Two (Unfortunately) Predictable OpenBazaar Scams and What To Do About Them
This article is part of a series on BlockStamp’s involvement with the OpenBazaar decentralized marketplace. For more background, see our previous articles on:
- an overview of how we’re getting more involved with OpenBazaar,
- a specific description of our OpenBazaar 2-level moderation policy, and
- how we reach Level 2 Arbitration verdicts and how you can plan your deals accordingly.
This article addresses:
- two scam scenarios we anticipate may happen on a decentralized marketplace like OpenBazaar and
- how they will play out with regards to our Level 2 Arbitration and the BlockStamp OpenBazaar Listing Explorer.
Let the predictions begin!
Predictable Scam #1: Fake inventory
While it might take some time, it doesn’t cost money to list products — real or otherwise — on the OpenBazaar network.
Likewise, it is also financially free to create fake stores, fake recommendations, fake moderators, and fake disputes with fake resolutions. That’s a lot of potential fakery.
Fortunately, though, it isn’t that difficult to spot if you look for two things:
1. Unmoderated deals. Even if a scammer has a track record of moderated deals (probably with themselves as moderator), he will be reluctant to enter a moderated deal with you.
A scammer probably just won’t make a moderated deal with you. But let’s say he does. The funds will go into escrow and when you don’t get your products you’ll take it to Level 1 Arbitration.
In that case, the scammer probably won’t even make contact with BlockStamp or whichever moderator you are working with. You should get your funds back relatively painlessly.
And it is highly unlikely (virtually unthinkable?) that the scammer will enter Level 2 Arbitration due to the costs involved. He can’t win it — and it costs a lot.
2. Unpromoted products. The BlockStamp OpenBazaar Listing Explorer lets vendors burn BlockStamps to promote their products. In doing so, they show they are serious about their business. A scammer is highly unlikely to burn BST promoting a fake product.
Predictable Scam #2: A well-funded attack on a rival vendor
In this scenario, one vendor might aim to “buy out” a significant chunk of a rival vendor’s inventory tie up the payment for them in escrow. That means the victim will have “sold” a great deal of inventory without receiving payment for it.
Tip: If you’re a vendor, don’t sell a significant chunk of your inventory to one buyer, even if the deal is moderated!
Such an attacker will plan to go into Level 2 Arbitration and pay the Level 2 Arbitration onboarding fee accordingly.
This dispute may in fact be unresolvable if, for example,
- the attacker sticks to his dishonest story that he has not received the products, the products are not as ordered, or something like that and
- the victim sticks to his honest story that he sent the products as per the deal terms.
However, to execute this attack, the attacker will likely need to create multiple fake buyer accounts. Otherwise, it will obviously be suspicious if one buyer account is opening multiple Level 2 Arbitration cases against one vendor account.
Therefore, in this scenario the Level 2 Arbitration fees are going to add up 2X faster for an attacker vs the victim.
Remember that the Level 2 Arbitration fees include:
- A 500 EUR onboarding fee per buyer account and
- A 500 EUR case review fee per case.
An attacker’s cost of opening a new case using a new buyer account would be 1,000 EUR each time.
The victim would also need to cover the 500 EUR onboarding fee — but not for every case. And it’s likely that the victim would have the 500 EUR case review fees refunded when the case verdict is in his favor.
But even if a case stays unresolvable,
- the victim will be out 500 EUR for the case review fee plus the lost inventory,
- while the attacker will be out 1,000 EUR for the case review fee and onboarding fee.
This mismatch will obviously discourage this sort of attack.
The only way to mount a successful attack like this would be for the attacker to make a massive one-off purchase of the victim’s inventory. Then both victim and attacker would be out 1,000 EUR and the victim would not receive payment for the lost inventory.
Again — vendors, don’t let this happen! Don’t sell all your inventory to one buyer with whom you don’t have a solid history.
Check back next week for a quick summary of best practices for OpenBazaar buyers and sellers and where we’re looking to go next with OpenBazaar!
Make sure you’re part of the BlockStamp social community and feel free to ask any questions there!
About BlockStamp:
BlockStamp is a Bitcoin blockchain fork hosting an ecosystem of fair play apps, including a true-odds multiplayer crypto gambling platform, a decentralized marketplace listing optimizer, and a private messenger with sword-in-the-stone encryption (launching soon).
