What Is A Bitcoin ATM?
A Bitcoin ATM is a physical terminal for exchanging government-issued currency (fiat) for Bitcoin. Some Bitcoin ATMs are capable of making two-way exchanges (buying and selling bitcoin) while others are only capable of making one-way exchanges (only selling bitcoin). Bitcoin ATMs may also be referred to as BTM which is short for bitcoin teller machine.
Some Bitcoin ATMs also interact with a 2nd layer of the bitcoin network called the lightning networkWhat Is The Lightning Network? The lightning network is a layer 2 payment protocol that enables near-instant, low-fee, private payments on the Bitcoin network. It is intended to enable scalable,.... These layer 2 ATMs are commonly known as Lightning ATMs and are able to send payments in seconds and often come with much lower fees than standard ATMs.
First, not all ATMs offer the same functionality. Some only sell bitcoin. These ATMs are called one-way ATMs because they only function one way. Other ATMs are able to sell bitcoin to users as well as buy it back from users. These ATMs are called two-way ATMs.
There’s also a growing subset of bitcoin ATMs that use the lightning network but you probably won’t use one of those until you have a more intermediate understanding of bitcoin.
Why Use Bitcoin ATMs?
Bitcoin ATMs often offer a couple of advantages over buying from an exchange or using peer-to-peer services to buy or sell bitcoin.
Bitcoin ATMs are about as instant as they come. When you use a bitcoin ATM, you simply insert fiat, and with just a couple of taps on the screen, you have bitcoin sent to your wallet moments later.
This is as simple and easy as it comes in the bitcoin space.
Bitcoin ATMs also typically offer more privacy than dealing with any sort of large centralized exchange. While most ATMs in the US will require some sort of personal information, other terminals around the world offer more privacy for their users.
Bitcoin ATMs offer a similar on-ramp in that they are something that people are relatively familiar with. This familiarity likely helps to bring new users into the bitcoin space.
Different Types Of Bitcoin ATMs
While most bitcoin ATMs look basically the same, not all of them function the same. There are four types of Bitcoin ATMs: one-way, two-way, on-chain and lightning. Understanding the difference between all of them and how they work can be useful so you know what an ATM is capable of doing.
One-Way ATMs
One way ATMs are bitcoin terminals that only offer the one-way function of selling bitcoin. These are usually smaller terminals since they are designed to hold smaller amounts of cash and require less security.
An example of a one-way ATM is from a company named Lamassu. Their smaller terminal is named Gaia and only offers the ability to sell bitcoin.
Two-Way ATMs
Two-way ATMs are bitcoin terminals that are capable of both selling bitcoin to users as well as buying bitcoin from users. This two-way functionality provides utility for anyone who wants to convert their bitcoin to the local currency.
Two-way ATMs can be useful if you are traveling to a foreign country and need to get some of the local cash for your day to day expenses.
On-Chain ATMs
On “on-chain ATM” is not a technical term but it helps to better understand the types of functionality that different ATMs offer. When you use an on-chain ATM, you are receiving a bitcoin payment on the bitcoin blockchainWhat Is The Blockchain? The blockchain is the public record of bitcoin transactions, which are organized into blocks that are all chronologically linked to one another. Because every block is... itself. Since you are receiving an on-chain payment, your payment won’t actually be in your wallet until after you have received at least 1 confirmation (which takes about 10 minutes on average).
When you purchase from an on-chain ATM, you will likely pay a premium (a fee) that is charged by the owner of the ATM. This is similar to paying an ATM fee when you use your debit card at a regular fiat ATM except that bitcoin ATMs usually charge fees based on the market price of bitcoin whereas fiat ATMs usually charge a flat fee of around a few dollars (or local currency).
You also have to pay the miner feeWhat Is A Transaction Fee? A Bitcoin Transaction Fee, commonly known as a miner fee, is the amount of bitcoin that a sender attaches to their transaction to incentivize Bitcoin... because you are transaction on the actual blockchain. When the demand for making on-chain payments is higher, miner fees naturally rise to accommodate the increase in demand.
This means that when you purchase using an on-chain ATM, you will pay 2 fees. You pay a premium (fee) to the owner of the ATM and a fee to the mining poolUnderstanding Bitcoin Mining Pools Bitcoin mining is one of the fastest growing industries in the Bitcoin space right now. As more people wake up to Bitcoin, more people want to... that includes your transaction in a block.
On-Chain ATMs are probably better for buying larger amounts of bitcoin ($100 or more) and receiving it as soon as your payment is confirmed on the blockchain.
Lightning Network ATMs
A Lightning Network (LNWhat Is The Lightning Network? The lightning network is a layer 2 payment protocol that enables near-instant, low-fee, private payments on the Bitcoin network. It is intended to enable scalable,...) ATM is a specific type of bitcoin ATM that only transacts using the bitcoin lightning network. Instead of receiving a transaction directly on the bitcoin blockchain, LN ATMs use the Lightning Network to send payments in seconds as opposed to waiting for the payment to be included in a block.
When you use an LN ATM, you are also likely to pay a premium charged by the owner of the ATM but since you are not transacting directly on the blockchain, you won’t pay a miner fee. You will only be charged routing fees by the nodes that route your payment. These routing fees will end up being MUCH smaller than a typical miner fee and your payment will arrive in your LN wallet in a matter of seconds.
This means that when you use an LN ATM, you are also paying 2 fees but 1 of the fees is different than an on-chain ATM. You pay a premium (fee) to the owner of the ATM and a routing fee to each bitcoin nodeWhat Is A Bitcoin Node? A bitcoin node is any computer that runs the bitcoin software, enforces the bitcoin consensus rules, and validates bitcoin transactions and blocks. Bitcoin nodes are... that you route through. These routing fees will be much less than a typical miner fee.
LN ATMs are probably better for buying smaller amounts of bitcoin ($100 or less) and receiving it in a few seconds. You are still likely to pay a fee charged by the owner of the ATM itself but fee to transact on the lightning network is usually just a few satsWhat Is A Satoshi? A Satoshi (sat or sats for short) is the smallest unit of a bitcoin. 1 Satoshi is a hundred millionth of a BTC (1 sat =... (satoshis).
Finding A Bitcoin ATM
The best resource online for all things related to bitcoin ATMs is a service named Coin ATM Radar. Their service helps users not only locate the ATMs nearest to them but also gives information on fees, hours of operation, type of ATM terminal and some other useful pieces of information about each terminal on their map.