Also called Bitcoin Teller Machines (BTMs), Bitcoin ATMs are terminals or kiosks that allow people to buy or sell Bitcoin and other cryptocurrencies using cash. They function very similarly to typical ATMs, giving people the convenience of accessing their digital assets and transacting with them.

BTMs work by connecting users to reputable crypto exchanges, linking to cryptocurrency wallets and facilitating the movement of funds. Despite being called Bitcoin ATMs, it is noteworthy that the machines typically accept transactions in other cryptocurrencies in addition to Bitcoin. Ethereum, Bitcoin Cash, Litecoin, and Dash are among the popular digital assets compatible with some BTMs.

How Do They Work?

Instead of being connected to a bank like traditional ATMs, BTMs communicate directly with the blockchain. Consequently, they are constantly in connection with the internet to power crypto transactions and provide real-time exchange rates. They typically allow users to connect their crypto wallets to the machines via QR codes to facilitate transfer to and from their wallets.

There are two types of Bitcoin ATMs:

1) Unidirectional BTMs: These machines support either the buying or selling of cryptocurrencies.

2) Bi-directional BTMs: These machines support both the buying and selling of cryptocurrencies.

Using Bitcoin ATMs: Benefits and Risks

There are several pros and cons to the use of Bitcoin ATMs. We’ve highlighted them in more detail below:

Benefits

1) Convenience: Besides face-to-face interaction, Bitcoin ATMs are the only way people can convert their digital assets to cash without linking to bank accounts or waiting for funds transfer. They offer immediate and 24/7 access to fiat currencies, increasing overall convenience.

2) Accessibility: Bitcoin ATMs are successful in bringing blockchain technology closer to people. Unlike traditional banks, Bitcoin ATMs don’t need debit cards and users’ bank accounts to complete transactions. This can bring financial solutions to the unbanked and underbanked population, including those with little technical knowledge of navigating crypto exchange platforms.

3) Fast transactions: Bitcoin ATMs serve as repositories of cash, ensuring quick access when people arrive. This reduces wait times and offers users swift access to their digital currencies without reliance on any third-party processors.

4) Privacy: BTMs provide a level of privacy to users. Unlike online exchange platforms, which require users to input extensive personal information, Bitcoin ATMs offer a more discreet option.

5) Familiar process: Because the interface of BTMs is similar to traditional ATMs, they are very familiar to users. They also ensure a smooth transition from traditional banking to decentralized banking, since millions are already familiar with ATMs. 

6) Customer support: In some cases, Bitcoin ATMs can offer customer service to resolve issues encountered during transactions. This additional service can improve overall user experience and adoption.

Risks

1) High fees: Bitcoin ATMs operate at significantly higher fees (5 to 20 per cent) compared to online crypto exchange platforms (typically less than 1 per cent). These fees cover for hardware maintenance, customer support, renting space, and other recurring costs needed for seamless transactions on the kiosk. Furthermore, some BTMs also impose variable miner fees that compensate the individuals validating the transactions.

2) Limited cryptocurrency choice: It is important to note that the Bitcoin teller machines don’t support transactions with all cryptocurrencies available on online exchange platforms. This restricts the extent of digital assets users can explore through these machines.

3) Transaction limits: There are upper and lower limits to the cash that can be deposited through BTMs. Larger transaction volumes generally require verification processes like Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

4) Availability: Although Bitcoin ATMs are progressively growing in numbers, they are still few compared to the global population. Furthermore, most of the machines are located in North America, with very few present in Asia and Africa, the world’s most populous continents.

Featured image source: Breet