Digital Transactions - November 2014 - (Page 44)
November 2014 digitaltransactions
the Bitcoin ATMs
By Peter Lucas
Enthusiasts are betting Bitcoin ATMs will be the next step in taking the
digital currency from monetary curiosity to mainstream acceptance.
ince the first Bitcoins were
mined in 2008, evangelists for
the fledgling digital currency
have dreamed of making Bitcoin as
ubiquitous as dollar bills. To say the
least, the road to omnipresence has
been anything but smooth.
Unless a consumer is ambitious
enough to mine Bitcoins, which
requires a deep knowledge of cryptography, batteries of high-powered
computers, and countless hours to
crack the currency's algorithmic code,
Bitcoin exchanges have been the only
other outlet for obtaining the currency.
Most consumers, however, do not
know what a Bitcoin exchange is. Or
they have become wary of them since
Mt. Gox, which reportedly handled
70% of all Bitcoin transactions, collapsed earlier this year after news that
about 850,000 Bitcoins belonging to
its customers were reported stolen.
So consumers need a more convenient, reliable way to buy Bitcoin
if it is to become a mainstream currency. Enter the Bitcoin ATM, a device
designed to make it easy for consumers
to buy Bitcoins and convert them into
cash. The machines work like the traditional ATMs millions of consumer use
every day to withdraw funds from, and
make deposits to, their bank accounts.
"One of the challenges Bitcoin
has faced gaining broader acceptance
is that it is not easy to buy, sell, or
convert Bitcoins into hard cash," says
George Peabody, a partner for Menlo,
Calif. based payments consultancy
Glenbrook Partners LLC. "ATMs
offer faster, easier access to Bitcoins
'Less Time And Risk'
To use a Bitcoin ATM, a consumer
must have a digital Bitcoin wallet.
Within the wallet is a quick-response
(QR) code that, when scanned at the
ATM, authenticates the wallet holder.
The wallet holder then follows the
on-screen prompts to either insert
paper money into the machine to buy
a specific denomination of Bitcoin or
instruct the machine to extract a specific value from the Bitcoin wallet as
cash. Consumers can also print out a
paper copy of the QR code and scan
it at the ATM to initiate a transaction.
To more accurately verify a wallet holder's identity, Las Vegas-based
ATM marketer Robocoin has implemented palm-scanning technology on
its machines. Bitcoin wallet holders
must first register their palm print with
Robocoin before using one of its ATMs.
The advantage of Bitcoin transactions conducted through an ATM vs.
an exchange is real-time settlement,
which removes the risk that the value
of the Bitcoin will decline before it is
* digitaltransactions * November 2014
deposited in the buyer's account. It can
take up to seven days to clear a transaction through a Bitcoin exchange, during which time the currency's value can
fluctuate based on whether speculators
bid the price up or down. That's a scary
thought for most consumers not used to
such wild swings in value in currency.
"For consumers that want to use Bitcoin right away to make purchases, buying Bitcoin through an ATM involves
less time and risk," says Peabody.
An added benefit of Bitcoin ATMs
is that consumers can buy a portion
of a Bitcoin, such as $100 worth, as
opposed to an entire Bitcoin, which
as of mid-October was trading around
$360. Exchanges do not sell or trade
fractions of Bitcoins.
"Being able to buy a portion of a
Bitcoin makes the currency more accessible to consumers," says Haseeb Awan,
chief management officer and cofounder of BitAccess Inc., an Ottawa,
Canada-based Bitcoin ATM maker.
Because Bitcoin ATMs are so new,
there is no accurate count as to how
many have been deployed by the handful of manufacturers producing them.
About 50 ATMs that dispense Bitcoins and convert them to cash for withdrawal have been deployed worldwide,
according to Evan Rose, president and
chief executive of San Diego-based
ATM maker Genesis Coin Inc., which
has sold about 30 ATMs. BitAccess has
Table of Contents for the Digital Edition of Digital Transactions - November 2014
The Gimlet Eye: Don't Write off POS Terminals Just Yet
Trends & Tactiics
Acquiring: POS Terminals Have a Future, And It's Looking Good
Strategies: Behind the Acquirers' M&A Spree
Cover Story: The 10 Most Pressing Issues in E-Payments
Acquiring: Should They Stay Or Should They Go?
Digital Currency: Here Come the Bitcoin ATMs
Endpoint: Why It's Different With Apple Pay
Digital Transactions - November 2014