Weighing Bitcoin ATMs in C-Stores

By 
Jackson Lewis, Assistant Editor

bitcoin

CHICAGO -- Is the bitcoin ATM (BTM) the next must-have accessory for convenience stores? There's certainly reason to consider it as the machines begin to show up in retail locations.

As of Dec. 31, 2015, there were 503 BTMs up and running in the world. Two years later, that number has risen to 2,016, and more than 75% of these devices are located in North America, according to the website Coin ATM Radar.

The rise in the number of BTMs reflects the fast-growing value of bitcoin, a "cryptocurrency" that can be used worldwide. In 2012, the nontraditional currency sold for about $7 per unit. As of Jan. 4, the currency is worth $14,718 per unit.

But what is bitcoin, exactly? Is it stable? And are enough people using it to warrant the presence of more BTMs? Click through to read an analysis of these questions and more on bitcoin and its potential effect on c-stores …

What is bitcoin?

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Bitcoin is a digital currency. It is not traded in the form of paper and coins like traditional money but rather digitally, online. As such, it exists outside the traditional banking system.

The bitcoin network is also different than a bank credit card, in that it is run by more than one person or organization. In fact, the currency system is run by a decentralized network of computers using blockchain technology to track the currency’s transactions (see the following slide for more information on blockchain).

While the U.S. dollar has the backing of the U.S. government and its value can fluctuate as a result of the government’s actions, the value of bitcoin is almost entirely dependent on people all over the world who use it and agree on its worth.

The downside of this system is that criminals commonly use the currency to buy and sell drugs online. But because the cryptocurrency is not bound to any financial institution or government, many people consider it a sound investment, similar to gold or silver.

Is it stable?

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Whether bitcoin is stable or not depends on who you ask. USA Today recently released two articles with opposing views on the subject.

On one side of the issue are those who don’t accept bitcoin as a currency at all. Due to its volatile nature and lack of backing by any organization, these naysayers view bitcoin more like stock in a company in a moment of popularity. They contend that drug dealers and tax evaders are using bitcoin to game traditional financial systems. Finally, they warn that the cryptocurrency is a financial bubble that could burst at any minute.

The other side says that it’s hard to argue with the dizzying growth in value that the digital currency has experienced and that as long as people only invest what they can afford to lose, it won’t hurt them too much if the worth of a unit of bitcoin dips.

Furthermore, those in favor of bitcoin contend that blockchain, the technology tracking the currency, is the future of digital innovation. Moe Levin, who penned the argument in favor of Bitcoin for USA Today, compares today’s blockchain technology to the internet boom of 1999.

Blockchain is essentially an encrypted ledger or organizational program. The tool allows secure transactions of bitcoin from one person or another, but the potential uses for blockchain technology go beyond tracking currency. Amazon Web Services use blockchain technology, and it can be used across industries, from healthcare to supply-chain management.

How do BTMs work?

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BTMs operate much the same as conventional ATMs. Users take steps to verify their identity, then they can withdraw from or add to their account if they so choose.

Instead of swiping a card and entering a personal identification number (PIN), BTMs require a telephone number or a scan of a driver’s license. Those who enter a phone number receive a text message with a code to access the BTM.

These machines sell bitcoin at a higher cost than the currency is worth—between 10% and 20% above market price, according to the Pittsburgh Post-Gazette.

Because each unit of bitcoin currently has such a high value, most people don’t buy or withdraw an entire bitcoin in one transaction. BTMs can sell as little as $1 worth of the currency, and it can be divided into fractions as small as 0.00000001.

Is a BTM worth adding to your business?

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The Pittsburgh Post-Gazette wrote that a c-store operator near the city’s Lawrenceville neighborhood, Lee Gutkind of Quick Stop, sees a “steady stream” of customers daily who enter his store to use the BTM. The newspaper also reported that 75 businesses in Pennsylvania  accept bitcoin as payment.

Bodega operators in Brooklyn and Manhattan also reported that their BTMs are used often by customers.

These firsthand accounts are strictly anecdotal and don’t measure the profitability (or lack thereof) of including a BTM in a convenience store, but the existence of these machines and their increased popularity is worth examining as America and the world carefully follow the ups and downs of bitcoin.