Bitcoin Depot ATM

The Value of Bitcoin ATMs by Brandon Mintz from Bitcoin Depot

In the following video from TabConf held in January 2018, Brandon Mintz, the president of Bitcoin Depot, talks about the value of bitcoin ATMs during Bitcoin’s mainstream adoption.

Bitcoin Depot is an operator that works with Genesis Coin, and at the moment of this conference, they had 104 machines installed. As he says, there was a rise in demand for a more physical feel when having cryptocurrency transactions that are more similar to cash ATMs and provides people with a trust factor.

When Bitcoin experienced a 25x rise in 2017 it was followed by an exponential rise in media presence. Celebrities like Kathy Perry and 50 Cent are starting to get into Bitcoin. Large companies like Subway, T-Mobile, and Microsoft, started to accept it also. Logically Bitcoin-related google searches are starting to rise, which also resulted in a rise in users. It becomes mainstream. It is estimated that 60% of US population have heard of it, and about 1% of US population owns it. Therefore, numerous trading methods emerged.

Methods to trade Bitcoin

Methods to buy bitcoins

1. Peer to Peer

The pros of this method are that It is open to anybody and It is very quick compared to other methods. But on the other hand, since it is open to anybody it is not very reliable, and it is pretty easy to get scammed. Sites like Localbitcoins.com do not do their due diligence on every user. Also, customer support is limited. If a person reports a scam it can take a couple of days to get a response, and even then, the response will be that it is not their responsibility.

2. Exchanges

The upside of exchanges like Coinbase.com is that they offer some of the lowest fees around. The downside is that on the same exchange it can take way too much time to verify your account. It can take weeks or up to a month to get proof that you are a legal owner of your bank account. Coinbase also has unsatisfactory customer support. They state that they offer phone support but in practice they redirect customers to send e-mails, especially when usage spikes.

3. Broker Method

Companies like Genesis Trading that offer this way of connecting buyers to sellers are very quick with the verification and have low fees. But they do not work with customers that are not planning to spend a couple of million dollars through the course of a couple of months. So, if you plan to spend 100.000 dollars on Bitcoin, they might not answer your phone.

4. Bitcoin ATMs

The best method to trade bitcoin is ATMs. It is most convenient and absolutely the fastest. You do not need to prove that you are the owner of your bank account. When using bitcoin ATM, you can use any wallet. Customer support offers phone, SMS and e-mail support.

The downside of using ATMs is that it has higher fees, but you pay for a convenience that ATM offers. Another downside is that ATMs accept cash. But in the majority of the locations, there is a cash ATM close by so you can acquire cash easily.

When comparing methods, one of the important aspects is time. While ATM verification is instant, other methods take too much time and it can be costly. The price of Bitcoin can go up during the verification process, so you can lose money by not buying bitcoin instantly. In some situations, it can be cheaper to pay the higher fee by using ATMs and save time.

Although these machines are called bitcoin ATMs, they really need to be called crypto ATMs, because more and more of these machines are starting to offer multiple different cryptos.

Summary of comparison of all mentioned above methods is represented in the following slide:

Buy bitcoin methods comparison

Security

A big issue with Bitcoin wallets is security. About 14% of all of the major cryptocurrencies have been lost due to hacks over the past few years. 2-factor authentication is an extra passcode in addition to your password that prevents hacks. Brandon recommends Google Authenticator. It produces codes that are completely unique and change every 30 seconds. So even if somebody has your username and your password he cannot enter your account without this code.

Security

Another 2-factor authentication app is called Authy. It is not so good as Google Authenticator since it is linked to your phone number. Brandon had two tips for people using 2-factor security:

  1. Use Google Authenticator
  2. Call your phone carrier and add an additional pin to your account.

Some other things that people need to watch out for are:

  • Fake websites, wallets, and exchanges
  • Ponzi schemes like bitconnect
  • Bad checks or ACH. They are reversible, and it can happen that you can end up without your bitcoin and your cash.
  • Underpriced online classifieds. If you receive an e-mail where you can see anything that seems way cheaper than it really is, it is a spoofed e-mail. Even if it seems like it came from E-bay or Craigslist.

Wallets

Bitcoin wallets

Brandon recommends these Wallets:

  • Airbitz as a mobile wallet
  • BitGo as a web wallet because it allows you to set a fee for your Bitcoin which can be very useful in tangling with Bitcoin scaling issues.
  • Jaxx and Coinomi as altcoin wallets since they allow you to send bitcoin to the wallet in exchange for the altcoins right in the app.

Q&A Session

  • What do you do with information when customer sells bitcoins at your machine?

Bitcoin Depot is a regulated MSB, similar like Western Union or MoneyGram. We collect customer information like ID, address, etc. It is stored in a secure server and not sent anywhere without request. This is required to comply with government regulation regarding AML / KYC policy.

  • What are verifications and when ID scan is required?

Bitcoin Depot requires ID scan for transactions above $1000. There are other triggers that may ask for ID below $1000. For transactions above $3000 it is required to make a photo ID and it allows the customer to transact for up to $5000 / day.

  • How one enters bitcoin ATM business, what are the requirements and steps?

The hardest part is compliance program and full time compliance officer. That is not cheap. Depending on the business model it might be required to get licenses on the state level. Regulatory compliance is the hardest part.

Also you need to find a bank that will work with you. You have to buy a bitcoin ATM. In most cases you buy it from software provider, who ports it on machines produced by ATM manufacturer. Configurations are set up on the online management platform.

According to Brandon, it is not as worth as it was 3-4 years ago, due to start up expenses and need for economies of scale.

  • What is the benefit for store owner to host your machine?

It is similar model to cash ATM, when Bitcoin Depot owns and operate machine. Machines drive more foot traffic, the store is going to earn more. All what is needed is 2*2 sq.ft space. Operator pays the store a fee on every transaction. Store doesn’t need to pay any upfront fee, operator puts all the capital.

  • What are regulations on cryptocurrencies, and how many departments are involved?

It depends on business model. The main ones are FinCEN, who regulate money service businesses on the federal level. Additionally at each state department has own banking office, every state has own regulation. You need to comply on federal and on state level. IRS is the auditing agency for both of those parties. And there is law enforcement, of course.

  • If bitcoins are sold at ATM and redemption code is received, should the customer come back to machine he used, or can use another machine?

First of all, there is an option to get cash instantly out of machine. This happens when miner fees set are high enough. In case customer sets low fees, he will be given a redemption code. Normally, this code is bound to machine where transaction is initiated, but if you drove away, you can call us and we can transfer cash out option to another machine from the network with same redemption key.

  • What is an average transaction size?

On buys it is less than $200. Usually people sell more than they buy, and this probably because they gained enormous profits and they cash out.

Summary

The Bitcoin ATM proves to be the most convenient and the fastest method of trading bitcoin. It offers the users a trust factor and the instant authentication that can save you money. Since Bitcoin became a lucrative business a number of hacks have been recorded, so security became an important issue. Google Authenticator proved to be a great example of 2-factor security for your account. Scams are also highly present in the crypto world so people need to be extra careful when choosing with who they will do business.

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