by Bolama Public Relations
Making a bitcoin deal is followed by a lot of uncertainties. The space is filled with scammers who are constantly trying to put their hands on your coins. In the following article, Bolama sales experience as active bitcoin dealers in the space, will be conveyed to you for a smoother experience in your deals with other OTC traders and businesses.
Proof of Coins
This procedure is basically a method for verifying that the other party owns the coins that he/she is claiming to have before going through with the deal. The software used in this guide is called Electrum wallet which could be used separately or with a hardware wallet. There may be other tools that can be used to conduct a proof of coins procedure.
The Proof of Coins procedure goes like this:
- The seller claims to have X number of bitcoins for a bitcoin trade
- Seller gives you a bitcoin address containing the number of coins he/she claims to own.
- Seller uses Electrum to sign a message with the provided address: Example: “I am Mr. Satoshi and this Proof of Coin is meant for trading with Bolama on date X”
- Seller sends the message along with the generated signature to you
- You verify the message and the signature with the provided address
So basically:
The Seller will provide Proof of Coins by sending 1) the address which holds the coins 2) the message and 3) the signature for that message
The Buyer will use the provided data to verify that the seller at least has access to these coins.
Picture guide on how to sign/verify messages with Electrum:
- Select the “Tools” option on the top bar and choose “sign/verify message”
- Put the message and address and click on “Sign”. It will ask you for your password or in case of a hardware wallet, a confirmation from the device.
- Once signed, a signature will be produced
- In order to verify, one must have the message + address + signature
If you are a seller, now you know how to prove that you hold your coins.
If you are a buyer, now you know how to verify that someone owns the coins he/she is claiming to have.
Note: You could also use Ledger or Trezor Hardware wallets with Electrum in which Electrum acts as a graphical interface.
Download: You can download Electrum from Electrum.org
If you have any questions, don’t hesitate to ask us. You can contact us on Telegram here
Check out Bolama’s Telegram Channel and Bolama website for Bitcoin OTC trades in the Middle East.
Disclaimer: The scammers in the space are restless and they have infinite time and resource to trick you and get hold of your coins. Their methods are updated day by day and you should always be careful in your trades.
Proof of Coins, although a great method for distinguishing a dealer from an empty-handed scammer, still, it does not mean that the dealer won’t be able to scam you. Bolama wishes the best for all bitcoin traders.
