Over The Counter Trading

In this article, you will learn about the MWC OTC market, various scams to be aware of and where to find trusted traders and how to safely trade with them. Near the end of the article are six steps on How To OTC Trade. In a few months, hopefully trustless BTC/MWC atomic swaps will be deployed.

Since inception the Bitcoin and MWC over the counter trading markets have thrived. Many find this way of acquiring to be far superior to exchanges because it can be done in larger size with less slippage and more discretely.

Dealing with trustworthy counter-parties with long standing reputations of successful trading is very important. There are plenty of dishonest fly-by-night scammers trying to steal your precious BTC and MWC.

Many of the MWC OTC traders meet in the #otc channel of the MWC Discord, Telegram and many other places.

An issue with a proof of work blockchain in its infancy is hash rate. As it claws its way out of the primordial ooze it may be vulnerable to block withholding and/or 51% attacks. These types of attacks are more annoyances than anything else. Binance Academy explains the types of disruption a 51% attack may cause and users ought to understand them.

The best defenses are to deal with trusted counter-parties who can always resend a transaction if it gets orphaned or reforged and to just patiently wait for more confirmations. In its infancy, the MWC network was attacked by malicious miners, who had costs and/or opportunity costs, and the disruption minimally affected users.

For comparison purposes the MWC Dashboard calculates approximately how many MWC blocks it would take to equal the work in one BTC block.

Everyone needs to make their own decision on how much cumulative difficulty they want piled on top of their transactions. Some may want one confirmation while others may want a days worth of 1,440 or more.

Trusted Traders

As Nick Szabo observed, "Trusted third parties are security holes." While we appreciate the exchanges that list and support MWC, nevertheless, a robust OTC market is very important for providing liquidity. This is how Bitcoin grew up also and some of us remember when there were no functional Bitcoin exchanges and the only option was to meet people at a coffee shop or send envelopes of cash. This led to the rise of Webs of Trust. While exchanges are nice for real-time price discovery and lots of other reasons, they are not essential.

There are some 'trusted traders' in the MWC Webs of Trust and OTC markets. However, there have been a lot of scammers infesting the MWC communication channels also.

How can new users and members of the MWC community be able to quickly, easily and safely assess who is a 'trusted trader' and who is a scammer?

The MWC Team neither takes any position on who is or is not a 'trusted trader' nor provides any legal advice and encourages MWC users to be compliant with all legal requirements in their respective jurisdictions.

However, as a service to the MWC community we want to (1) alert you to an example of some common scams and (2) provide some information from various 'trusted traders' that may help you be able to assess them.

Anytime someone wants you to send BTC, MWC, etc. first then you should be on red alert and make sure you are dealing with a 'trusted trader'.

Reorg Attack Scam

The reorg attack scam was much easier to carry out in the early days of MWC when there was not much hashpower securing the network. Keep in mind that a 51% attack is only a reorganization of the blockchain and not a security flaw or vulnerability.

How this would work is the scammer sends the funds, receives the funds from the victim and then uses a 51% attack to reorganize the blockchain they sent the funds on. That way they have the victim's funds and with the reorganization they have their original funds back. Even exchanges can be subject to these types of attacks if they do not wait for enough confirmations like in the case of an $18m Bitcoin Gold reorg attack on an exchange.

You can protect yourself from this type of attack by waiting for enough confirmations. MWC Dashboard provides useful calculations for doing this.

Impersonation Scam

The impersonation scam is when someone fraudulently pretends to be a 'trusted trader' in order to induce the victim to send them funds thinking they are trustworthy.

This can be guarded against by being meticulous in verifying who you are trading with. Be very careful of the avatars you interact with on Signal, Whatsapp, Telegram, Twitter, Discord and other places. However, even if you are interacting with the correct avatar it is still possible that your trading partner's account has been hacked.

On Discord you will need to verify the User ID. Click on User Settings, Appearance and in Advanced Enable Developer Mode.

When you right-click on a user you can 'Copy ID' and paste it somewhere. Then you can verify the ID with the User ID for the trusted trader in the Web of Trust on this site and/or in the signed message provided by the trusted trader.