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20 October 2016
Bitcoin usage and trading volumes are on the rise: in October 2016, the number of daily confirmed Bitcoin transactions reached 270.000. As the cryptocurrency not owned by any country or bank goes mainstream, the demand for its reliable infrastructure is also growing. And while online bitcoin communities, trading platforms and exchanges have become an ordinary thing, the market has a new ace in the hole that can win hearts and minds of BTC users. Have you heard about hardware Bitcoin machines aimed to make exchange operations easier and strengthen the overall network?
Bitcoin ATMs: what is the difference from regular cash machines?
Since Bitcoin is an online-only currency that exists electronically, you can’t expect any cash withdrawals. Contrary to traditional cash machines, Bitcoin ATMs act as web-based exchange platforms allowing users to convert their money to BTC and vice versa. While some Bitcoin ATMs can be used for both buying and selling operations, most of them allow users just to purchase bitcoins. That’s why Bitcoin ATMs are rather currency exchange kiosks than classic bank cash machines.
Another difference is that a large number of Bitcoin machines require two-factor identification: first, you need to confirm your phone number via a SMS code, then you need to confirm your identity via a fingerprint, palm vein or face scan. However, an ATM operator may refuse to collect personal information and turn off that functionality to support the idea of anonymity. However, in that case, he will also need to limit the maximum transaction limit (in US – up to $500) to comply with various Know Your Customer and Anti-Money Laundering regulations.
In addition, since the legal status of bitcoin is still uncertain in most countries, running a Bitcoin ATM business can be quite problematic. Such operators always need to have a plan B in case if their bank closes their accounts due to restrictive government’s policy concerning cryptocurrency-related operations. For example, in 2014, Cointrader, which launched the first bitcoin ATM in Montreal, reported that its bank accounts were shut down by the Bank of Montreal to prevent potential criminal implications of using bitcoins.
How to sell/buy BTC via a Bitcoin machine
If you want to buy BTC in a Bitcoin machine, you typically need to scan the QR code of your bitcoin wallet and then insert cash to finish the transaction. The equivalent amount in BTC will be credited to your online account. When you sell bitcoins for cash using a Bitcoin ATM, you need to send your BTC to address QR code provided by the machine. After that, depending on the ATM type, you will either get cash immediately, or you’ll need to wait for bitcoin transaction confirmation.
Keep in mind that Bitcoin ATMs usually charge high transaction fees that make this service much pricier than traditional online currency exchanges – the average Bitcoin ATM sell fee is 5.83%; the average buy fee is 7.83%. By comparison, online platform Coinbase charges a 1.49% fee for buying/selling BTC. Plus, the currency conversion rates can be less beneficial than you can find online – about $50 above the market rate for buying BTC.
Interesting facts about Bitcoin kiosks
The world’s first-ever Bitcoin ATM was installed on October 29, 2013 in Waves Coffee House in Vancouver, Canada. Even though this fact can be considered as a coincident, but the next day the “Bitcoin” article on Wikipedia became the second most read page after “Halloween.” On the first day of its work, the Canadian ATM processed 81 transactions with a combined value of CND$10,000. A third of all users were first-time Bitcoin buyers that created an account on the spot.
A few weeks later, the ATM owners noticed that the machine had voided 15 transactions in a row. When they arrived in Waves Coffee House to find the reason of that bug, they saw a man sitting near the machine and holding a sign offering visitors to change their BTC without any commission. Thus, the ATM owners had to hire a supervisor to protect their business from human competitors and help people use the machine.
The leading Bitcoin ATM brands available on the market are Genesis Coin (317 machines), Lamassu (175 machines) and General Bytes (119 machines). If you want to buy a Bitcoin ATM, it will cost you around $6,000 for a buy-only machine and about $7,000-$9,000 for a buy-and-sell machine. On average, Bitcoin kiosks bring $20,000-$30,000 in volume per month depending on their location and current market state. That means that their gross profit is about $2,000 per month.
How many countries have Bitcoin ATMs?
Over the last several years, the number of Bitcoin ATMs installed in different parts of the world has considerably increased. While in 2014 the total number of such machines was just 4, now you can find 809 BTC kiosks in 54 countries, and this number will rise even further as the number of bitcoin users is growing. You can use the Coinatmradar.com website or download their iOS/Android app to find the closest ATM locations.
As for Bitcoin ATM availability in different countries, about 70% of all Bitcoin kiosks are located in North America. Currently, there are 450 machines in the United States and 118 machines in Canada. Europe is number two: it has around 22% of all Bitcoins ATMs (UK – 36 machines, Spain – 26 machines, Finland – 17 machines, Czech Republic, Switzerland and Austria – 14 machines each). Asia and Oceania have less than 5% of all Bitcoin kiosks – for example, Japan has 11 machines while Hong Kong just 8. There is just one Bitcoin ATM in Africa located in Midrand, Kyalami.
The Bitcoin ATM industry is just 3 years old, but it sees steady growth. Such hardware kiosks help bring online currencies into the real world and show people that there is always an alternative to traditional payments systems and bank services. While it may take a lot of time to adopt bitcoin as a day-to-day currency and get Bitcoin ATMs installed in all large cities, the fast expansion of BTC machines makes these possibilities more realistic.
Exciting articles several times a month