Thursday, July 3, 2014

Payment Systems of Underground Economies

An underground economy for the sake of this blog is a market for goods and services banned by government.  Payment systems consisting of payment hubs exist for these markets as they do for any other but some of the payment hubs have unique controls allowing them to act like valves between banned and unbanned markets.

Payment instructions flow into banned markets in two ways: use of electronic payments and hiding some of the payment data in a cipher disguised as another element, or cash. Payment instructions flow out of banned markets into unbanned markets electronically by joining a stream of unbanned flow or by joining unbanned cash receipts.

The cash valves have few distinguishing features, although predictable surges into electronic payment systems can identify the presence of underground markets, identifying precise  movements, however, becomes haphazard at best and at worst leaves a morass of paperwork and mounds of false positives.

The control structure of the valve for electronic hubs leaves forensic evidence of the passage of one type of funds (banned or unbanned) into the realm of the other.  Further the encryption of data to disguise the origin of funds causes detectable backpressure. The characterizing nature of valve payment hubs provides s a method for detecting an array of unauthorized activity of various types found in non-valve payment hubs.

The side effects from creating too many underground markets mean the detecting the existence of payment valves requires increased granularity of detected payment flow. There may be a ratio of banned to unbanned goods and services that indicate major social changes such as revolution or civil war inevitability, but that is a discussion dear reader(s) best left for another blog.


Next Blog: Turnstiles

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