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Summary:

When the first bitcoin ATM went live in Vancouver last fall, it attracted a lot hype. But would it still be hot months later? The answer, it turns out is yes — but that still doesn’t mean bitcoin ATM’s have staying power.

Vancouver bitcoin ATM

When the world’s first Bitcoin ATM went live in a Vancouver coffee shop last fall, it created a global media buzz and racked up over $100,000 of transactions in eight days. Still, I thought, what a dumb idea.

While intrigued by Bitcoin, I didn’t see the point of putting an ATM in a place like Canada, which has a stable banking system and where you can easily obtain the crypto-currency by other, cheaper means. In a few months, I predicted, the bitcoin ATM would end up forgotten in a corner of the coffee shop like a cobweb-covered Frogger game.

But I also resolved to go see firsthand how the ATM was doing once the initial hype had died down. In late December, that’s what I did.

The Bitcoin ATM, 3 months later

At 7:30 on a dark and dreary Friday morning, I installed myself at Waves, a nondescript coffee shop in Vancouver’s business district where the bitcoin ATM has sat since late October. I didn’t tell the ATM owners I was coming.

Sure enough, the ATM, was sitting by the front door. The machine, which looks like an oversized arcade game, is manufactured by Nevada-based Robocoin and is owned by local investors who pay the coffee shop to park it there. Customers can exchange Canadian cash for bitcoins (and vice versa), paying a five percent commission for doing so. Those withdrawing bitcoins can receive the digital currency via a QR code to their smartphone wallets or else obtain a temporary paper “wallet” printed by the machine:

bitcoin atm

In the first hour, no one came to use the machine and the coffee shop was basically deserted — this was hardly a surprise as I had come on one of the slowest business days of the year when the usual downtown crowd of stock brokers and lawyers were not around. Soon, however, people starting coming to visit the machine, one every 20 minutes or so. Some just gawked at it but others put money into it.

Also, at around 9 o’clock, a young woman sat down at a table beside the ATM and offered to answer questions and help anyone with the machine. At one point, I overheard her explain that Bitcoiniacs (the ATM owners) had decided it made sense to pay someone to staff the machine. She talked to dozens of people over the course of the day. Some were newbies and others were veterans of the ATM veterans; a few were just drug-addled cranks demanding an explanation of Bitcoin.

ATM keeps humming

The Vancouver bitcoin ATM opened for business on October 30 and, 29 days later, its operators claimed the machine had processed $1 million (about $920,000 USD) over the course of 1,500 transactions.  At the time, I had my doubts. Given the air of evangelicalism that surrounds so many things Bitcoin, it seemed possible that the ATM operators were puffing up the numbers.

I still don’t know if the $1 million figure is accurate, but I can say that, on December 27, people plunked thousands and thousands of dollars into the ATM. I know this because the ATM screen, which I could see from my table, shows how much money someone has inserted for any given session. I also discovered that serious bitcoin buyers pull up a chair:

bitcoin atm

I saw several people put in C$3,000, which is the most the ATM will accept at a time (it’s also reportedly the maximum daily amount permitted by Canadian financial services regulations). I asked one fellow why he had just bought three grand of bitcoins, and he simply said he wanted to invest some money he had made up north.

Nearly every ATM user was male, and most were under 40. But some were a lot older, including this guy who had brought along his teenage daughter, who told him “Dad, don’t invest all your money in bitcoins.”

Bitcoin dad and daughter

While few of the ATM’s dozens of customers that day bought or sold anything close to $3,000, most of the transactions were between $100 and $1,000. This was apparently pretty typical, according to Bitcoiniac representative Alex Robertson, who took over table duties in the late afternoon.

Robertson told me the ATM attractes around 50 customers on a busy day, and as many as 100 when during price spikes like the one in early December, when bitcoins sold for US$1,200.

This volume is part of the reason the ATM operators are planning to open their own exchange to carry out the machine’s back-end transactions. Right now, the ATM operators rely on Bitstamp, a Slovenia-based exchange to handle the swaps between $CDN and bitcoin — a process that can lead to long transaction times.

In my case, after I bought $20 worth of bitcoin to test the machine, I had to wait over an hour for the digital swag  to be delivered to the address printed on the paper wallet that the ATM spat out. (Disclosure, I now own 1.02 bitcoins which are stored in a Coinbase wallet; I bought a single bitcoin in June for an earlier assignment).

As for the ATM, it has a quick, intuitive interface and worked just fine.

Time to buy your own Bitcoin ATM?

The Vancouver ATM owners say will plan to install more Robocoin ATMs, which sell for around $20,000 a pop, in other Canadian coffee shops — possibly in Toronto and Calgary — sometime this month. The expansion plans have been cooking for a while, but it sounds like it might actually happen this time.

All of this raises the original question of whether Bitcoin ATMs make sense in the first place. Leaving aside the question of whether Bitcoin itself makes sense, the apparent success of the Vancouver ATM suggests it’s a good business bet — maybe.

While a five percent commission sounds like a quick way to make money, ATM operators must also pay a cut cafe owners to park the machine and, presumably, to Robocoin for use of the software. There is also the ongoing specter of regulatory trouble.

In the case of the Vancouver ATM, the machine comes with a biometric handprint system to ensure the same person doesn’t make multiple visits to the machine and violate the $3,000 daily limit set by Canadian law. When I visited, however, the system was disabled; it’s unclear if financial authorities knew or cared. (To be fair, I didn’t see anyone use the machine twice and, in any case, I’m not sure why the government should require biometrics in the first place — after all, you can visit regular currency exchanges all day long without providing ID).

In any case, if Bitcoin does prove to be a permanent fixture — and many smart investors say it will — that doesn’t mean Bitcoin ATMs will also be permanent. I still believe that online exchanges are a cheaper, more logical way to obtain an online currency but, for now, the booming business at Waves coffee shop shows that a lot of people disagree.

Another test for bitcoin ATM’s is the same as for bitcoin itself: will people ever start spending it? While companies like Coinbase, Bitpay and Gyft are racing to create incentives to encourage shopping with bitcoins, most people are just hoarding them instead. Call it a chicken-or-egg problem if  you want, but until there’s an easy way to spend bitcoin, there’s no real need for a bitcoin ATM.

 

  1. I completely disagree for the lack of need of a bitcoin ATM.

    When you want to buy bitcoins you have to jump through hoops; first you have to confirm your identity (or at least your bank account) which can take several days, and then when you want to buy bitcoins you have to wire money to the exchange’s bank account, which will also take a few days.

    Not only online you have to wait days for the setup, and days for the money transfer, but the bitcoins you bought will also be linked to your identity.

    Bitcoin ATMs offer an instantaneous way (well, 1 hour) of getting bitcoins without the need of having a bank account, just with cash, and it’s definitely a far easier and people-friendly process.

    1. Thanks for the comment, James. But don’t you think using the ATM also involves a bunch of hoops? You have to go get cash from a regular ATM, then insert it into the Bitcoin ATM, then wait an hour, then transfer the paper walllet into an online wallet. The transaction fees are also high — the ATM seems to offer a higher than market rate, plus there’s the 5 % commission.

      I agree that linking a bank account online is a big hassle and, possibly, a security risk. But after that’s done, it’s easy (and much cheaper) to acquire or sell bitcoin. And at least one service (Coinbase) has eliminated the 3 day wait for first time users who provide a credit card.

      To be clear, I admire what the Vancouver bitcoin guys are trying to do, and I don’t know for sure whether the ATM will make it or not. I think a lot of the ATM’s success will have to do with the success of Bitcoin itself.

      1. I think ATMs will become unnecessary when Bitcoin has made it. Everyone will accept it and everyone will already have it, or enough of it to perform daily purchases without having to exchange out fiat. And no one really wants to carry around paper wallets in my opinion. It removes the advantage of it being primarily electronic and protected (although that’s debatable how secure it is currently). This is primarily the same as people walking into a bank and saying here is $500 I want you to put it in a money market account. They just walk away and probably have no idea how to use it.

  2. I believe that airports are best place for Bitcoin ATMs. When travelling it is a manual hassle to obtain foreign fiat in advance or look for ATMs on arrival. One can easily pay 5% on atm and fx fees getting fiat that way.

    If Bitcoin ATMs were at arrivals in all major airports then that would be fantastic.

    1. Jeff John Roberts Andrew Thursday, January 9, 2014

      That’s a really smart idea, Andrew. It would also work because airports are full of people with money looking for something to do. Let us know if you’ve heard of anyone who’s trying to get an ATM installed in an airport. (I think YVR would be a good candidate)

  3. bitcoinvancouver Thursday, January 9, 2014

    Interesting view… thanks for your enthusiasm…did you mention that you can get cash out? Why do you use coinbase? I assume you are based in US… have you seen the coinkite litecoin wallet?

    1. Thanks for the comment. Yes, I use Coinbase as it seemed like the simplest way to get Bitcoin here in the US (I’m from Vancouver but live in New York now) .. I haven’t tried other wallet products but will try and check them out.

  4. I agree that there are cheaper methods for getting bitcoins online. But with bitcoin prices rising at an average of over 1% per day, by the time your money gets to an exchange the price may have risen above what you could have paid at the ATM. CoinBase is good for US citizens but is not available worldwide, and their price is also usually higher than some cheaper exchanges.

    As for where to spend the bitcoins…Overstock.com just started accepting Bitcoin payments, and they ship all over the world. A large percentage of your online purchases can be made with bitcoins now. You can use it at thousands of restaurants through gyft.com and at least one grocery store chain has started accepting bitcoins for filling their store cash cards. It is getting easier and easier to spend your bitcoins. The daily transaction volume is easy to track, and it is growing daily.

    1. Jeff John Roberts Elwar Thursday, January 9, 2014

      Elwar, thanks for the comment. It was my understanding that there are a number of exchanges in Canada. Is that the case? And as for the price, it seems pretty comparable to other exchanges — and better than Robocoin’s (I think).

      For spending, yes, I agree that Overstock is a significant ad to the merchant pool. However, until we start seeing an uptick in the spending vs speculating rate, I’m going to remain a bit skeptical. And while lots of other places are accepting Bitcoin, most seem to be doing so as a marketing ploy (for a while, any pub or cupcake shop could get their name in the press by saying “we accept bitcoin”)

  5. The reason I bought 2k worth of bitcoin on the 27th of December from the BitCoin ATM was due to the fact that it was more anonymous than going through an exchange service. I also don’t use banks, so for me the ATM service made sense. I also bought on a dip so that helped negate the fees.

    I realize that Bitcoins are a highly speculative investment and there is a moderate chance that Bitcoin could fail in some spectacular way. But there is also a very distinct possiblity that this is the future of money.

    I am astonished at the potential of bitcoin. We are all witnessing the first time in human history where control of an entire monetary system has moved from centralized state control to a decentralized international public system. This is so profound, it has the ability to make large sectors of the banking, government, military, legal and other such systems obsolete. I believe that on the other side of that equation is a lot more freedom.

    I believe that with the invention of this technology we will see a complete cultural shift worldwide over the next ten years.

    I would encourage everyone to watch this video which highlights some of the capabilities of the bitcoin protocol, currency etc.

    Didn’t realize you were a reporter/blogger.

    – Guy from up north.

    1. Jeff John Roberts R.H. Thursday, January 9, 2014

      Hi, RH, thanks for detailed and thoughtful perspective on Bitcoin. Your explanation of seeking relative and anonymity and buying on a dip makes sense — I should have introduced myself and asked for more details at the time.

      FWIW, I share your admiration of Bitcoin as a protocol, and its potential to be the first real money for the internet. As Jeremy Allaire (who launched the Bitcoin start-up Circle) notes, it’s like the early days of HTTP.

      But, again, we’re still waiting on a real world use case. For me, the best candidate is in the remittance eco-system — foreign labourers, maids, etc who want to send money home without paying 8% to Western Union. We’ll see

      (PS Go Canucks)

  6. Good article. You stuck to the facts and gave useful insight into what’s actually happening on the street.

    I can easily see how a vending machine like this can be a practical way of getting in and out of Bitcoin. A lot of people just want to dip their toes in the Bitcoin pool and don’t necessarily want to set up online accounts and wait for money transfers. This machine probably makes first tie investors feel more comfortable. Also, if you want to take advantage of a particular price point, you need to act fast. Waiting days or weeks for money to transfer into an account is not conducive to timely trading, especially with something as volatile as bitcoin. Even though I have online accounts, I still need to wait for my fiat to get into them. This machine would give me more direct access and could improve my timing.

    I agree that many people are hoarding (investing) right now but, just like any investment, it’s pointless if you never cash out. I initially bought bitcoins as an investment because I wanted to make money and believe in the idea. But I’m at the point now where I want to start spending them. The beautiful thing is, that’s becoming easier. I can cash out my earnings by buying goods and services and bi-passing fiat altogether. You can’t do that with stocks and bonds.

  7. At its heart the ATM is a tangible portal for people to step into the world of BTC. A way for the technologically inept to buy and sell BTC. You said your transaction took around an hour to process, that’s rare and is usually at fault of third parties either bitstamp having high volume or just the nature of the BTC network, usually buys take between 5 – 10 minutes, and sells 5 – 15 minutes

  8. Bitcoin ATM Sunday, March 2, 2014

    “This master pin code works with all ATM Machine,An Automatic Teller Machine is a machine that is used for communication with a financial institution to provide a secure method for dispensing money”

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