Breaking the Ice: Using Transparency to Overcome the Cold Start Problem in an Underground Market

Published: Workshop on the Economics of Information Security, 2024

Authors: Tina Marjanov, Konstantinos Ioannidis, Tom Hyndman, Nicolas Seyedzadeh, Alice Hutchings

Abstract: New users in anonymous underground marketplaces face the cold start problem; they have no reputation to signal their trustworthiness, hindering their ability to trade in the market. This study explores transparency, captured by the choice to make full contract details publicly visible to other users, as an overlooked trust signal. Analysing data from the Hack Forums marketplace, we find that transparency acts as a trust signal, primarily benefiting newcomers constrained by their lack of experience and reputation. However, as participants accumulate credibility, the importance of transparency wanes. Our findings underscore the dynamic nature of trust in such environments, highlighting the distinctive characteristics of private and public contracts as the market evolves.

Keywords: transparency, trust, signalling, underground markets, cold start problem, cybercrime, asymmetric information

Presented at: 23^rd Workshop on the Economics of Information Security (Dallas, 2024)