Bitcoin ATM numbers are booming
The number of global Bitcoin ATMs is exploding. But as numbers have risen, thieves have continued to exploit vulnerabilities in the technology.
The world’s first Bitcoin ATM hit Vancouver in 2013, and the total number of machines worldwide has grown rapidly to over 5,000 in 2019. The machines are run by 600 different operators and appear in prime city-center locations like gas stations, corner shops, hotels, and shopping centers.
Total number of Bitcoin ATMs, source: Coinatmradar.com
LibertyX, the company that launched the first U.S. Bitcoin ATM in Boston’s South Station in 2014, now operates over 1,000 ATMs in the U.S. The company has announced plans to expand across 90 retail locations in Arizona and Nevada in the next 12 months.
Everyday cryptocurrency users
Demand for the devices, says Brandon Mintz who leads ATM firm Bitcoin Depot, stems from ‘everyday users’ of cryptocurrency.
Unlike exchanges, which cater to the whims of traders and the needs of investors, Mintz suggests that Bitcoin ATMs are used primarily for utility—serving the underbanked, which is a segment that represents up to a fifth of the US population who lack sufficient access to financial institutions.
Young, male, unbanked millennials are the main demographic turning to Bitcoin ATMs. They use them to send remittances to friends or relatives in other countries or to buy goods and services online.
"It’s simple. Run down to your 24/7 store with cash, sign up and transact within a minute, send the money down to a receiver and they will get it 20 minutes later," said Mintz at a blockchain conference in Atlanta earlier this year. "I won’t be surprised if a couple of years down the road pretty much every gas station and convenience store has one."
The physical presence of the machine is also thought to reassure first-time buyers. Jorge Farias, who runs Panama-based bitcoin ATM company Cryptobuyer, told Brave New Coin that, "People often put more trust in a machine that seems familiar, than a person or even a website, especially in their first experience interacting with Bitcoin or any other virtual currency."
Growing pains
But while ATMs might be a trusted place to buy Bitcoin, several recent incidents have threatened this sense of safety.
In a shopping center near London’s Bond Street tube station last month, a Bitcoin ATM was captured on video spitting out notes as if it had developed a sudden distaste for fiat currency, while a hapless customer attempted to divert the flow into a duffle bag.
"Everything was going well during this transaction," ATM operator Shitcoins Club reportedly told Hard Fork, but the incident highlighted teething problems that are occurring across the industry.
Holding an average of $10-15K in both fiat and BTC—which according to Coinatmradar is needed to provide sufficient liquidity—Bitcoin ATMs can be a lucrative target, and some thieves are now adapting old techniques used for attacking legacy ATMs.
Investigators from cybersecurity firm TrendMicro found a familiar malware device, once used in regular ATM exploits, that had been reimagined for Bitcoin ATMs and made available on darknet markets.
Simple brute force attacks have also been used. An incident in Northampton, England hit headlines in June when masked robbers used a sledgehammer to remove a Bitcoin ATM from the wall. Given the clinical precision with which the maneuver was carried out, some have suggested that career criminals were responsible. They may have wanted the ATM to convert stolen fiat currency into bitcoin. This method of money laundering, says Brian Krebs, could be a "quicker replacement" for "tried-and-true methods of disbursing cash" like Western Union and MoneyGram. "I suppose it’s possible that the wire transfer companies are getting better at detecting and blocking suspicious transactions, but I doubt that’s the reason. More likely, sending cash via Bitcoin results in a more immediate payday," says Krebs.
Nevertheless, such thefts remain relatively isolated incidents, and if development continues at its current pace, we expect Bitcoin ATMs to become increasingly secure, and increasingly widespread.
As Mintz points out, this segment of the crypto ecosystem is not only growing rapidly it is relatively immune to the market cycles that hold sway over the rest of the industry. "Regardless of the price [of bitcoin], the ATM industry is pretty stable and growing quickly every year. We have at least doubled the number of crypto ATMs out there. I think we are going to keep doubling and doubling until we get close to 50,000."
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