Bitcoin ATM machine gold mining secrets: monthly revenue can reach $30,000, and the handling fee is up to 20%

As the currency market enters winter, the number of Bitcoin ATMs is increasing rapidly against the trend.

According to the Bitcoin ATM statistics website Coin ATM Radar, as of February 20, 2019, there were 4,357 Bitcoin ATMs worldwide, a year-on-year increase of 100% for three consecutive years.

These machines are located in more than 70 countries and are manufactured by 44 manufacturers.

The three largest Bitcoin ATM manufacturers account for more than 70% of the global market share. They are Genesis Coin, General Bytes and Lamassu.

Recently, a blockchain reporter conducted email interviews with two of the manufacturers, General Bytes, Lamassu, and Coin ATM Radar, and made on-site visits to understand the secrets behind the counter-cyclical growth of the Bitcoin AMT business.

01 Hiding in a grocery store

"Bitcoin for sale here." At the door of West End Grocery Store in the center of Edinburgh, UK, there is an A3-sized notice with the Bitcoin logo on it.

When you walk into a grocery store, you’ll immediately see a bright yellow Bitcoin ATM.

A Bitcoin ATM at West End Grocery Store in Edinburgh city centre

It was surrounded by a pile of stationery and greeting cards, and the screen showed the real-time price of Bitcoin when a blockchain reporter visited on the afternoon of February 20: 3411.2 pounds.

This is the only Bitcoin ATM in Edinburgh. There are currently 4 Bitcoin ATMs in Scotland, where Edinburgh is located, and the other 3 are located in Glasgow (2) and Dunfermline (1).

Andy is a clerk at West End Grocery Store. More than half a year ago, out of curiosity, he decided to try to own digital currency, so he bought 100 pounds worth of Bitcoin through this machine.

"This machine is easy to use. You can buy Bitcoin directly with cash," he said.

After that, users can transfer bitcoins to their own electronic wallets. If users do not have electronic wallets, some machines can also provide users with electronic wallet cards.

Convenience is one of the main reasons why Bitcoin ATMs are popular in the market.

Patrick Barton, business development manager at Coin ATM Radar, told a blockchain reporter that according to the survey, the average transaction amount for people buying Bitcoin is $100, and the average transaction amount for selling Bitcoin is $200 - this shows that many people own Bitcoin for the first time by using ATM machines.

"It takes time to set up an online digital currency trading account, and it also takes time to transfer money between banks, not to mention the need for a bank account." Neil Connor, customer service manager at Lamassu, a Bitcoin ATM manufacturer, believes that it is obvious that using a Bitcoin ATM is the easiest and fastest way for users to enter the world of digital currency.

Good profitability may be another major reason for the successful implementation of Bitcoin ATMs.

They charge a handling fee of 5% to 20% for each transaction, with the specific amount set by the operator. This is not a small amount.

According to statistics, a Bitcoin ATM located in a good location can bring in $20,000 to $30,000 in turnover per month. If a 10% handling fee is calculated, the machine can earn $2,000 to $3,000 per month.

The hardware investment made by operators for this purpose is not that much.

Currently, Bitcoin ATMs can be divided into two categories: one is a one-way coin exchange machine that only supports users to purchase Bitcoin with cash; the other is a two-way coin exchange machine that allows users to sell digital currency and obtain cash.

Martin Weissmeyer, marketing manager of Bitcoin ATM manufacturer General Bytes, told a blockchain reporter that their one-way coin exchange machine BATMTwo has two models, priced between $3,249 and $4,999; and their flagship two-way coin exchange machine BATMThree has five models, priced between $7,499 and $9,499.

Barton said that Genesis Coin's most popular one-way coin exchange machine, Satoshi1, starts at $7,000; the most popular two-way coin exchange machine, Satoshi2, starts at $9,000.

The machines produced by Lamassu are more expensive, with a one-way currency exchange machine priced at $6,000.

By this calculation, if we ignore the cost of falling coin prices that must be borne to maintain liquidity, the entire investment can be recovered within a few months.

02 Development History

Bitcoin ATMs have only been around for seven years, and they have experienced many ups and downs in the past seven years.

The first stage was from 2013 to 2014, which was the embryonic stage.

In October 2013, Waves, a chain of coffee shops in Vancouver, Canada, installed the world's first officially operational Bitcoin ATM. A photo circulating on the Internet showed people patiently queuing in the coffee shop, waiting to use it to "try it out".

The world's first Bitcoin ATM prototype appeared in February of that year. At that time, 33-year-old Zach Harvey demonstrated it at a forum. Later, he founded Lamassu with his brother Josh Harvey and entrepreneurial partner Matt Whitlock.

General Bytes and Genesis Coin also entered the market during this period and launched the first generation of Bitcoin ATMs.

"At the time, it was mainly digital currency enthusiasts who bought the machines. They placed the machines in their own shops or other places where they had obtained permission," said Barton.

Other places, including shopping malls, hotels, office buildings, stations, restaurants, and airports, all have huge passenger flows.

Barton said that a popular Bitcoin ATM at the time was called Shyhook. It was small, priced at about $800, and had a high cost-performance ratio. However, due to its limited functions, it has now withdrawn from the market.

During this period, some Bitcoin ATMs had to be closed due to unclear regulatory policies. For example, the first ATM in Albuquerque, the capital of New Mexico, was forced to close shortly after it was turned on.

From 2015 to 2016, Bitcoin ATMs entered their second stage, the development stage.

During this stage, the industry gradually matured and more and more Bitcoin ATM operators entered the market.

But their luck was not good - during this period, Bitcoin was in a big bear market for most of the time. In 2015, in particular, Bitcoin fell by 40% in three days, a staggering drop.

"Operating Bitcoin ATMs requires maintaining liquidity, which means operators must bear losses from falling prices," Barton said.

Many small operators closed down as a result.

Some large operators benefited from economies of scale and continued to expand. The cold winter period turned out to be a period of growth for them.

During this period, regulatory policies gradually became clear. Some countries proposed to regulate digital currencies and Bitcoin ATMs. "This is conducive to the further legal development of large operators," Barton said.

During this period, a new change has also emerged in the market: Bitcoin ATMs have begun to provide exchange services for digital currencies such as Ethereum and Litecoin. So far, 70% of Bitcoin ATMs around the world can provide exchange services for digital currencies other than Bitcoin.

From 2017 to the present, Bitcoin ATMs have entered their third stage, the explosive growth period.

The direct trigger was that Bitcoin began to rise gradually and entered a bull market. Many new users joined in. According to a Coindesk survey, more than 50% of Bitcoin users in 2017 were new users.

However, the threshold for buying digital currency online is too high, and newcomers encounter various difficulties when registering on exchanges. Therefore, they simply use Bitcoin ATMs to buy digital currency with cash. The number of Bitcoin ATMs has increased dramatically during this period.

"So far, General Bytes has sold a total of 2,170 machines, half of which were sold in 2018," Weissmeyer told a blockchain reporter.

During this period, a new trend also emerged in the market: some large operators, when their business grew to a certain scale, found that it was more profitable to develop ATM machines themselves, so they turned to producing their own machines. Coinme, Bytefederal, and LightningXchange are all representatives of this trend.

"They understand the market better and are good at developing products that better meet customer needs," Barton told a blockchain reporter.

So far, in which countries are the Bitcoin ATMs in the world mainly distributed?

According to Coin ATM Radar, the United States has the most Bitcoin ATMs in the world, with 2,621 machines, accounting for 60% of the world's total. Chicago alone has 226 machines.

The second country is Canada, which has 702 machines, accounting for 16.11% of the total number of Bitcoin ATMs in the world.

The third and fourth countries are Austria and the United Kingdom, with 271 and 221 Bitcoin ATMs, respectively.

It is worth noting that the number of Bitcoin ATMs in Australia has grown rapidly in 2018. This is because in mid-2018, the Australian government abolished the high taxes on Bitcoin ATMs, which greatly reduced the handling fees and stimulated transactions. Currently, there are 54 ATMs in Australia.

"Judging from the situation in 2018, the market for Bitcoin ATMs has begun to shift to other places, such as some developing countries." Barton believes that such changes are more meaningful.

03 Upgrade and Future

In order to compete for the market, Bitcoin ATM manufacturers on the market are upgrading and renovating their machines.

Take the appearance of the machine as an example. Early Bitcoin ATMs had a very simple appearance, but now, more and more machines have larger screens and more beautiful appearances.

For the flagship BATMThree model, General Bytes even designed a beautiful LED neon bezel to attract users' attention.

The real competitiveness of Bitcoin ATMs lies in the performance of their internal driver software.

Weissmeyer said General Bytes has been constantly updating the machine's software, fixing bugs and adding new features. In the past, they sent notifications via text messages and emails, and recently, they began using Telegram robots.

"Many of our competitors' machines are always connected to the operator's servers. But considering that the blockchain world is decentralized, this setup is not ideal." Weissmeyer said that the machines manufactured by General Bytes allow operators to choose software independently or use cloud servers provided by General Bytes.

In addition, both General Bytes and Lamassu offer open-source software, which allows operators to add their own digital currencies to the software and upgrade their machines.

“Lamassu’s machines can already process transactions in Litecoin, Zcash, Bitcoin Cash and Dash,” Connor said.

One operator of Lamassu even added precious metal trading capabilities. At the Bitcoin ATM, users can top up their gold and silver accounts with cash.

Many Bitcoin ATM manufacturers and operators are still working to address anti-money laundering issues.

Many people believe that the convenience of Bitcoin ATMs is like a double-edged sword - because of the low threshold for identity authentication, it is in danger of becoming a tool for money laundering.

But now, if you use the Bitcoin ATM at the West End grocery store in Edinburgh, it will scan the fingerprint of the user's left hand to verify their identity.

"There is a camera installed in the ATM machine. As long as you touch the screen, the remote operator can see everything," said Andy, a clerk.

The digital currency market is still in a bear market, but industry practitioners remain optimistic about the future.

Barton believes that based on historical experience, a bear market is actually a good time to research and enter the market - the ATM operators that made the most profits in 2017 all entered the market to "ambush" during the previous cold winter.

Weissmeyer predicts that the future of Bitcoin ATMs will be very bright in the next 10 years.

“They will enable new ticketing services, payment options and more blockchain applications,” he said.

Perhaps because there are not many digital currency enthusiasts in Edinburgh, the Bitcoin ATM in Andy's grocery store is not doing good business.

In the past year, only two or three people came here to buy Bitcoin each week.

The Bitcoin that Andy bought for one hundred pounds is now only worth fifty or sixty pounds.

But he feels that in the future, Bitcoin will definitely rise again.

"If this is not a revolution, we won't participate in it," said one practitioner.