scorecardresearchWhat are bitcoin ATMs and how do they work?

What are bitcoin ATMs and how do they work?

Updated: 04 Sep 2022, 01:00 PM IST
TL;DR.
We all use ATMs to withdraw cash from our bank saving accounts. What exactly are Bitcoin ATMs then?
A bitcoin ATM is not like a conventional ATM that allows customers to deposit or withdraw money in a bank account.

A bitcoin ATM is not like a conventional ATM that allows customers to deposit or withdraw money in a bank account.

A Bitcoin ATM is a kiosk connected to the internet that enables a user to buy bitcoins and other digital currencies by using cash or debit card. Usually, it is required to have an operational bitcoin wallet to carry out transactions on the machine, but some bitcoin ATMs also allow opening of a wallet. 

A bitcoin ATM is not like a conventional ATM that allows customers to deposit or withdraw money in a bank account. Instead, these ATMs carry out blockchain-based transactions and transfer digital currency to a digital wallet via a QR code.

So, customers can buy bitcoins or other cryptocurrencies at a bitcoin ATM. In fact, some experts call the use of ‘ATMs’ improper because these machines cannot be used to procure cash. Instead, they connect to the bitcoin network via the internet, allowing customers to buy crypto tokens with deposited cash.

Using a Bitcoin ATM

Although different ATMs have different functionality, most bitcoin ATMs have a standard procedure. At the outset, a user is supposed to scan a QR code that is linked to a bitcoin wallet address. Afterwards, they are meant to deposit cash to buy the digital currency. The newly purchased bitcoins will then be transferred to the wallet address entered. In case the buyer does not own a wallet, they can also create a new one. After the purchase has been made, a record of the bitcoin will be reflected in the wallet.

Some Bitcoin ATMs offer the option of both the purchase and sale of Bitcoin (bidirectional) for cash whereas the others only allow the purchase (unidirectional). As a matter of fact, merely 30 percent of crypto ATMs around the world are bidirectional.

Some Bitcoin ATMs are conventional ATMs with improved software installed in them, but they do not ask for a bank account or debit card prior to the use. Unlike other ATMs, the bitcoin ATMs levy a transaction fee which usually ranges between 10 percent to 20 percent, but it can be higher, or lower.

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One can buy bitcoins or other cryptocurrencies at a bitcoin ATM with the deposited cash, 

It is believed that the world's first Bitcoin ATM was a Robocoin machine that started its operations on October 29, 2013 in Vancouver, Canada. It stopped functioning after two years in 2015.

The first bitcoin ATM was set up in Kemp Fort Mall in Bengaluru in 2018, but was seized by the cyber-crime police because the RBI — in 2018 — had imposed restrictions on banks to allow transacting in bitcoins, effectively rendering the use of bitcoins illegal. Later one bitcoin ATM was set up in Delhi-NCR in Gurugram in July 2020.

 

 

First Published: 04 Sep 2022, 01:00 PM IST