Bitcoin ATMs (Automatic Teller Machines) – A Smart Business on the Rise

Data & Research / 14.08.2020

The Bitcoin ATM sector continues to experience record growth across the globe. Part of the reason for this growing demand is the fact that these devices feature better technology, more functionality, and lower costs than their predecessors. Consequently, every day more people turn to these units as a reliable alternative to fiat-to-crypto exchanges

Frictionless Entry

Bitcoin ATMs provide frictionless entry into the cryptomarket. For most people, converting fiat to crypto is a hassle. You must register for a regulated exchange to accomplish this task. Bitcoin ATMs simplify the entire on-ramp process. In this way, they provide users with anonymous and instant access to the blockchain sector.

Simplified

Bitcoin ATMs are an attractive option as a business model because they streamline the entire crypto experience. For one, the units require no technical know-how to operate. Additionally, they are small enough to fit nearly anywhere, and they require minimal setup. Nowadays, Bitcoin ATMs come in a variety of sizes, shapes, and configurations to suit your specific needs.

How to Use a Bitcoin ATM

Using a Bitcoin ATM is as easy as using your traditional ATM. The task begins when you locate a local machine. Luckily there are a bunch of websites dedicated to this task such as coinatmradar. The next step is to check the device to see what types of transactions it allows. Notably, not every Bitcoin ATM provides a full-suite of functionalities. Most US-based models, for instance, only offer the ability to purchase Bitcoins.

Now that you have located a working Bitcoin ATM in your area, you are ready to begin the purchasing process. You will need to select the type of cryptocurrency you desire. The next step is to insert your fiat currency directly into the bill acceptor. The screen will then display precisely how much Bitcoin you will receive and the fees incurred. From here, you must approve the transaction.

Now that your transaction is approved, you can decide how to receive your Bitcoin. Most units offer a variety of options. The most popular choice is to receive your Bitcoin via a mobile wallet. In this scenario, you just need to scan the barcode of your wallet to enter the address into the device. You can also choose to receive your Bitcoin on a paper wallet. Presto, you are now the proud owner of your very own Satoshis.

Starting a Bitcoin ATM Business

Anyone looking into starting a Bitcoin ATM business will be happy to learn that these units have seen a steady decline in their pricing over the last two years. Currently, the highest-rated Bitcoin ATM models cost around $10,000 each. Considering that these automated workers require minimal maintenance costs, this is a reasonable price point. Best of all, you never need additional hardware to monitor your investment.

Types

There are two main types of Bitcoin ATMs in the market currently. Each provides you with a different set of risks and rewards to consider. 

Self Load

Self-loading Bitcoin ATMs require you to connect your device to a hot wallet dedicated to your ATM. In this scenario, you make all the fees from your machine. Best of all, you get to decide how much in fees to charge. However, there are some drawbacks to consider.

For one, you need to monitor your device to ensure you have Bitcoin available for purchase. If your wallet runs out of crypto, your business is down until you refill the wallet. Savvy investors will evaluate restocking fees to ensure that they receive higher returns.

Volatility

Volatility is perhaps the biggest concern for anyone hosting this style of ATM. Whenever Bitcoin’s value drops below the price paid for the coins in the ATM, it puts the ATM owner in an unfortunate predicament. Nobody wants to sell their Bitcoin and take a loss. In these situations, the operator will deactivate the device until the market corrects. In this way, they lose customers and all the profits associated with that new business.

Auto Load

Autoload Bitcoin ATMs are the most popular version seen today. These units connect directly to an exchange. Bitcoin is purchased directly from the exchange before it is transferred to the Bitcoin ATM user. The upside is you never have to fund your device.

The downside to this approach is that it tends to have much higher fees. In most instances, the ATM operator will choose to pass the exchange fees on to their customers. All of these fees make Bitcoin ATMs one of the most expensive ways to enter the market.

Selling Bitcoins

As previously discussed, not every Bitcoin ATM offers every possible Bitcoin service. Selling Bitcoins via a Bitcoin ATM is one of the most controversial strategies currently in place. As such, Bitcoins that allow Bitcoin users to sell their crypto are a bit more complicated to set up and run. For one, these devices require you to stock the unit with fiat currency. Now that your unit is full of cash, it requires security equal to a traditional ATM.

More Expensive Units

Since there is a much higher chance of theft once your device is full of cash, it requires more security and monitoring. All of these requirements equate to more development costs for the unit. In general, a Bitcoin ATM that can make purchases will cost double one that cannot.

Additionally, since the ATM provides people access to fiat currencies via the sale of their Bitcoin, a host of additional legal requirements must be met. In many countries, these units are not allowed yet. One location where this style of BTC ATM has seen success is in Japan.

Buying Bitcoins

Bitcoin ATMs that exclusively offer sales options are the most popular for many reasons. Thankfully, Bitcoin ATM regulations relax when discussing selling Bitcoin. However, you will still need to check with local lawmakers to ensure that your investment will remain in operation without any problems. 

Compact Design

Most BTC ATMs are compact enough to fit nearly anywhere. There are even tabletop models available as well. Some of these units are portable so that you can bring your crypto aspirations anywhere you desire.  

Build Your Own

If you are a technically savvy individual, you can always build your ATM from scratch. Recent footage posted on social media from Lightning Network developer 21isenough demonstrates an easy to build model that costs under $500. He even goes as far as to provide you with detailed plans.

The video is a proof-of-concept for a Lightning Network-powered ATM. The Lightning Network enables fast micropayment across the Bitcoin network for a fraction of the costs of traditional transactions. Importantly, 21isenough points out that his ATM is not ready for commercial use. He cited vulnerabilities to specific attacks.

In a now widely publicized video, the developer demonstrates the amazing micro-payment capabilities. The video utilizes a cardboard mockup with a small LCD screen. He even lists the exact parts and steps needed to complete your own.

The Community Get Involved

Already, multiple variations exist online. Each version features a slight upgrade over its earlier model. If you are technically savvy, you may be able to put the final pieces to this puzzle and create an easy to make BTC ATM for a fraction of the cost of buying a new one. 

Bitcoin ATM Concerns

As with any new technology, analysts continue to point out areas of concern this product introduces. These concerns include the security, stability, legal, and technical aspects of these devices. Here are the most significant issues facing mainstream Bitcoin ATM adoption presently:

Regulations

Before investing in a Bitcoin ATM, it’s smart to seek approval from your local government. This step can be as easy as going to a city council meeting and explaining your proposition. Once you receive the blessing of the local authorities, only then should you begin placing your units in public. Don’t think for a second that the city won’t tear your ATM down if they are caught off-guard by its appearance.

AML & KYC

Anonymity is a critical feature in BTC ATMs. These devices seldom require a person to submit any form of identification. In the past, regulators voiced concerns over nefarious individuals using these devices to launder their ill-gotten earnings. However, there are many ways to purchase crypto anonymously. It’s highly unlikely a super-criminal would choose to go to a securely monitored and probably under surveillance Bitcoin ATM to commit their crimes.

Higher Fees

All of these features come at a cost. Notably, the transaction fees of Bitcoin ATMs are the highest in the industry. Remember, each ATM owner decides their fee structure. These fees include exchange rate fees, rent, electricity costs, and any other costs the operator seeks to recoup. On average, a Bitcoin ATM’s fees costs double, or even triple, than that of a traditional exchange.

Bitcoin ATMs – Blazing Forward

The Bitcoin ATM industry continues to see more activity every year. These unique devices are sure to become a driving force within the crypto community over the next decade. For now, both regulators and ATM developers must figure out the best way to integrate this revolutionary technology into the market efficiently.

David Hamilton aka DavidtheWriter is a long time Bitcoinist and cryptocurrency journalist. Currently, he has over a thousand articles published on blockchain technology. His expertise and experience makes him one of the most reputable writers in the sector.