You might have heard people say that they are skeptical about the use of Bitcoin because its convertibility is not like that of other fiat currencies.
Some say it is difficult to convert Bitcoin into the local currency when you need it, pointing to the complexity of going through an exchange. Since Bitcoin is not as widely accepted as many would like, this is a sticking point. Well, there is a solution and it has been deployed for years now. The solution is called the Bitcoin ATM.
A Bitcoin ATM is an ATM machine that is actually a live Bitcoin exchange that allows you to buy or sell BTC in person.
How does a BTC ATM Work?
People can withdraw cash denominated in their local currency through a Bitcoin ATM. There are some costs involved and the transaction is not as fast as those you are used to on traditional ATMs. This is due to the nature of Bitcoin and the way the ATM business in general works. Here is how a Bitcoin ATM works, in general terms:
- Transfer some BTC to your phone wallet or head over to where the ATM is with your computer and your wallet of choice
- Go up to the screen on the Bitcoin ATM and select withdraw
- You will see the quoted BTC price and the amount of fiat you are expected to get
- The screen will show an address and a QR code
- Transfer Bitcoin from your phone, web, desktop or hardware wallet to the address on the screen
- Take the receipt from the Bitcoin ATM. Warning: This is the only proof you have of ownership at this point. If you lose the receipt, you lose the money!
- Come back to the machine 20 to 30 minutes later and select the withdraw option on the Bitcoin ATM screen
- Enter the code that is on the receipt you got earlier
- The Bitcoin ATM will dispense the money you were owed in cash
Buying BTC or Depositing Fiat
- Have a Bitcoin address ready. We recommend you write down the address from your preferred wallet or get a screenshot of the QR code for that address
- Go to the Bitcoin ATM and select the buy BTC or deposit cash option
- The machine will ask for the amount of fiat you would like to deposit and will quote a BTC price so you know how much BTC you will get
- Once you select the amount, the Bitcoin ATM will ask you to either type your BTC address or scan your QR code
- After you type your address or scan your QR code, the Bitcoin ATM will ask you to deposit the amount in fiat
- When the deposit is complete, you will get a receipt. Hold on to that receipt until you see the BTC you purchased in your wallet and the transaction is confirmed because it is the only proof you have that you deposited fiat
- The transaction might take up to 30 minutes
Bitcoin ATMs are Really Physical Bitcoin Exchanges
Now that you know how a Bitcoin ATM operates, you might have noticed that it is not really an ATM. If you want to describe these machines more accurately, you would call them physical Bitcoin exchanges, or cash to BTC exchanges. The price of Bitcoin on them even changes in real time, just like on an online exchange, so the Bitcoin ATM doesn’t even operate like an automated fiat exchange would. Nevertheless, they fulfill the same role that regular ATMs fulfill: They give you on demand cash for the money you have in your account and allow you to deposit cash to your account. The only difference is that the account we are talking about is a Bitcoin wallet, and that requires the machine to behave a little differently.
Bitcoin ATM Fees
Fees are another sticking point when talking about Bitcoin ATMs. When you withdraw cash from them or when you buy Bitcoin on them, you will notice that the BTC price given to you can be lower or higher than market price respectively. This is due to the following factors:
- Bitcoin ATM owners take on exchange risk. Fees help them mitigate that risk
- The convenience of having a Bitcoin ATM is costly. The user bears that cost
- Companies operating Bitcoin ATMs are subject to the same dynamics any other company is subject to, so they seek profit.
Even after you calculate the fee, you might notice that it is not different from the fee you can expect to pay at a traditional fiat ATM for a withdrawal. This makes Bitcoin ATMs a good option for convenience, and since they provide anonymity in many cases – some don’t KYC their users – the fee could be seen as paying for the privilege of remaining anonymous. Both are certainly worth it.
Cash Readily Available at your Local Bitcoin ATM
Bitcoin ATMs have also spread far and wide, bringing these benefits to an increasing number of users around the world. They are not as ubiquitous as traditional ATMs and they will never be. But chances are that if you live in a big city in a Western country, or even in Latin America and certain parts of Asia, the nearest Bitcoin ATM will not be too far away from you. So next time people tell you that Bitcoin convertibility on the spot is an issue, point them to the nearest Bitcoin ATM and show them how far and wide the Bitcoin revolution has already spread!