As Bitcoin reaches mainstream popularity after its meteoric rise in 2017, liquidity in terms of fiat currencies remains to be a concern for many individuals. While the main selling point for cryptocurrencies has always been their self-sufficient digital nature, it is no secret that they are far from realizing that goal in its entirety.
As such, Bitcoin ATM machines strategically located in urbanized areas across the world are common since they cater to the population that prefers to use them over online exchanges that are often obscure in terms of their functioning.
Without much introduction, let’s delve into what is Bitcoin ATMs and how do Bitcoin ATMs work.
How do Bitcoin ATMs work?
The first Bitcoin ATM is said to have been installed as early as in 2013 by the now-defunct company, Robocoin when Bitcoin was still in its infancy. Since then, several other manufacturers and providers have introduced their own machines in locations ranging from coffee shops to bars.
According to Coin ATM Radar, there are now over 2200 Bitcoin ATMs located in 63 different countries. The website is an excellent resource for anyone looking for a machine close to their geographic location.
Bitcoin ATMs provide its users with the choice to either purchase or sell cryptocurrency in exchange for local, government-issued currency. However, if the businesses did not wish to invest in a more expensive machine, they may choose to offer only one service and not a two-way one.
Once you have ascertained that a particular Bitcoin ATM is the right choice for you, you will have to perform a type of validation process that typically involves verifying your phone number.
If you are purchasing Bitcoin, the machine will ask you for your Bitcoin wallet address. Typing the entire receiving address into a machine with only a number pad is likely an exercise in futility. The alternative is to scan the receiving address QR code instead.
Almost every smartphone wallet app will provide this functionality. Place the barcode on the scanner and allow the machine to proceed. At this point, it will ask you to insert your cash into the machine and confirm that you wish to proceed.
The procedure to sell your Bitcoin in exchange for fiat is not too different from the above process. Instead of providing a receiving wallet address yourself, the machine will display a QR code on the screen to which you will need to send your Bitcoin.
Once a certain number of verifications have been confirmed on the blockchain, the machine will eject currency equal to the transferred amount.
Another advantage of Bitcoin ATMs is the guarantee of privacy at these machines. Online exchanges require you to verify your complete identity regardless of whether the amount you wish to trade is minuscule and insignificant or not.
On the other hand, Bitcoin ATMs require as little information as your phone number provided the amount you wish to transact is below a certain threshold.
It is important to note, however, that the convenience of a Bitcoin ATM may sometimes come at a very hefty price premium. During times of extreme volatility in either direction, Bitcoin ATM owners may sometimes want to insulate themselves from risk by setting the Bitcoin exchange rate higher or lower.
The actual amount of price delta depends on whether you are looking to buy or sell cryptocurrency from the machine but it is likely to be there regardless.
The Bitcoin transaction fee is yet another factor to be wary of while using a Bitcoin ATM. According to an advisory issued by the Consumer Financial Protection Bureau, the transaction fee for Bitcoin ATMs can be as high as 7 percent.
Some Bitcoin ATMs will also not allow you to trade beyond a certain limit per day. This is because of their required presence with local laws and regulation that are in place to prevent money laundering and other illicit activities.
For that reason, many Bitcoin ATMs around the world will require you to complete a simple KYC verification before proceeding to transact large amounts of cryptocurrency.
Of all the countries with Bitcoin ATMs, it appears as if the United States is home to the most number of machines at close to 1500 of them in all. Restaurants and cafes tend to be the most common places where Bitcoin ATMs can be found, but a surprisingly large percentage of them also exist at corporate offices and supermarkets.
Like any other traditional ATM owned by banks though, every such Bitcoin machine is not limited to a maximum value you can withdraw before it needs refilling.
In the past, some people have also used Bitcoin ATMs as a convenient method of fund remittance from one country to another. While the volatility of Bitcoin may be a small risk, usage of the cryptocurrency comes with the advantage of not having to deal with the hefty transfer fees that most banks levy for international transfers.
On the other hand, given that Bitcoin transactions can occur for as low as a few cents regardless of the transferred amount, they are a promising candidate for remittances.
Furthermore, Bitcoin’s global reach allows you to transact the held cryptocurrency in your wallet regardless of which country you are in.
Businesses that are looking to add a Bitcoin ATM to their storefront can do so with remarkably little effort, especially if they are located within the North American region where federal and state regulation on the matter is quite clearly defined.
The United States-based Genesis Coin is responsible for the lion’s share of the Bitcoin ATM market and provides machines to businesses at a fixed rate.
One of the biggest problems with Bitcoin ATMs is their relative rarity in the third world and developing countries. As previously stated, there is perhaps no shortage of such machines in the Western world. However, in places that could possibly benefit the most, Bitcoin ATMs are, for the most part, nowhere to be found.
Venezuela, for instance, turned to Bitcoin when its economy collapsed due to massive hyperinflation and political corruption.
Given the illiquidity, however, the cryptocurrency also became hard to come across. A Bitcoin ATM under such circumstances would have helped the community prosper.Hope this article gave you a clear idea about how do Bitcoin ATMs work.
Feature image by StudioTale