Launch of #bitcoin-otc
The #bitcoin-otc IRC channel launches, creating a decentralized 'Web of Trust' for peer-to-peer trading.
On October 17, 2010, community member nanotube announced the creation of the #bitcoin-otc (Over The Counter) channel on the freenode IRC network. As exchanges like Mt. Gox were still primitive and often lacked liquidity for large trades, advanced users needed a way to trade directly with one another. However, anonymous P2P trading carries high risk. To solve this, #bitcoin-otc implemented a Web of Trust (WoT) using GPG signatures.
Users would cryptographically sign statements rating other users based on successful trades. This created a decentralized reputation graph. If you wanted to trade with someone, you could check their 'trust score' to see if they had a history of honest dealings with other trusted members. This was a practical implementation of the reputation systems theorized by Cypherpunks in the 1990s.
The #bitcoin-otc marketplace became the hub for large block trades, hardware sales, and exotic financial experiments (like the first loans and short sales). It demonstrated that a community could self-police and facilitate high-value commerce without a central intermediary. #bitcoin-otc established the first decentralized reputation system for the Bitcoin economy, enabling high-value peer-to-peer commerce to flourish alongside centralized exchanges.
Key Sources:
• Bitcointalk: #bitcoin-otc Announcement
• Bitcoin-OTC Wiki
• Bitcoin Wiki: OTC Trading