the  administrators,  then  this  puts  her  money  as  well  as  her  reputation  at  risk  

of  being  expropriated.  

This  points  to  a  second  crucial  set  of  trust  relationships  –  trust  not  only  of  

one’s  fellow  transactors,  but  of  the  authorities  which  oversee  and  perhaps  

intermediate  directly  in  these  transactions.    They  too  may  have  incentives  to  behave  

in  an  untrustworthy  fashion.  They  too  may  want  to  use  reputation  as  an  anchor.  I  

turn  to  these  problems  in  the  next  section.  

 

Trusting  the  Leviathans  of  Cybercrime  

 

Online  moderated  communities  do  not  solve  the  problem  of  trust  among  

criminals,  so  much  as  they  displace  it.  If  criminals  do  not  trust  the  community  

administrators  and  moderators,  then  they  will  not  trust  other  criminals  within  the  

system  that  these  administrators  and  moderators  oversee.  Administrators  must  act  

as  a  kind  of  micro-­‐Leviathan,  deploying  a  near  absolutist  authority  in  pursuit  of  the  

general  good  if  they  are  to  underpin  free  exchange  among  the  many  community  

members.  

  23  

This  presents  an  obvious  chicken  and  egg  problem.  Someone  who  sets  

herself  up  as  the  administrator  of  a  community  aimed  at  online  lawbreakers  is  

asking  others  to  trust  that  she  will  run  the  community  fairly.  But  since  she  herself  

has  no  good  means  of  validating  her  identity,  potential  members  of  the  community  

will  have  no  good  reason  to  trust  her.  These  problems  of  trust  were  presumably  

even  harder  for  the  first  wave  of  people  creating  these  sites,  who  had  to  contend  not  

only  with  distrust  in  their  intentions,  but  also  skepticism  that  the  scheme  could  

work  even  if  everyone  were  honest.  

It  isn’t  clear  exactly  how  these  problems  were  solved  by  the  initial  creators  of  

Silk  Road  and  other  such  communities.  It  is  possible  that  shared  ideology  proved  a  

significant  early  inducement  for  people  to  trust  others  who  they  should  perhaps  not  

have  trusted.  Casual  empirics  would  suggest  that  many  of  the  users  and  

administrators  of  these  sites  are  fervid  libertarians,  whose  attachment  to  online  

illegal  markets  goes  beyond  making  money  into  a  commitment  to  fundamentally  

remake  politics.  This  may  have  provided  sufficiently  strong  perceptions  of  common  

ground  that  people  were  willing  to  trust  others  who  sent  the  right  signals,  even  if  

they  had  no  grounded  reason,  beyond  political  signals  of  a  common  ideology,  to  

trust  them.    

However,  shared  ideology  is  probably  not  sufficient  in  itself.  The  

administrators  of  new  sites  may  possibly  have  tried  to  send  costly  signals  that  they  

were  honest  and  committed  to  trading  honestly  in  the  long  run  rather  than  cheating  

people  and  running  for  the  hills.  Anecdotal  evidence  suggests  that  the  founder  of  

  24  

Silk  Road  offered  free  merchandise  to  early  members.10  This  plausibly  served  as  a  

costly,  though  imperfect  signal  that  the  Dread  Pirate  Roberts  was  committed  to  long  

term  relationships,  and  to  the  long  haul  –  if  one  invests  significantly  in  building  up  

relational  capital,  one  probably  is  not  going  to  cheat  immediately.  

More  generally,  the  only  way  that  would-­‐be  administrators  can  attract  

potential  members  to  their  community  is  by  signaling  they  are  reliable.  However,  

such  signals  need  to  be  credible,  and  generating  credibility  is  hard.  Malign  

administrators  are  more  than  a  theoretical  danger.    The  community  of  online  illicit  

marketplaces  has  been  roiled  by  fraud  and  allegations  of  fraud  for  the  last  year.  

Shortly  before  the  collapse  of  the  first  version  of  Silk  Road,  another  major  

marketplace,  Atlantis,  disappeared,  taking  a  lot  of  its  customers’  Bitcoin  with  it.  

After  Silk  Market  fell,  one  of  its  major  competitors,  Black  Market  Reloaded  closed  

business,  saying  that  it  wasn’t  able  to  handle  the  surge  of  new  customers,  while  

another,  the  aptly  named  Sheep  Marketplace,  sheared  its  customers  of  tens  of  

millions  of  dollars  worth  of  Bitcoin,  closing  after  it  claimed  that  its  security  had  been  

compromised  by  one  of  its  vendors.  Dissatisfied  customers  suspected  an  inside  job,  

and  speculated  that  the  entire  site  had  been  a  scam  from  the  beginning.  The  

administrator  of  a  third,  less  significant  market  admitted  after  closing  that  he  had  

stolen  his  customers’  Bitcoin.11  

                                                                                                               10  See  e.g.  http://silkroad5v7dywlc.onion/index.php?topic=58102.0  checked  October  4  2014  (only  available  via  Tor  Browser).  11  Andy  Greenberg,  “Silk  Road  Competitor  Shuts  Down  and  Another  Plans  to  Go  Offline  After  Reported  $6  Million  Theft,”  Forbes.com,  December  01  2013.  Available  at  http://www.forbes.com/sites/andygreenberg/2013/12/01/silk-­‐road-­‐competitor-­‐shuts-­‐down-­‐and-­‐another-­‐plans-­‐to-­‐go-­‐offline-­‐after-­‐6-­‐million-­‐theft/  (checked  October  4,  2014).  

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Given  credible  fears  of  fraud,  some  actors  have  adopted  a  signaling  strategy  

of  linking  themselves  to  reputations  established  on  a  previously  trustworthy  site.    

This  approach  was  taken  by  the  administrators  of  “Silk  Road  2.0,”  which  was  

announced  by  a  former  Silk  Road  moderator,  “Libertas,”  on  the  original  site’s  

forums,  displaying  his  PGP  key  (a  key  facilitating  encoded  communications  which  

can  also  serve  as  a  reasonably  reliable  indicator  of  identity.  This  replacement  site  

started  business  a  little  over  a  month  after  the  initial  site’s  demise.12  Libertas  and  

his  or  her  colleagues  were  able  to  build  both  on  the  brand  name  of  the  previous  site,  

and  leverage  their  own  reputations  acquired  in  the  course  of  transacting  on  that  

site.  A  new  “Dread  Pirate  Roberts”  emerged  as  senior  administrator.  

Initially,  the  site  appeared  likely  to  succeed,  because  it  was  able  to  build  on  

the  success  of  its  prior  incarnation.  In  Christin’s  description:  

 

Silk  Road  has  history  since  a  number  of  old  vendors  have  re-­‐appeared  on  the  new  marketplace—  and  with  history  you  can  build  reputation,  which  is  paramount  in  the  commerce  of  illicit  goods,  be  it  online  or  offline.13    

However,  the  new  version  of  Silk  Road  soon  found  itself  plagued  by  serious  

problems.  The  first  was  generated  by  law  enforcement  –  US  legal  authorities  have  

drawn  up  indictments  against  three  individuals,  claiming  that  they  were  key  site  

administrators  of  Silk  Road  2.0,  including  ‘Libertas.’  Shortly  after  the  arrests,  the  

new  Dread  Pirate  Roberts  disappeared,  saying  that  his    account  had  been  

compromised,  although  claiming  that  the  site  as  a  whole  was  still  secure.  He  has  not  

                                                                                                               12  Digital  Citizens’  Alliance  (2014).  13  Quoted  in  ibid.,  p.  8.  

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appeared,  nor,  apparently  has  his  appointed  successor,  leaving  the  site  to  be  run  by  

a  former  administrator.  Worse  was  to  come.  The  Silk  Road  2.0  was  compromised,  

perhaps  thanks  to  a  subtle  bug  in  the  implementation  of  the  Bitcoin  protocol,  

allowing  unknown  individuals  to  make  off  with  a  very  large  amount  of  Bitcoin  from  

Silk  Road  2.0  customers.  

This  led  Silk  Road  2.0,  which  was  on  the  verge  of  complete  collapse  to  adopt  a  

new  and  different  signaling  strategy  –  of  ceasing  to  operate  an  escrow  service  until  

it  was  able  to  implement  a  variant  that  did  not  rely  on  any  single  actor,  and  

promising  that  it  would  fully  refund  all  customers  who  had  lost  money  through  

fraud.  While  Silk  Road  has  still  not  implemented  a  safer  form  of  escrow,  and  has  lost  

some  customers  to  other  services,  it  has  refunded  the  majority  of  customers  

continues  to  operate  with  reasonable  success.  This  is  likely  because  it  has  sent  out  a  

highly  costly  signal  –  that  it  is  prepared  to  make  good  customer  losses  even  if  it  has  

to  bear  substantial  losses  itself  to  do  so.  It  is  unlikely  (though  not  impossible)  that  a  

genuine  scam  operation  would  employ  such  a  costly  signal.  Rather  extraordinarily,  

this  avowedly  criminal  enterprise  is  behaving  a  little  like  a  state,  putting  

commitment  to  principle  above  its  short  term  interests,  and  hence  creating  an  

environment  in  which  it  can  (over  the  longer  run)  begin  again  to  extract  revenues,  

and  promote  trusting  relations  within  its  community.  

Conclusion  

 

Trust  among  online  drug  dealers  is  obviously  not  a  particularly  socially  

valuable  form  of  trust.  Many  of  these  drug  dealers,  for  all  their  appeals  to  libertarian  

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philosophy  appear  to  be  highly  unpleasant  people  (Ulbricht  appears  to  have  

conspired  to  have  enemies  of  his  murdered).    

Even  so,  it  provides  a  very  interesting  laboratory  in  which  one  can  see  how  

trust  can  grow  even  in  highly  unpromising  conditions.  People  who  only  interact  

with  each  other  online  do  not  –  and  cannot  –  know  each  other  in  the  thick  sense  of  

knowing  that  some  theorists  of  trust  talk  about.  When  they  are  criminals,  they  

cannot  appeal  to  character  either.  Nor  do  they  usually  have  social  networks  that  

they  can  fall  back  on,  other  than  those  they  can  construct  themselves  online.  Even  

so,  they  appear  to  be  able  to  build  quite  substantial  forms  of  trust  that  support  

mostly  honest  interactions  where  the  risk  of  cheating  would  appear,  on  the  face  of  it,  

to  be  very  high.    

This  is  in  large  part  because  they  have  been  able  to  come  together  in  

communities  of  actors  with  (relatively  long  lasting  pseudonyms).  These  

communities  work  in  some  of  the  ways  that  offline  communities  do  –  they  facilitate  

the  exchange  of  gossip  and  information,  which  both  provides  incentives  for  

individuals  to  be  trustworthy  and  provides  means  to  sanction  those  who  are  not.  Yet  

they  require  a  substantial  degree  of  hierarchy  to  work.  Someone  has  to  manage  the  

system,  police  pseudonyms,  identify  and  ban  cheaters  and  underpin  transactions.  

That  someone  has  a  remarkable  degree  of  hierarchical  power.  Yet  without  such  

power,  the  system  would  be  unworkable.  Perhaps,  in  future,  we  will  see  truly  

distributed  systems  of  identity  maintenance  to  parallel  distributed  currencies  such  

as  Bitcoin.  Yet  at  the  moment,  no  properly  developed  system  of  this  kind  is  available.  

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The  need  for  hierarchy  displaces  the  problem  of  trust  back  one  level.  Trust  

among  community  members  can  only  be  maintained  if  they  trust  the  administrators  

who  are  running  their  community.  However,  administrators  do  not  have  meta-­‐

communities  of  their  own  to  guarantee  their  good  behavior,  and  hence  need  to  fall  

back  on  costly  signaling  and  other  hacks  to  signal  their  trustworthiness  (and  also,  

sometimes,  deliberately  to  abuse  it).  

  These  online  communities  resemble  stripped  down  societies  and  states  in  

crucial  respects.  Specifically,  they  bear  a  distinct  resemblance  to  the  “states  of  trust”  

depicted  in  Margaret  Levi’s  work.  They  are  cousins  of  these  states  –  from  the  distaff  

side  of  the  family  to  be  sure,  but  with  enough  physiognomic  similarities  that  one  can  

see  them  as  family  members.  Just  like  Levi’s  states,  they  support  trust  and  

trustworthy  activity  among  their  ‘citizens,’  so  long  as  the  ‘states’  are  seen  

themselves  as  committed  to  long  term  principle  rather  than  short  term  gain.  

  Because  these  communities  operate  in  reduced  form,  one  can  easily  see  that  

they  support  Levi’s,  rather  than  Hardin’s  account  of  the  relationship  between  states  

and  citizen  trust.  Community  members  surely  trust  the  administrators  of  their  little  

islands  of  criminal  stability  to  some  degree,  since  they  have  to.  This  is  not  to  say  that  

this  trust  is  always  well  placed  or  well  advised.  But  no  theory  should  limit  trust  only  

to  cases  where  it  is  ex  post  merited,  since  abuses  of  trust  are  as  important  to  its  

constitution  as  its  justification  by  events.  

  Very  obviously,  criminal  communities  are  not  a  perfect  model  for  the  larger  

societies  that  they  are  embedded  in.  There,  very  plausibly,  vast  institutional  forces  

play  a  more  important  role  than  the  more  intimate  forms  of  knowledge  we  associate  

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with  trust.  Yet  as  these  communities  show,  trust  of  the  traditional  kind  can  turn  up  

in  the  most  unlikely  of  places.  It  is  plausible  that  there  are  other  (and  more  readily  

attractive)  forms  of  trust  to  be  found  elsewhere  in  the  interstices  of  our  

technologies.  

 

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