Bitcoin ATMs are a quick and easy way to buy Bitcoin using cash or a debit card. They are the next step towards worldwide cryptocurrency adoption, but how do they work and should you use one? What benefits do they offer over an exchange or peer-to-peer service such as LocalBitcoins? Here are the important facts.
What Is a Bitcoin ATM?
A Bitcoin automated teller machine (ATM) lets you buy Bitcoin and sometimes perform other blockchain operations from a physical kiosk. This may be in a local convenience store, mall, or other space used by the general public. Some Bitcoin ATMs support two-way functionality, whereby you can sell Bitcoin and withdraw funds to your bank account or cash via the machine itself. In exchange for cash or digital funds, you’ll receive your Bitcoin in your wallet address, or you’ll get a paper wallet print-out.
One of the biggest benefits of buying Bitcoin through an ATM is speed. This varies depending on the machine, but often the transaction begins as soon as you have enough funds. This can be as quick as 15 seconds, but if you have a lot of notes to enter, this may take longer. Most ATMs accept cash or debit card, but as most banks block cryptocurrency purchases on credit cards or other Bitcoin credit buying options, you may not be able to complete your purchase with alternative payment options.
Many Bitcoin ATMs connect to the exchange powering them. These exchanges enable the trade and ensure you can get your Bitcoin as quickly as possible. You’re not interacting with another person who wants to sell, so there’s no need for Escrow accounts, lawyers, or contracts. Because of this, the convenience factor, and the cost of running an on-premises machine, Bitcoin ATM fees are often excessive. An average fee of $50 or roughly 16% of the transaction is not unusual.
Because these machines are often powered by exchanges, you may need to create an account or use an existing account to complete your purchase. While some Bitcoin ATMs allow anonymous transactions (especially for smaller purchases), it’s a less common feature. Even if you didn’t need to complete any know your customer (KYC) verification, you still need to pay with cash to remain anonymous.
How Do You Use a Bitcoin ATM?
Bitcoin ATMs differ in quality, features, and manufacturer, but they often work the same way:
- Select your payment choice and the total number of Bitcoins to buy
- Complete the payment
- Scan your wallet QR code (if you already have a Bitcoin wallet)
- Collect your paper wallet (if you don’t already have a wallet)
Bitcoin ATMs may have restrictions in place around the total cash value you can buy, total Bitcoin available, KYC requirements and more. Bitcoin ATMs almost always have CCTV monitoring, due to the potentially large quantities of money involved.
If you’re not sure how to operate a specific machine or you encounter a problem, there is often a shop operator nearby who can advise on your next steps or offer a potential solution.
Is It Risky Using a Bitcoin ATM?
With the prevalence of card cloning devices in the debit/credit card market, you’re right to be concerned around the security of any Bitcoin ATM. What if the machine gets hacked? What if it loses power during my transaction, or steals my money without dispensing any Bitcoin?
The risk associated with any Bitcoin ATM varies depending on the machine and location. If you’re in a shady area of town, you may need to be more diligent than in an upmarket area. Carrying large quantities of cash may draw unwanted attention, especially as anyone using a Bitcoin ATM is likely to spend a large sum of money. Thieves may target people who use the machine.
Equally, the Bitcoin ATM could have a card skimmer attached to it, or someone could steal your new paper wallet. When using a Bitcoin ATM it pays to be diligent. Always ensure you’re operating in a well-lit area, with a clean and functional ATM. You don’t know how well the machine works, but if it’s in a clean condition in clean surroundings, you’ll have less trouble than the dirty old machine covered in graffiti.
The cybersecurity aspect is tougher to test. Researchers recently uncovered a potential Bitcoin ATM malware designed to dispense cash from the machine. While this impacts the ATM owner/operator and not you, it raises concerns around their digital security. If they can get infected such that nefarious people can dispense cash at-will, what’s to stop them getting hijacked to take your Bitcoins? What’s stopping a hacker from siphoning your Bitcoins to their account, and presenting you with a dummy paper wallet?
While most machines have alarms, you can use a machine where you already have an account with the exchange. This limits the potential for harm during any attack. The exchange powering the ATM can send the funds to your wallet address which is already on file, rather than generating a new account and performing the transaction on-chain.
Where’s My Nearest Bitcoin ATM?
The best way to find your nearest Bitcoin ATM is through the online service Coin ATM Radar. This free service uses your location (or an address your choice) to display the nearest Bitcoin ATMs to you.
This service displays the shop name, distance from your location, total fees, and any daily machine limits. It shows details for several cryptocurrencies, including Ethereum and Litecoin. It also shows user-feedback around the machine status, if the machine is online or not, along with the location opening times (if any) and the machine manufacturer.
Start Using a Bitcoin ATM Today!
Now you know what they are and how they work, will you start using a Bitcoin ATM? Is there even one near you? We’d like to hear your thoughts on Twitter, so join the discussion @blocksdecoded.
Don’t forget to secure your private keys after purchasing any amount of cryptocurrency.
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