Bitcoin ATM Transaction Flow: How do Bitcoin ATMs Work?
- By Localcoin
- September 15, 2023
Bitcoin ATMs (BATMs) serve as a crucial bridge between the physical and virtual realms of cryptocurrency, ensuring this exciting space is accessible to everyone.
For those wondering, "How do Bitcoin ATMs work?", this should act as a transparent look into the process that occurs when you complete a transaction. While it may appear as a simple interaction on the terminal screen, it is, in fact, a multi-layered process backed by sophisticated technology.
To demystify this, let's embark on a journey that takes you through each step of a BATM transaction, unveiling the mechanics that ensure a seamless and secure experience.
This article acts as a gateway to the backend process of Localcoin’s ATM and does not function as a tutorial. If you are interested in using a Localcoin ATM, check out the How to Buy Bitcoin and How to Sell Bitcoin pages.
Navigating the world of cryptocurrency can be daunting, especially when you're standing in front of a Bitcoin ATM terminal, ready to make a transaction. Yet, the process is streamlined and systematic, leveraging modern technology and stringent security measures.
Here is a closer look at what goes on behind the screen.
Is using a Bitcoin ATM safe? Absolutely! To bolster security and maintain transaction integrity, you're required to provide and verify your phone number. This step involves sending you an SMS containing a one-time password (OTP). You need to enter this OTP on the ATM within the given timeframe. We also monitor staff members on-site, there are CCTV cameras within the stores, and we pick trust locations after thorough a verification process.
But how does verifying your phone number provide an additional layer of security? Here are some of the main factors:
- Verification Step: When you're asked to verify your phone number at a Bitcoin ATM, it introduces an element of user authentication. This means that not just anyone can approach the ATM and make a transaction; they would need to verify themselves first.
- One-Time Password (OTP): An OTP is a code that is valid for only one login session or transaction. It's a dynamic form of authentication that's much harder to compromise than static passwords. When you receive an OTP via SMS, it proves that you are in possession of the registered phone number, adding an extra level of validation.
- Time-limited OTP: Since the OTP is only valid for a short duration, even if someone intercepts it, they have a very limited window of time to use it. This reduces the risk of unauthorized transactions.
- Identity Creation: By verifying your phone number and creating your identity on their server, it ensures that every transaction can be traced back to a user, which acts as a deterrent for any malicious activity. It also provides a method for the company to contact or identify users in case of any disputes, issues, or suspicious activities.
Completing this step not only adds an extra layer of security but also creates your identity in our server, a critical component of the transaction process.
In essence, this process ensures a safer transaction environment by validating the identity of the user, introducing a dynamic, time-sensitive authentication step, and ensuring traceability of every transaction.
Wallet Address & Blockchain Data Platform Security Check
Once you scan your digital wallet's address at the terminal, it doesn't just sit there. Behind the scenes, the address is forwarded to the blockchain data platform. This service assesses, scores, and even has the authority to block your transaction based on the risk associated with the wallet. This ensures only genuine transactions go through and is how Bitcoin ATMs ensure transaction security.
Exchange Rate and Fee Calculation
Next up, the terminal connects to the Cryptocurrency Exchange (CEX) or its liquidity partner to fetch the most recent exchange rate. Understanding fees on Bitcoin ATMs is essential as transaction fees are typically around $4 plus an added 5-15% profit over the market value, determined by the Bitcoin ATM’s server.
Cash Reconciliation in a Bitcoin ATM
As the transaction concludes, the cash reconciliation process begins, ensuring that every penny is accounted for, setting the stage for subsequent transactions.
Compliance and Customer Safety
Localcoin maintains a strict adherence to Canadian compliance laws and an unwavering commitment to prioritizing customer safety. Operating within the rigorous regulatory framework of the Canadian cryptocurrency landscape, Localcoin ensures full compliance with anti-money laundering regulations, safeguarding against illicit activities and maintaining the highest standards of financial integrity.
Beyond legal obligations, Localcoin goes the extra mile to foster a secure environment for its customers. Localcoin ATMs are equipped with state-of-the-art security features, including encryption protocols and real-time monitoring, guaranteeing the safety of every transaction.
With a steadfast dedication to both legal compliance and customer well-being, Localcoin continues to be a trusted gateway for Canadians to access and invest in cryptocurrencies with peace of mind.
Transacting with a Bitcoin ATM might seem complex initially, but as you've seen, it's a series of well-coordinated steps aimed at ensuring security, transparency, and efficiency.
Whether you're new to cryptocurrencies or a seasoned trader, understanding the intricacies of the BATM process empowers you to transact with confidence and clarity.
For those seeking a secure means of entering the crypto space and transacting using cryptocurrency, Localcoin offers a non-custodial solution that guarantees complete control over your assets.