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0 Confirmation Scam: Bitcoin ATM Trick now Appears on OTC Market!

“Zero Confirmation” is never safe! You should wait for at least 1 block confirmation when you are trading with others.

The Bitcoin ATM trick (0 confirmation scam)now appears on OTC market again. Traders may suffer a loss during the OTC trade if their counter party play this trick to them. We shall figure out what happens in this trick and know how to avoid the loss.

What is a Bitcoin ATM trick?

According to a report on March 2019, four Canadian men are wanted in connection with conducting double-spend attacks against Bitcoin ATMs in four cities. Over 112 transactions in 10 days netted the scammers a total of around $200,000.

How did this trick happen?

The scammers took advantage of the flaw of these Bitcoin ATMs which accept transactions with zero confirmation.

Step 1:

The four scammers initiated transactions on the ATMs with very little miner fees first, so that the Bitcoin network would not confirm these transactions in short time.

Step 2:

After they got cash from the ATM, they immediately initiated another NEW tx with high miner fees. The second tx was sent to their own bitcoin address. Finally, the Mempool rejected the previous tx in Step 1 and add the second tx into block.

Thus, the scammers get the fiat but without loosing their bitcoins (Only loose small tx fee).

Does it a kind of Double-spending?

Though some people think it is a kind of “Double-spending”, but actually it is not. It is a kind of 0 confirmation scam. And there are two different between them.

  1. Influence: Double-spending is a kind of threat to the Bitcoin blockchain. And it is hard to achieve. Scammers need to initiate a 51% attack to the system. And once it happened. It leads to inflation by creating a new amount of copied currency that did not previously exist also makes the blockchain untrustworthy anymore. But for the 0 confirmation scam, it only makes the merchant who accepts zero confirmation loss. No one would consider this as a threat to the Bitcoin blockchain.
  2. Spend or not: A Double-spend means the former tx already been added into the block which matches the description of Bitcoin Whitepaper. But for the 0 confirmation scam, the former tx only stays in mempool and never been added into a block. So, actually it never been spend.

Is it related to RBF?

The answer is negative. RBF is a Bip(Bitcoin Improvement Proposals) proposed by Peter Todd. It allows users to accelerate a former tx with higher tx fee. But the tx are towards to the same address. In this case the scammers replace the former tx with a different bitcoin address.

How to avoid 0 confirmation scam?

Rule №1 : Never ever trust a zero confirmation.

Rule №2 : Start to use an Escrow Service.

Please start to use an escrow service when you are trading with some else. The 0 confirmation scam now appears on OTC market, trades who get used to 0 confirmation also can be cheated by their counter party. To avoid this kind of scam. We suggest to use an escrow service.

Here in Bitpie wallet, we have offered users the “ Instant Escrow ” Service. All the txs are confirmed by the blockchain. And if any issues happens during the trade, you can also initiate an arbitration for help. Therefore, you can have Bitpie wallet as a trusted third party to escrow your trade.

This function can be found under “ More>Instant Escrow ”. If you need this function and want to learn more about it, you can check the link below:

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