Retaliation in Bitcoin networks

Abstract

<p>Due to counterparty risks, some Bitcoin trading platforms allow users to rate the level of trust they have in others. We examine users’ feedback behavior on two Bitcoin trading platforms and provide statistically strong evidence that the feedback behavior of Bitcoin users is dependent on how they are rated themselves, that is, they retaliate. In addition, user's reputation is strongly and positively associated with the scores they deliver, and there is a certain persistence in the scores a user gives to others. We find that peers deliver negative feedback relatively quickly to users with bad reputation. Moreover, well-reputed users withhold negative feedback longer and give positive feedback faster than users with bad reputation.</p>