Bitcoin ATM
Bitcoin ATM works like any other similar machine that works with fiat money, the only difference is Bitcoin is represented as of the participants of the exchange. Acquiring or selling of coins in such ATM might be much more expensive, that the typical way of online acquisition, since setting up an ATM its cost and maintenance are also included in the commission that is charged once the transaction comes through. The steps that are necessary to transfer fiat money and bitcoins are also a part of the price in this scenario.
Bitcoin-ATM is, basically, the means of transferring money, and thus enterprises fall under the definition of payment systems, they must comply with the laws. Different countries put forward a different list of requirements, the most common procedures: “Know your client” (KYC, the need to identify the client) and “Anti-money laundering”. Registering remittance status can be expensive, and this means that ATM vendors have to raise a commission.
The fees that are applied to the user of the machine are about 5% of the total transaction, however, it may increase as it is calculated depending on multiple factors, such as the location of an ATM and its type. Companies that provide services of Bitcoin ATM’s tend to manage the money and bitcoins as they have to maintain balance, however, too many bitcoins without hedging can lead to disastrous results.
Differences in Bitcoin ATMs
The first challenge for anyone who wants to buy Bitcoins through an ATM is to find this ATM itself. There are more than 425,000 of them in the USA alone. You should use an interactive map when searching for a Bitcoin ATM. The best at the moment is coinatmradar.com. With it, you will find out the exact address and hours of operation of the nearest ATM.
The second step is purchasing the Bitcoins. And this harder than you can imagine. Difficulties happen due to the fact that this operation does not use the card issued by the financial institution, as would be the case with a bank ATM. Therefore, the process often includes additional checks. What makes the situation worse, there is no standard for the Bitcoin ATMs and more than half a dozen companies are now engaged in the development and production of such machines.
As ATMs differ, some can only conduct one-sided transactions and sell you bitcoins, others two-sided ones, have the technical ability to buy and sell bitcoins. Except for the verification procedure, you also need to have an online wallet so that the machine knows where to send the Bitcoins you have purchased. A smartphone with a wallet installed simplifies this process. Otherwise, you need a QR code with the Bitcoin address encrypted on it, printed on paper.
How ATMs Work
The purchased cryptocurrency can be forwarded to the wallet that was specified by the user or there is also an option to create and print the paper-type wallet. The used to sell you the Bitcoin depends on the exchange rate which is extracted from the Internet. The ATMs charge a certain percent of the transaction as a fee for the services provided as well.
The number of Bitcoins that can be purchased in one machine is limited as it might be connected to a specific online-wallet that is used to sell Bitcoins. Another way, the ATM can function is if it’s connected to an online exchange and the currency is bought in real-time as if it was you who was using the online exchange, the only difference is that the ATM does it on your behalf. Which one of the two is used depends on the settings of the machine and the legislation in the area where the ATM is situated. A lot depends on the legislation as in the state of Texas, for example, Bitcoin ATMs can only work with online-wallets and purchase of the bitcoins on behalf of the person using the machine is forbidden. Legislation differs a lot in various areas, that is why Bitcoin ATMs are produced with multiple ways of functioning.
Purchasing the Coin
The steps might differ depending on the machine you’re using, however, the whole process in general looks the following way:
- Verification phase (optional, may vary significantly depending on ATM type);
- Obtaining a Bitcoin address for making a deposit (can be generated and printed/sent by email, but it’s better to have it with you before using the device);
- Putting your cash in the ATM;
- Confirmation of operation (Bitcoin went to your wallet).
It is necessary to note that these are general instructions, however, there is no need to be more specific in this case as the overall procedure is not much different from the typical ATMs that we all use. The differences mainly concern the verification procedures and the differences in machines operating systems, although, it does not influence much. As mentioned before, some ATMs can sell fiat money for Bitcoins, so the major difference is whether you want to buy or sell the coins themselves. Except that, everything goes the same way. Still, we think it would be great to mention some of the features that happen to be present in the ATMs.
Several models of ATMs, for example, produced by Lamassu (the most widespread), Skyhook and CoinOutlet, interact with the user in just such a simple manner as we described. Other companies have added various identity checks that some users may find intrusive or annoying, for example:
- BitAccess machines require users to enter a mobile number to which the machine then sends a verification code and which must be entered on the touch screen of the ATM;
- Genesis Coin machines also use this confirmation but are not limited to this as the person using the ATM will have to scan the fingerprints in order to use it;
- Robocoin outdid everyone. In the beginning, the user of these ATMs must create an account, which includes the above-described scheme with phone entry and a confirmation code. Then you must select a PIN. The next step is to scan your photo ID, as well as your photo for verification. You will also have to wait a few minutes for the system to create and verify your account. The whole process of using this kind of ATM looks the following way: first, you need to enter both your phone number and pin, after that proceed with scanning your palm, once the verification process is finished you will be allowed to conduct transactions.
Why is it Worth Buying Bitcoins in ATM
Currently, more than 4,000 Bitcoin ATMs are installed in the world, more than 2,000 of which are located in the United States. The second country by the number of installed Bitcoin-ATMs is Canada. Austria is the third from the top. Despite the fact that the method of buying cryptocurrencies through an ATM is convenient and anonymous, fees for transfers are a little scary, as they range from 6-10%. But, sometimes anonymity is worth it.
Except for anonymity, there are other points that show us that using ATM’s is convenient. For example:
- It is convenient for travellers who may face even higher currency exchange fees (traditionally, from a country's currency to dollar/euro, then to local currency). Total commissions may be lower than withdrawing Bitcoin through an ATM. Although with its volatility it can also be risky.
- Bitcoin ATMs provide an opportunity to get cash urgently
At the same time, as mentioned before, buying or selling Bitcoin in an ATM is much more expensive than doing the same thing online on any of the known cryptocurrency exchanges such as Binance as you will be charged with additional fees with every conducted transaction. However, if it’s the only way that works for you, ATM is still better than nothing.
Conclusion
Experience and the market will put everything in its place. After some time, it will become obvious how difficult the process of buying bitcoins should be. At the moment, there are too many different kinds of ATM’s that operate at different rules, so there’s literally no way to create a guide that will be able to cover everything, however, most of the steps that you will have to do either way are already explained in this article.
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