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​​What is a Bitcoin ATM: How They Work | What They Do | Are They Secure?

  • By Localcoin
  • September 7, 2021
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At Localcoin, our mission is to provide a simple, secure buying and selling experience of digital currency for customers across North America. From running North America’s largest Bitcoin ATM network to our online retail platform, we are constantly seeking to innovate in the blockchain infrastructure space. Welcome to our blog, where customers can educate themselves on the world of cryptocurrency, learn more about our company vision and more!

Launched in 2009, Bitcoin (BTC) is the original blockchain-based digital currency and the world’s most popular cryptocurrency. As of August 2021, Bitcoin is even accepted by some major retailers, allowing it to be used for a variety of offline transactions. The success of Bitcoin has inspired the creation of a variety of other cryptocurrencies, otherwise known as “altcoins”, but despite the competition, Bitcoin has remained the world’s most widely-adopted decentralized digital currency. 

Considering Bitcoin’s rise in popularity and the fact that many see cryptocurrencies becoming far more relevant as time goes on, many aspiring crypto-enthusiasts are looking for safe, secure ways to buy and sell this novel form of currency. But how does one go about doing that? While it can seem daunting and confusing for newcomers, one of the easiest ways to buy and sell cryptocurrencies is with a Bitcoin ATM. Keep reading to learn more about Bitcoin, the blockchain, and how to use a Bitcoin ATM!

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Browse This Content: 

  1. What is a Bitcoin ATM?
  2. What is the Blockchain and How is it Used for Bitcoin Transactions?
  3. What is a crypto wallet?
  4. How to Use a Bitcoin ATM
  5. Is it Secure to Use a Bitcoin ATM?

What is a Bitcoin ATM?

While these terminals are often referred to as Bitcoin “ATMs”, they actually don’t work like regular, bank-owned ATMs that dispense cash, deposit money, and withdraw from a bank account that’s connected to the user’s identity. A Bitcoin ATM functions quite differently

  1. These internet-enabled terminals help users perform blockchain-based transactions from their crypto wallets, whether they are buying or selling Bitcoin, or other forms of cryptocurrency such as Ethereum or Litecoin. 
  2. Bitcoin ATMs are connected to the Bitcoin blockchain network, allowing customers to purchase cryptocurrency with cash or sell crypto from their wallet. 
  3. Bitcoin ATMs often utilize QR codes as an easy way to connect to the user’s Bitcoin wallet. 

While instructions on the terminal may appear straightforward at first glance, having an understanding of blockchain and crypto wallets is important in learning how to use a Bitcoin ATM properly. Plus, because transactions cannot be simply reversed, it helps to know the basics before you buy or sell!

What is the Blockchain and How is it Used for Bitcoin Transactions?

Unlike government-regulated fiat currencies, Bitcoin is a decentralized digital currency that is sent from person to person via a different kind of network. 

Bitcoin transactions are securely monitored and recorded by a massive decentralized authority called the blockchain. This means that Bitcoin exists as balances that are kept on a public, digital ledger that anyone and everyone has access to, rather than as a physical coin. Here is how a Bitcoin transaction works in a nutshell: 

  1. When I want to make a transaction, I send or broadcast a file containing all the transaction information (how many Bitcoins are being traded, sender/recipient information, etc. ) to the blockchain from my crypto wallet.  
  2. This transaction file is then analyzed by many different computers on the blockchain network to confirm its authenticity. 
  3. From there, many different transaction files are grouped together into “blocks” (hence blockchain) and miners will then compete to have their block of transactions permanently added to the blockchain’s ledger, thus confirming those transactions and locking them in place. 
  4. This “competition” comes down to using computational power to solve complex mathematical problems. The reward? Blocks of transactions have mining fees attached to them, meaning that successful miners will be rewarded with newly minted Bitcoins. 

This system may sound convoluted, but it aims to allow for a safe, secure means of making digital transactions without the need for banks or other intermediaries. Decentralization and increased privacy as a result is a large part of what fundamentally makes cryptocurrency different from fiat currencies — and for many, it’s exactly why they love to use crypto!

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What is a Crypto Wallet?

Understanding the role of crypto wallets is important in learning how to use a Bitcoin ATM. Just as Bitcoin ATMs are not exactly ATMs, crypto wallets are not the same as traditional wallets. Due to the decentralized nature of Bitcoin, the coins you own aren't stored in a wallet, rather, crypto wallets exist to keep track of coin ownership. They are necessary for the generation of public Bitcoin addresses which make the purchasing and selling of coins possible. 

Your Bitcoin address, balance and transactions may be public on the blockchain, but these are not tied to your identity, and your coins are protected in your wallet by a private key. Private keys are long sequences of letters and numbers unique to you that both act as a password for accessing your Bitcoins and as digital signatures that verify your transactions on the blockchain. 

Here’s How To Use a Bitcoin ATM

Now that we’ve covered some of the basics, let’s have a look at how transactions are done using Bitcoin ATMs. Every Bitcoin ATM is different, but they all follow a similar process. Before heading to your local Bitcoin ATM, ensure you have a Bitcoin-compatible wallet set up and ready to go. Then, follow the prompts on the ATM screen. 

How to Buy Bitcoin Using a Bitcoin ATM

  • Step 1: If the ATM offers buying/selling services for more than one currency, select Bitcoin (BTC).
  • Step 2: Find the QR code associated with your Bitcoin address in your wallet. 
  • Step 3: Scan the QR code using the built-in camera. 
  • Step 4: Insert your bills when prompted. 
  • Step 5: Confirm the amount and complete your purchase. Transactions are usually instantaneous, but may take anywhere between 10–30 minutes, or even 1–2 hours in some cases. 

How to Sell Bitcoin Using a Bitcoin ATM 

  • Step 1: If the ATM offers buying/selling services for more than one currency, select Bitcoin (BTC). 
  • Step 2: Select the amount of BTC you want to sell or the amount of cash you want to receive (this depends on the capabilities of the machine.) The machine is constantly updating its conversion rate every few minutes. 
  • Step 3: Confirm your selection and wait for a receipt that contains the QR code to send your Bitcoin to. 
  • Step 4: From your mobile wallet, send Bitcoin to the address given on the QR code. 
  • Step 5: Bitcoin ATMs give multiple confirmation scores that indicate how hard it is to reverse the transaction. You will need to wait for a specified amount of confirmations before being able to withdraw your cash from the ATM. 
  • Step 6: Collect your cash from the ATM. 

Note that identification may be required for transactions over a specified dollar amount. There will also be a service fee which can vary based on the realities of the Bitcoin market at the time of your transaction. It is recommended that you wait for at least one confirmation on the blockchain before spending or sending your purchased funds.

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Is it Secure to Use a Bitcoin ATM?

Using a Bitcoin ATM is a safe and reliable method of buying and selling cryptocurrency. However, this doesn’t mean that there aren’t security risks; it’s the customer’s responsibility to keep their private keys private as they are used to validate crypto transactions, allowing a potential hacker to move Bitcoins into their own wallet if accessed. Always use a reliable wallet app that you trust to manage your private keys. Additionally, users should always be aware of waiting for complete confirmation on the blockchain before considering a transaction complete. 

Localcoin ATMs offer an accessible, user-friendly and secure way for anyone to buy and sell Bitcoin and other cryptocurrencies in their communities. This is especially meaningful for beginners who are seeking a hassle-free way to dive into the world of digital currency with confidence! Newcomers and experts alike can easily access Localcoin ATMs when and where they need to. As Canada’s largest Bitcoin ATM network with more than 550 terminals across Canada and the U.S, it’s never been more convenient to buy and sell cryptocurrency. 

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Interested in buying and selling Bitcoin and other cryptocurrencies at a Localcoin ATM? Click here to find a terminal near you.

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