A Bitcoin ATM, perhaps?
Let’s first fully understand - “What is a Bitcoin ATM?” and then later develop a better understanding of ‘how does Bitcoin ATM work’ and ‘how to use Bitcoin ATMs?’
Once a product is developed, thousands of supporting firms start sprouting up to support any thriving sector.
This is also true in the cryptocurrency realm, where digital wallets, exchanges, media outlets, and influencers are all-embracing Bitcoin and other cryptocurrencies. The Bitcoin ATM is one of the most intriguing technologies to result from this frenzy.
What is a Bitcoin ATM?
BTMs, also known as bitcoin ATMs, are points of sale where users may purchase the cryptocurrency known as bitcoin as well as occasionally sell it. Third-party businesses own and run Bitcoin ATMs; the two with the biggest networks are Bitcoin Depot and Coinme.
Customers may use a Bitcoin ATM to convert their local currency into Bitcoin by inserting cash or a debit card. While most people can use Bitcoin ATMs, the user may need to already have an account with the Bitcoin ATM operator.
Now that we covered ‘What is Bitcoin ATM?’ Let’s go ahead and know a bit of the history around it.
A quick look back at Bitcoin ATMs
On October 29, 2013, the first Bitcoin ATM became operational. It was a Robocoin machine that could be found in Vancouver, Canada's Waves Coffee Shop. Due to Bitstamp's operational mistakes, it was only in operation until 2015, yet it is commonly regarded as the world's first Bitcoin ATM. Shortly after, a Bitcoin ATM was launched in Europe. It was put up on December 8, 2013, and it was situated in Bratislava, Slovakia.
On February 18, 2014, the first Bitcoin ATM in the US was set up in Albuquerque, New Mexico. However, it was only operational for a month before being discontinued.
The regulation of Bitcoin ATMs has subsequently presented several difficulties, much like the cryptocurrency itself. Finally, an agreement was reached that Bitcoin ATMs needed to follow the same rules and legislation as conventional ATMs.
This includes restrictions on how many deposits and withdrawals a person may make per transaction, per day. For instance, in the United States, all Bitcoin ATM operators are required to register with FinCEN and abide by the BSA's anti-money laundering (AML) rules.
Depending on how many transactions you do, the Bitcoin ATM could need your cell phone number to SMS you a verification code. You could be required to scan a piece of government-issued identification, such as a driver's license, before completing a purchase.
A number of Bitcoin ATMs no longer provide the privacy they formerly did, which is another thing that many cryptocurrency aficionados find disappointing. This is due to laws that demand users confirm their identity before making a transaction, especially one involving large sums of money.
Currently, there are over 28,000 Bitcoin ATMs operating worldwide, with the bulk of them in the United States. With over 90% of the worldwide market for Bitcoin ATMs, North America dominates. The two main producers of Bitcoin ATMs now are General Bytes (41.5 percent market share) and Genesis Coin.
The majority of BTMs may be found in cafés, specialty stores, and transportation hubs like train stations and airports. Business owners often need to sign a contract with a Bitcoin ATM provider in order to install a BTM within a commercial area. The gadget will then be installed on-site by the provider.
With a history of Bitcoin ATMs and an understanding of ‘What is a Bitcoin ATM?’, you will further get to know ‘how to use Bitcoin ATMs?’
How to use a Bitcoin ATM?
All Bitcoin ATMs have one thing in common: you can use them to buy Bitcoin by exchanging fiat cash for it. Since Bitcoin is digital money that isn't linked to a bank account, you'll need a cryptocurrency wallet to hold it. You can enter your wallet's address or QR code after inserting the cash amount you wish to swap for Bitcoin into the ATM. The money will be converted into Bitcoin at the going rate and sent to your online wallet.
Some Bitcoin ATMs are bidirectional, allowing both the buying and selling of bitcoin. In the latter scenario, you may enter the quantity of Bitcoin you wish to convert to cash and either pick up the cash in person or have it sent to your debit card.
You may send Bitcoin to someone else using Bitcoin ATMs. The Bitcoin you buy will be put into the recipient's wallet when you provide their address as the recipient's wallet address rather than your own cryptocurrency wallet address.
In certain circumstances and depending on the transaction amount, you might need to scan or take a photo of a form of ID at the machine before completing the currency conversion.
And, that pretty much sums up “how to use Bitcoin ATM?”
How do Bitcoin ATMs work?
Bitcoin ATMs make buying and selling Bitcoin far more convenient than using online cryptocurrency exchanges. Typically, in order to use a Bitcoin ATM, a user must already have an account.
There are two categories of Bitcoin ATMs or BTMs:
- Unidirectional Machines: Devices for one-way Bitcoin transactions that permit both buying and selling.
- Machines that are two-way and facilitate both buying and selling of cryptocurrencies are known as bi-directional machines.
In order to facilitate the conversion of cryptocurrencies into cash, BTMs must be online. Some BTMs still use paper receipts, but most BTMs move money using a public key on the blockchain. When making significant transactions using bitcoin ATMs, a verification step is frequently necessary.
Bitcoin transactions are blockchain-based, in contrast to conventional ATMs, which only allow for physical deposits and withdrawals of money. They employ a QR code to deliver cryptocurrency to a user's Bitcoin wallet. They are also not run by major financial organizations because they do not link to a bank account. But as we just said, they follow the same rules and laws.
Typically, a QR code corresponding to the user's Bitcoin wallet address will be requested. Coins bought after then can be added to their wallet. After a few minutes of processing, a record of the transaction will then show up in the user's digital wallet. The amount of cash that may be deposited with a Bitcoin ATM is likewise subject to lower and upper limitations.
After knowing the types of Bitcoin ATMs, and “how does a Bitcoin ATM work?”, next up we will cover the pros and cons of Bitcoin ATMs.
Pros of a Bitcoin ATM
- Privacy: While occasionally requiring you to scan an ID before making a transaction, Bitcoin ATMs frequently don't entail disclosing your personal information.
- Accessibility: Anyone can purchase or sell cryptocurrencies because it isn't dependent on a single system, and it doesn't matter if they have a bank account or not. It is simple to acquire (or sell) Bitcoin using cash transactions since Bitcoin ATMs are widely available.
- Ability to sell Bitcoin: Some Bitcoin ATMs are bi-directional, allowing users to sell Bitcoin through them.
Cons of a Bitcoin ATM
- There aren't enough cryptocurrencies available: Typically, Bitcoin ATMs only let you exchange cash for cryptocurrency. You'll probably need to visit an online cryptocurrency exchange if you want to purchase other sorts of cryptocurrencies.
- High transaction costs: The charge for using a Bitcoin ATM to exchange money might be anything between 5% and 20%. While this is going on, transaction costs on certain online Bitcoin exchanges are less than 1%.
- Frequently targeted by scams: One drawback of the accessibility and anonymity of Bitcoin ATMs is that scammers and fraudsters may easily take advantage of them. The FBI reported an upsurge in fraudsters in 2021 who gave their victims fraudulent instructions to withdraw or transmit money using Bitcoin ATMs. It might be particularly challenging to find the con artist and get your money back if you fall for fraud utilizing a Bitcoin ATM.
- Lack of protection: The federal government does not regulate Bitcoin or other cryptocurrencies. This implies that when you purchase Bitcoin via a Bitcoin ATM and add it to your digital wallet, it is not protected against theft or loss of funds by the FDIC, as it would be in a bank account.
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Why are Bitcoin ATMs gaining popularity?
Although trading cryptocurrency online is highly easy, consumers may run into issues with transaction timing, privacy, and support. Utilizing Bitcoin ATMs lessens its impact. Bitcoin often appears in the user's digital wallet in a matter of minutes or even seconds, making transactions instantaneous. Users are not required to divulge any personal information, including their banking information. Individuals who prefer to handle cash or are paid in cash should also find it simple to obtain cryptocurrencies.
With more than 20,000 Bitcoin ATMs deployed worldwide, we can anticipate them being crucial to the development of cryptocurrencies.
Summary: Bitcoin ATMs' Potential for Growth
Since its launch in 2013, the value of Bitcoin has risen steadily. One Bitcoin was worth about $200 back then. Years later, despite price swings, its value has increased to thousands of dollars.
Bitcoin and other cryptocurrencies are anticipated to grow in popularity as the world continues to move towards digital solutions in general, including financial transactions.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide tax, legal, or financial advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.