Bitcoin ATMs

Bitcoin ATM devices have grown in popularity over recent years. There are now more than 2,000 Bitcoin ATM locations in the United States, and more can be found in countries like Canada, the United Kingdom, Finland and even Mexico.

These ATM machines for Bitcoin are a small step in making cryptocurrency more accessible to the masses. They could also be beneficial for financial institutions that are beginning to use blockchain technology to provide transactions for the public. A Bitcoin ATM could be a hallmark of a truly cashless society, but what are these machines and how do they work?

What is a Bitcoin ATM?

You are familiar with fiat ATM machines that exist on every street corner in every country. You insert a debit card which is linked to your bank account into the machine and withdraw cash. A Bitcoin ATM is similar in that it allows you to make a transaction, but the term ATM is perhaps a misnomer. ATM stands for Automated Teller Machine. Traditional ATMs essentially perform the same function as a physical bank teller.

A Bitcoin ATM operates on a slightly different principle. Investopedia defines a Bitcoin ATM as “an Internet-connected kiosk that allows customers to purchase Bitcoins with deposited cash.” These machines may sometimes be linked to a major cryptocurrency exchange, but can also be operated by a company that only buys and sells Bitcoin without providing a trading platform.

The machine keeps a record of all transactions and many will dispense a receipt upon request, just like a regular ATM. The most important difference between the two is that a Bitcoin ATM is not operated or backed by a bank, credit union, or  standard financial institution.

Also, one should not confuse Bitcoin ATMs with Bitcoin ATM cards. These are two different things. It is possible to obtain a Bitcoin ATM card which can be used at some fiat ATM machines. In this case, the holder of the card can use their Bitcoin balance to make cash withdrawals. An instant transfer takes place which converts cryptocurrency to fiat, and cash is dispensed just like it is from a standard ATM.

The History of Bitcoin ATMs

 These machines have been around longer than you might expect. The very first Bitcoin ATM opened on October 29, 2013. The machine was named Robocoin, and it was placed in a Vancouver, Canada coffee shop. The machine is believed to be the first kiosk ever developed which allowed users to purchase cryptocurrency.

In 2014, Robocoin placed its first United States machine in Albuquerque, New Mexico. It was located in a cigar bar. Unfortunately, the idea never gained traction and the machine was pulled just 30 days later. The D Casino in Las Vegas also chose to install one of the machines and had slightly more success.

By 2016, Robocoin had shuttered its operations. Many of its machines were sold to other companies who sought to reprogram them with proprietary software. Even though Robocoin ultimately failed, it is still an important company because it opened the door to the use and acceptance of Bitcoin ATMs. Every machine that has come after was in some way or other inspired by the efforts of Robocoin to popularize ATMs for cryptocurrency.

How Do Bitcoin ATMs Work?

The first thing to realize about these machines is that, while they look like regular bank ATMs, Bitcoin ATMs function much differently.

A Bitcoin ATM exists for the purpose of allowing an individual to deposit cash and purchase cryptocurrency. It does not provide fiat currency in the form of a withdrawal, nor does it dispense tokens that are considered as cryptocurrency. Bitcoin is a digital currency. It has no existence in a physical form.

That may seem like common sense, but there have been stories of people who actually expected to receive physical Bitcoin when they placed their money in one of these ATMs. All transactions that are made become a part of the blockchain, but these machines may not even provide a receipt unless the customer specifically requests one.

The customer begins by making a fiat deposit into the ATM. This cash can then be exchanged for Bitcoin. Many machines do this with the assistance of a cryptocurrency exchange. In order to receive the Bitcoin, a customer will have to provide a Bitcoin wallet address. The purchased tokens are then transferred to the customer’s wallet.

The customer can choose whether or not they would like to receive a receipt for their transaction. In reality, this receipt does nothing but confirm an exchange was made. Bitcoin ATMs are not backed a bank, so it is up to the customer to make sure they have entered their wallet information correctly and that the tokens were received.

Some machines have a limit on how much Bitcoin can be purchased per transaction. In many cases, this will be a total of one Bitcoin. Fractional amounts of Bitcoin can be purchased. The exchange rate is determined by the current price of Bitcoin as stated on the cryptocurrency exchange being used.

A few machines also require the user to submit to various security protocols. These can include the scanning of a photo ID or driver’s license or entering a phone number in order to receive a text message. The text will contain a code that must be entered in order to complete the transaction. Obviously, those who have concerns about anonymity and privacy will find such requirements to be problematic.

As you might expect, fees are charged by the Bitcoin ATM provider. Unlike regular ATM machines which charge a flat rate, the fees at a Bitcoin ATM are generally a percentage of the total purchase. This can add up to a significant sum when one makes a large purchase.

Processing time for transactions is usually very fast, but it can take several minutes for the Bitcoin to arrive in an individual’s wallet. That can also be a concern for some people as they stand waiting at the ATM for the transaction to post.

The Future of Bitcoin ATMs

As cryptocurrency becomes more popular around the world, one can reasonably expect that more Bitcoin ATM machines will appear. Many countries have already begun to discuss how the use of these machines can be regulated in order to protect consumers from fraud.

One could expect that in the future many more Bitcoin ATMs will allow individuals to withdraw fiat currency with a card that is backed by Visa or MasterCard. Indeed, a limited number of companies are now providing such a card. Most of these cards are expensive to obtain, and they are not available in all countries.

Given time, the presence of a Bitcoin ATM in supermarkets, malls, and coffee shops may be as common as a bank ATM. It all depends on how quickly the public warms to cryptocurrency as a convenient means of exchange.

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