The Case for Bitcoin ATMs
A quick overview of Bitcoin ATMs and their advantages
Over the past year, Bitcoin ATM deployments have expanded from just a handful to 350 machines worldwide. Bitcoin ATMs, or BTMs, marry the benefits of two very powerful forms of currency, cash and Bitcoin.
There are certain characteristics of cash that don’t exist in the virtual version of fiat you’ll find in your bank account. Cash transfers are instant, banknotes have 100% global adoption and cash transfers require no third party.
The peer-to-peer nature of cash means that no banks are involved in the transaction. The existing global adoption means that BTMs running on local currency may be placed anywhere in the world. Combine that with Bitcoin, which also requires no third party and can be sent effortlessly about the globe, and the possibilities become apparent.
What are BTMs’ advantages over exchanges?
When using a BTM, the operator (the proprietor of the machine and provider of services) holds the cash for 4 seconds alone. That is the time it takes the bill acceptor to validate your banknote and send you bitcoins. Compare that with days for wiring funds into your exchange and waiting for them to clear.
Lamassu BTM operators are decentralized with no single point of failure. This is the only current example of a distributed network for buying or selling Bitcoin.
These two points are especially important considering the history of Bitcoin exchanges. BTM operators never hold users coins and there is no central server to hack or shut down.
Why are the fees so high?
The average convenience fee on Lamassu machines is currently 5%.
Fees are higher than exchanges because the cost of operation is higher. A physical machine that services users in a limited geographical area is not as efficient as an exchange servicing the world.
Fees can be higher if the location has high rent, but that may be justified if the location is considerably more convenient. Of course, there are machines with very low fees as well.
As the industry grows, and as operators’ cost to hedge Bitcoin value falls, we expect competition and growing demand to drive transaction fees down.
Who’s using them?
While we don’t have access to our operators’ exact figures, we have conducted surveys that shed light on the performance of machines in the wild. There are currently 117 live machines worldwide. Solid locations have a monthly volume north of $30,000 and the two NYC Lamassu machines have amassed volumes upwards of $130,000 each.
This transactional volume is going up. Operators are gaining experience, they’re finding their reference volume and moving slower machines to more profitable areas. Bitcoin awareness is ascending, and BTMs are proving to be a friendly and convenient on-ramp to the currency.
Has Bitcoin’s price drop affected purchasing habits?
There are no whales in this industry. Just people off the street putting in a couple bucks one day and a couple hundred another. As with exchanges, volume is at its highest when volatility rages, regardless of its direction.
How are BTMs different than traditional ATMs?
BTMs aren’t ATMs at all, much as Bitcoin wallets resemble leather wallets in concept alone.
When you approach an ATM you wish to perform an action on your bank account. When you approach a BTM you wish to perform an action on the Bitcoin block chain. No Bitcoin ATM is an ATM, regardless whitherward the cash flows.
BTMs may be placed anywhere in the world, the only requirements being electricity and internet. And with the introduction of our two-way machines, BTM operators themselves may soon bid their bankers farewell.
Zach Harvey is co-founder and CEO of Lamassu.