Entering the cryptocurrency market can be difficult. There’s countless coins, exchanges, wallets and now Bitcoin ATMs or BTMs. So How do Bitcoin ATMs work?
In order to buy Bitcoin would have to find a crypto to fiat currency onramp solution. Usually those are online exchanges where you have to deposit funds, complete an extensive identity verification process and deal with complex order types and various tools.
But for regular use cases this needs simplification. This is where Bitcoin ATMs take their place – a physical device you can use to convert cash to Bitcoin or vice versa. You scan your wallet address, enter the amount you want to purchase and insert cash. Or you scan the ATM’s address, send Bitcoin from yours and get cash. But there are some differences to the traditional automated teller machine.
In this post we are taking a deeper look into how Bitcoin ATMs work and some of the key differences with traditional ATM’s, as well as outline some of the key pros and cons of using it compared to online exchanges.
What Is A Bitcoin ATM?
Bitcoin ATM is a physical machine like the traditional automated teller machine, where you can purchase or sell your Bitcoin for cash. The vast majority that are currently out there only support Bitcoin which is why they are often referred to as BTMs, but support for some major altcoins is growing.
The major difference between the traditional ATM and BTM is that on ATMs you are still depositing or withdrawing fiat into your bank account, while BTMs are used for converting fiat to Bitcoin.
Another major difference is of course that instead of a debit/credit card, you use a BTM in conjunction with your smartphone and a QR code scanner.
Depending on the model and whether or not you can perform both buying and selling, the process may vary. For example on some there is complete anonymity while on others you have to confirm your identity in some way, at least giving your mobile phone number or at most registering an account and scanning your ID. The level of identification can also increase with the increasing amount of Bitcoins you want to buy or sell.
However, in most cases the process of using a BTM is similar.
How To Use An ATM To Buy Bitcoin
When you purchase Bitcoin at a Bitcoin ATM you can transfer it to your wallet, or the ATM can generate a new one for you with the newly purchased Bitcoin in it.
- First start by simply taping the “Buy Bitcoin” button on the screen.
- Second you may be requested to select a cash limit. This is for the later steps in ID verification if needed.
- Third, you scan the QR code from your mobile phone wallet which is the receiving address bringing your phone to the BTM’s scanner.
- Next you will be asked to insert cash and will see a screen with the exchange rate, with the equivalent amount of Bitcoin you will get for the cash inserted.
- Lastly, confirm the transaction and wait until Bitcoin is deposited into your wallet.
- Take your receipt.
You can check your wallet for the incoming Bitcoin transaction allocated to your wallet and should wait until the network confirms it in order to receive your Bitcoin. This can take anywhere from a few minutes to an hour depending on the network congestion.
How To Use An ATM To Sell Bitcoin
As we have already pointed out, some Bitcoin ATMs are only for buying Bitcoin, so first you need to check if the one you’re using supports selling Bitcoin. In the case that it does, the process is similar to purchasing.
- Click on “Sell Bitcoin” button on the BTM
- Select a cash limit and perform the associated verification.
- Insert amount of Bitcoin you want to sell or amount of cash you want to get, depending on the machine.
- You will now get the QR code on a receipt, unlike in the first case where you scan the QR code on your wallet.
- Now you need to scan the QR code on your receipt with your phone to send the Bitcoin you want to sell to that address. The amount you need to send will be automatically displayed according to the amount you entered on the BTM.
- As you most likely had to enter the mobile phone number in the second step, wait for the SMS notification that the transaction has been cleared and that you can withdraw cash from the BTM.
- Get back to the BTM with your receipt and select the “Redeem ticket” option and then scan the same QR code you got on the receipt to collect your cash.
Reasons To Use A Bitcoin ATM?
There are many reasons someone would want to use a Bitcoin ATM instead of buying or selling Bitcoin online.
It is highly convenient to use a Bitcoin ATM. Instead of going online and registering an account onto an exchange, dealing with complex orders and then waiting for up to 5 business days for your funds to transfer, you can simply walk up to the BTM and exchange your Bitcoin immediately.
Online exchanges have to follow strict KYC and anti-money laundering procedures which require users to provide all sorts of information which could include your ID, selfie with your ID, utility bill to verify your address, phone number, bank card etc.
While Bitcoin ATMs started out being completely anonymous, this trend is slowly shifting. There are still some models out there that don’t require much identification, and some new ones only require a mobile phone number.Those that require ID are often cleared quite fast due to its native face scanner.
Since you are dealing with cash there is less risk of credit card fraud or someone interpreting your communication with the exchange and stealing your sensitive data like passwords or private keys.
All of these Bitcoin ATMs are mostly shipped out and placed by reputable and registered companies and exchanges. BTMs are also connected to the internet and to the blockchain which guarantees the same level of trust as you would expect from transacting in an alternative way.
While Bitcoin ATMs are definitely convenient to use while possibly maintaining a higher degree of privacy and are secure and trustworthy there are certain trade offs which make them not suitable for everyone. They usually have higher fees of around 7-8% for the transaction, you have lower transaction limits and are still a rare thing to find. In saying that, BTMs, or Bitcoin ATMs are a great addition to the existing crypto to fiat gateways and their similarity to traditional ATMs makes them perfect for newcomers.