It looks like a high school science project, but this countertop machine may be a bulwark of financial privacy in the age of digital money.
Last weekend at the Free State Project's annual Liberty Forum in New Hampshire, entrepreneurs Zach Harvey and Matt Whitlock advanced the anonymous purchasing of bitcoin with their new Bitcoin ATM. The little machine, about 24"H x 12"W x 12"D, exchanged and dispensed over $5,500 worth of bitcoin in one weekend.
Similar to the way a vending machine operates, the orange prototype accepts cash bills and reads a QR code containing the depositor's Bitcoin address. After subtracting a 1% transaction fee, it delivers bitcoin to the address in about five seconds. The Bitcoin Machine can accommodate paper note denominations up to $100.
Previously, individuals who wanted to purchase bitcoin privately without revealing personal details had to arrange face-to-face meetings through LocalBitcoins.com; make use of bitcoin-otc, an online marketplace where participants take counterparty risk and rely on user reputations measured by an e-Bay-like ratings system; or make a cash deposit at a bank or retail location, under the watchful eye of security cameras.
Now, with a device that directly converts paper cash to bitcoin anonymously, the interaction is between human and machine. The value of that subtle difference should not be underestimated. No longer does the buyer of bitcoins have to show his or her face, or trust counterparties to make good on their end of a deal. Depending on how many bills each bitcoin ATM can hold and how much bitcoin it can digitally store, users can now enter the bitcoin blockchain in a very significant and private way.
The New Hampshire-based startup, Lamassu Bitcoin Ventures, hopes to commercialize the technology and get the countertop ATMs placed in restaurants, bars and other retail businesses. Harvey told CNET's Declan McCullagh. "If we made these machines somewhere around $1,000 to $1,500 each, depending on the commission, they could be able to buy [the machine] and make it back within a reasonable period of time."
This could prove to be very profitable for the establishments hosting the machines if their bitcoin inventory gains dollar value prior to sale. Additionally, Lamassu Bitcoin Ventures could be the exclusive provider of bitcoin for the ATMs or partner with an existing exchange to provide greater risk management.
Even people who have been in the Bitcoin world for a while and have used every type of exchange are blown away by the simplicity of this machine," Harvey said. "I'm just putting in a dollar. Before they really know what's going on, their phone tells them, 'You have Bitcoin.'"
Despite media reports claiming this to be the world's first Bitcoin ATM, that notable distinction belongs to Todd Bethall of BitcoinATM.com, which dispenses plastic BitBills and sends bitcoin to a Bitcoin address.
Launched in 2011, Bethall's beta ATM comes equipped with a Genmega GK1000 Kiosk running Windows XP Pro with ActiveX drivers for the bill acceptor, printer and card reader. The California corporation that owns the original Bitcoin ATM was recently put up for for sale at the price of 1,500 bitcoin, but that was before bitcoin's recent price appreciation. At the current exchange levels, the asking price now works out to about $45,000.
Jon Matonis is an e-money researcher and crypto economist focused on expanding the circulation of nonpolitical digital currencies. His career has included senior posts at Sumitomo Bank, Visa, VeriSign, and Hushmail. Currently, he serves on the board of the Bitcoin Foundation. Follow him on Twitter.