What is a Bitcoin ATM and Crypto ATM Working ?

In October 2021, Walmart, the largest US company by revenue, announced that it would install bitcoin ATMs in 200 of its 4,700 supermarkets. This created quite a buzz in the cryptocurrency world given Walmart’s size and customer base, but if you’re one of those who’s not even sure what a bitcoin ATM is, we’re here to help explain why. that. How do they work? And why you might see a lot of them appear.

Bitcoin ATMs (Automated Teller Machine) are kiosks that allows a person to purchase Bitcoin and other cryptocurrencies by using cash or debit card. Some Bitcoin ATMs offer bi-directional functionality enabling both the purchase of Bitcoin as well as the sale of Bitcoin for cash. In some cases, Bitcoin ATM providers require users to have an existing account to transact on the machine.

What is bitcoin ATM?

The term ATM is one of those universal bits that can explain almost any country in the world. They are machines attached to the banking system that allow you to withdraw cash from your account.

ATM stands for automated teller machine, which doesn’t do a great job of explaining the feature. A teller is an American term for someone who works at a retail bank, processing deposits and making withdrawals in person. So an ATM is just a machine that provides this function 24/7.

Since bitcoin is a digital currency, with no physical form or central authority, the machines work differently than the ATMs you’re used to at Walmart and in other parts of the world.

In fact, a better way to describe them would be a cryptocurrency exchange kiosk, although this can’t compete with the instant identification that the ATM abbreviation provides.

What does a bitcoin ATM do?

The main function of a bitcoin ATM is to allow you to buy bitcoin (and other cryptocurrencies) with cash, or sell bitcoin for cash.

Since cash as a form of money is slowly losing popularity, it seems rather ironic that it is the only form of payment accepted by bitcoin ATMs.

The big problem here is that ATMs will become money laundering traps because Bitcoin is anonymous, so they put limits on how much you can buy or sell and, in some cases, require you to create an account with an operator. of ATM. in some cases they also provide KYC.

How does the bitcoin ATM work?

As we have already explained, to buy bitcoins at an ATM you will need two things. Cash and a bitcoin wallet. If you’re not sure what a bitcoin wallet is or does, read this article first.

First, you need to provide your bitcoin address details by allowing the machine to scan the bitcoin wallet QR code on your phone. This is where the ATM will send your bitcoin after you buy it. It is completely safe since in a public address it is only allowed to deposit funds, not to go out.

You then tell the ATM how much cash you want to exchange for bitcoin. The machine will provide a quote based on the current exchange rate, plus hefty fees that can go as high as around 10%.

Once you accept the quote, it will only be available for a few minutes (indicated by a timer) due to constant price fluctuations, during which time you will need to deposit the required cash.

Once the cash is accepted, the machine will process the transaction, which you can confirm in your mobile wallet. You may have to fumble to make sure the transaction is confirmed, but the machine will provide you with a receipt for the transaction.

If you want to sell bitcoin and receive cash, the process is reversed. The machine gives you a QR code to scan. You indicate how much bitcoin you want to sell. Again this will give you a quote, once accepted you will have a set time to send bitcoins. It will be dispensed after receiving the cash.

Disadvantages of Bitcoin ATMs

Aside from the fact that bitcoin ATMs only handle cash, the fees are pretty eye-catching, but in line with another common form of exchange found in supermarkets: converting coins into cash.

The appeal of currency-to-cash converters is convenience. Very few places, including banks, will provide the service, so as long as the coins remain in circulation, there is a demand to convert large amounts into something more convenient, regardless of the exorbitant fees.

You can’t make the same argument for bitcoin ATMs, since you must already have a wallet to buy or sell. Some ATMs only give out a paper coupon, which is then redeemed via a QR code, but you still need a wallet, even if it’s after the fact.

Their nature has made them a target for criminals, either for money laundering or as part of various online scams. This is a small but frequent element of cryptocurrencies in general are extremely lucrative, 10% commission on bitcoin purchases is tidy business.