Judging by the name, most people think that a crypto ATM functions like any other ATM. You enter some details, choose the amount you need, cash comes thundering out, and your crypto wallet balance is deducted. However, this is not what a crypto ATM does. These ATMs actually have a very different function and operate more like a crypto exchange. Confused? Tag along as we quickly cover what crypto ATMs are and how they work. Let’s begin.
What is a crypto ATM?
Crypto ATMs are machines that allow you to purchase bitcoins or other cryptocurrencies using cash or a debit card. Therefore, the term crypto ATM may be a misnomer; the only similarities between crypto ATMs and their cash counterparts are how they look and their requirement of a debit card.
Now you might think that these machines are just exchanges with a physical location. Not quite. Crypto ATMs are stalls connected to a cryptocurrency network and typically not controlled by financial institutions. However, the primary way they are different from any cryptocurrency exchange is that the crypto you purchase is redirected to the digital wallet address of your preference.
In a cryptocurrency exchange, the crypto you buy is transferred to your exchange-hosted wallet, where the exchange controls your private key. These wallets are known as hot wallets. You also can transfer your tokens from your exchange wallet to your digital wallet. However, that would require you to perform extra steps.
How does a crypto ATM work?
A crypto ATM comprises of a QR scanner, monitor, debit card acceptor, and a bill dispenser, and in some cases, cash. On the back end is the software that makes buying and selling cryptocurrency possible.
When you approach the ATM, you must verify your identity. While the identification process may differ from one ATM to the next, most will require you to enter your phone number. Once you have done this, you will receive a verification code that you need to enter to proceed. Now your phone number is verified and registered with the ATM.
The next step requires you to enter your wallet address. The easy way to do this is to generate a QR code from your wallet’s mobile app. Simply place the QR before the code scanner in the ATM, and it will verify the address in a matter of seconds. This is much better than entering the wallet address manually — as one digit or alphabet here or there, and your crypto is lost forever. You then have to enter the number of coins you want to buy and input cash or a debit card to purchase your desired cryptocurrency.
After purchasing the crypto, it might take a few minutes to complete the transactions. In rare cases, it might even take an hour. After the transaction is complete, check your wallet to see if the transaction went through successfully.
Cryptocurrency ATM fees
Most crypto ATMs charge a percentage of the transaction value as a fee. This percentage usually ranges between 9 and 12 percent depending on the ATM you choose. Historically, this fee would be as low as 4 percent or as high as 20 percent.
The benefits of crypto ATMs
Crypto ATMs are designed to be easy to use and have a similar experience to a regular ATM. They are best suited for people who are not tech-savvy and prefer a streamlined way to buy cryptocurrency. They are also a great introductory tool for amateurs getting into crypto trading for the first time.
The disadvantages of crypto ATMs
For starters, crypto ATMs have exuberant transaction fees. They also limit how much you can buy due to anti-money laundering regulations. Finally, customer support will be hard to find if something goes wrong with your transaction.
But the biggest issue with crypto ATMs is their reach. While the number of these machines has shot up dramatically over the last few years, their coverage is still minimal. For instance, at the start of 2021, there were approximately 14,000 crypto ATMs. But by the end of the year, this number more than doubled, reaching 34,000. Yet, there are only two crypto ATMs in India, and they are both in Delhi.
(Edited by : Shloka Badkar)