Merged: Bitcoin - Part 3

[The_Animus]

Originally Posted by Dr.Sid

Doesn't that make it an exchange ?

Depends. It could be argued they are and nothing stops an exchange from also utilizing ATMs. But generally when talking about crypto exchanges, it's referring to a website that provides exchange services for anyone in the world but you have to register an account, verify your ID, and the wallet for that account is owned and managed by the exchange. So your transactions aren't private and if the exchange is hacked, or the people running it are fraudsters, there goes your money.

The ATM on the other hand could just be me deciding to buy a machine and setting it up at my local gas station. Would that be considered a crypto exchange? What if I decide to buy two more and place them in nearby towns?

And yet, if I were to keep expanding then at some point I might own machines across an entire state or country. So I'm not exactly sure where you'd draw the line at what is and isn't a typical crypto exchange

[The_Animus]

Originally Posted by jeremyp

I've never seen one in my life.

Have you looked? Do a quick google search for bitcoin atm near you and let us know your results.

Quote:

Let's suppose that you own one of these ATMs. Where do you get the BTC to "stock" it? How do you price the BTC?

You get it from mining, selling a good/service, or buying it from an individual or exchange. If your ATM is both buying and selling that helps it stock itself. The price is based on what people are willing to buy or sell for plus x% as a service fee. Exchanges have the highest volume of transactions and so have the best estimate for what people are willing to buy or sell for. From what I've seen ATMs generally update pricing about once a day based on the going rate at one or more exchanges. However, you can ultimately set your exchange rate at whatever you want.

Quote:

If you had a BTC ecosystem without exchanges, they will inevitably arise because they make certain functions very much easier.

Absolutely. Exchanges definitely make it easier.

Quote:

By the way, these ATM's sound like an excellent way to scam people, particularly the ones where you can sell BTC.

Quite the opposite. ATMs are currently much safer than exchanges. Exchanges hold a massive amount at a time, which makes them much bigger targets for hacking, and far more lucrative for scamming. With an exchange you can have your transaction go through just fine and then come back two days later and the exchange was hacked or the owners close shop and ran off with everything in your account. With an ATM if the transaction goes through then it's done and your money/btc is safe. If the next day the ATM gets hacked, your money/btc is safe. If the ATM owner decides to close shop and run off, your money/btc is safe.

They could scam you at the time of transaction, but remember that these machines are located inside normal businesses like chain gas stations who have a legal agreement to receive a fee in exchange for having them on location. It wouldn't take many scam transactions before the store boots them and their machine and possibly refers them for criminal or civil action. It's frankly less profitable to scam than to just do legitimate transactions unless the store manager/owner is in on the scam with the ATM owner.

[Dr.Sid]

Originally Posted by The_Animus

Depends. It could be argued they are and nothing stops an exchange from also utilizing ATMs. But generally when talking about crypto exchanges, it's referring to a website that provides exchange services for anyone in the world but you have to register an account, verify your ID, and the wallet for that account is owned and managed by the exchange. So your transactions aren't private and if the exchange is hacked, or the people running it are fraudsters, there goes your money.

The ATM on the other hand could just be me deciding to buy a machine and setting it up at my local gas station. Would that be considered a crypto exchange? What if I decide to buy two more and place them in nearby towns?

And yet, if I were to keep expanding then at some point I might own machines across an entire state or country. So I'm not exactly sure where you'd draw the line at what is and isn't a typical crypto exchange

The argument was if and how can bitcoin exist without exchanges. And IMHO it was meant as "a way to exchange BTC for fiat" .. and if you can do it with ATMs, clearly it means there is a way of exchange. So I don't see how it is relevant ..

[marting]

Originally Posted by Dr.Sid

The argument was if and how can bitcoin exist without exchanges. And IMHO it was meant as "a way to exchange BTC for fiat" .. and if you can do it with ATMs, clearly it means there is a way of exchange. So I don't see how it is relevant ..

I suspect those that buy bitcoin through an ATM are just doing it for the novelty and perhaps hoping it may go up a lot someday. The vigorish on the transaction is rather high.

[Dr.Sid]

Originally Posted by marting

I suspect those that buy bitcoin through an ATM are just doing it for the novelty and perhaps hoping it may go up a lot someday. The vigorish on the transaction is rather high.

Well if exchanges have bad reputation, these BTC ATMs are nothing great either. It's easy tool for phone call scammers .. they will tell people they are from their bank, and that only way how to fix sudden issue with their account is to go to BTC ATM and send all their money .. which are then impossible to get back. Recently they also managed to persuade people to take a loan and send even more. There is huge warning on the ATM, but it keeps happening.

Sure, it's not billions, it wont ruin countries .. but BTC certainly allows the scammers to get away with the money.

[marting]

Originally Posted by Dr.Sid

Well if exchanges have bad reputation, these BTC ATMs are nothing great either. It's easy tool for phone call scammers .. they will tell people they are from their bank, and that only way how to fix sudden issue with their account is to go to BTC ATM and send all their money .. which are then impossible to get back. Recently they also managed to persuade people to take a loan and send even more. There is huge warning on the ATM, but it keeps happening.

Sure, it's not billions, it wont ruin countries .. but BTC certainly allows the scammers to get away with the money.

Here abouts those scams mostly use pre-paid debit cards. People are told the IRS is about to arrest them if they don't immediately purchase the cards and read off the numbers to them over the phone. Not that many BTC ATMs around here.

But to your point about BTC. It's also ideal for unlock your database fraud. Sometimes into the millions of dollars. Hard to do with wire transfers.

[erwinl]

Originally Posted by The_Animus

Have you looked? Do a quick google search for bitcoin atm near you and let us know your results.



You get it from mining, selling a good/service, or buying it from an individual or exchange. If your ATM is both buying and selling that helps it stock itself. The price is based on what people are willing to buy or sell for plus x% as a service fee. Exchanges have the highest volume of transactions and so have the best estimate for what people are willing to buy or sell for. From what I've seen ATMs generally update pricing about once a day based on the going rate at one or more exchanges. However, you can ultimately set your exchange rate at whatever you want.



Absolutely. Exchanges definitely make it easier.



Quite the opposite. ATMs are currently much safer than exchanges. Exchanges hold a massive amount at a time, which makes them much bigger targets for hacking, and far more lucrative for scamming. With an exchange you can have your transaction go through just fine and then come back two days later and the exchange was hacked or the owners close shop and ran off with everything in your account. With an ATM if the transaction goes through then it's done and your money/btc is safe. If the next day the ATM gets hacked, your money/btc is safe. If the ATM owner decides to close shop and run off, your money/btc is safe.

They could scam you at the time of transaction, but remember that these machines are located inside normal businesses like chain gas stations who have a legal agreement to receive a fee in exchange for having them on location. It wouldn't take many scam transactions before the store boots them and their machine and possibly refers them for criminal or civil action. It's frankly less profitable to scam than to just do legitimate transactions unless the store manager/owner is in on the scam with the ATM owner.

Highlighted

You’re right. There’s actually one in the next city from me. Never would have expected that.

Hmmm. I do know that neighbourhood though.
More than likely, in the time needed to use the atm, your bike will be stolen from behind you.
Not really a confidence inspiring thought for something like bitcoin, if an atm is set up in a place like that.

[jeremyp]

Originally Posted by The_Animus

Have you looked? Do a quick google search for bitcoin atm near you and let us know your results.

There is one in my city allegedly (it's not clear if it's not just an ordinary ATM). The next nearest two (both definitely BTC ATMs) are in a different country (the different country is Wales and I live in Bristol, so not actually that far).

Quote:

You get it from mining, selling a good/service, or buying it from an individual or exchange.

To do mining I need some serious hardware and cheaper electricity than is available to me. The problem with exchanging it for goods or services or buying it from an individual is how do we set a price? What if I can't find somebody willing to exchange goods for BTC or money?

For all practical purposes, almost everybody who sets up an ATM will use an exchange to get their BTC from because it's convenient.

Quote:

Quite the opposite. ATMs are currently much safer than exchanges.

I had a look at the one near me on StreetView. I don't think I'd trust it if it was an ordinary ATM, never mind a BTC one.

[FatherLukeduke]

Originally Posted by The_Animus

Quite the opposite. ATMs are currently much safer than exchanges.

Nobody is forcing you to store your tokens on the exchange. You can just buy your token and immediately transfer to your wallet. That's all these "ATMs" are really doing - they are effectively just interfaces for what is effectively an exchange anyway.

Quote:

It's frankly less profitable to scam than to just do legitimate transactions unless the store manager/owner is in on the scam with the ATM owner.

From looking at the fees these so-called ATMs charge, their legitimate transactions look pretty scammy already. The fees range from 11% to a staggering 25%. In fact one provider, CoinSource, make a big show about only charging 11%....

Whereas kraken.com charges 0.26% on their transactions and look like a genuinely legit company (which is saying something in the world of crypto).

So why would anyone use one of these machines? I'm guessing it's the sort of person that has lots of cash, but doesn't want to use a bank for some reason....

[Chanakya]

Originally Posted by FatherLukeduke

Nobody is forcing you to store your tokens on the exchange. You can just buy your token and immediately transfer to your wallet. That's all these "ATMs" are really doing - they are effectively just interfaces for what is effectively an exchange anyway.


From looking at the fees these so-called ATMs charge, their legitimate transactions look pretty scammy already. The fees range from 11% to a staggering 25%. In fact one provider, CoinSource, make a big show about only charging 11%....

Whereas kraken.com charges 0.26% on their transactions and look like a genuinely legit company (which is saying something in the world of crypto).

So why would anyone use one of these machines? I'm guessing it's the sort of person that has lots of cash, but doesn't want to use a bank for some reason....

****, what? That high, is it? Is that actually the norm? That's like completely crazy, a 25% fee!

[FatherLukeduke]

I don't think 25% is the norm, but it seems 11% is the lowest. Looks like 20% isn't unusual.

Apparently some have dynamic fees depending on how many people use the machine. So it depends on how many people are money laundering in your area.

[Suddenly]

Originally Posted by FatherLukeduke

Nobody is forcing you to store your tokens on the exchange. You can just buy your token and immediately transfer to your wallet. That's all these "ATMs" are really doing - they are effectively just interfaces for what is effectively an exchange anyway.


From looking at the fees these so-called ATMs charge, their legitimate transactions look pretty scammy already. The fees range from 11% to a staggering 25%. In fact one provider, CoinSource, make a big show about only charging 11%....

Whereas kraken.com charges 0.26% on their transactions and look like a genuinely legit company (which is saying something in the world of crypto).

So why would anyone use one of these machines? I'm guessing it's the sort of person that has lots of cash, but doesn't want to use a bank for some reason....

The staggering fees I'm guessing are partially because these ATMs aren't confirming whole transactions on the blockchain before spitting out money.

So more like bitcoin pawn shops, really, with all of the legality and other issues that cause them to get the margins they get.

In the US it's easy to forget that a not small segment of the population is totally shut out of the banking system. Having to live on a cash basis in 2022 is really grim to the point that these fees seem not all that out of place. It's odd that having a "lot" of currency is a sign of poverty, but that's how it works.

I can make better cases for bitcoin for people in poverty than I can anyone else, really.

[psionl0]

Originally Posted by FatherLukeduke

I don't think 25% is the norm, but it seems 11% is the lowest. Looks like 20% isn't unusual.

Apparently some have dynamic fees depending on how many people use the machine. So it depends on how many people are money laundering making withdrawals in your area.

ftfy.

If you are going to accuse everybody who makes an ATM withdrawal of "laundering money" then you better have some evidence.

[Dr.Sid]

Well BTC ATM does have an advantage of anonymity. But how much would you launder ? You have to deposit in cash ..

[The_Animus]

Originally Posted by FatherLukeduke

Nobody is forcing you to store your tokens on the exchange. You can just buy your token and immediately transfer to your wallet. That's all these "ATMs" are really doing - they are effectively just interfaces for what is effectively an exchange anyway.

Yes, anyone who uses an exchange can then transfer their balance from the exchange to a personal wallet not associated with the exchange. Unfortunately many people don't understand how it all really works or the risks and may rely solely on the exchange due to ease of use and assuming it has similar security and protections to that of a bank or something like fidelity. If I recall correctly, exchanges also require an account with verified personally identifying information. So even if you immediately transfer it out of the exchange and into a personal wallet, it's still traceable back to you. There are things like coin joins to re-anonymize who the BTC belongs to, but it requires additional steps and tech savvy to do and even then there would still be record of you having done the coin join, which I believe is illegal in many places because it's essentially money laundering.

Quote:

From looking at the fees these so-called ATMs charge, their legitimate transactions look pretty scammy already. The fees range from 11% to a staggering 25%. In fact one provider, CoinSource, make a big show about only charging 11%....

Whereas kraken.com charges 0.26% on their transactions and look like a genuinely legit company (which is saying something in the world of crypto).

So why would anyone use one of these machines? I'm guessing it's the sort of person that has lots of cash, but doesn't want to use a bank for some reason....

I'm sure it has varied a lot over time and from place to place. The ones I've seen have been in the 7-11% range. Crypto is volatile and ATMs have lower transaction volumes than exchanges. To ensure they make a profit their fees have to be higher. Also, unlike exchanges, ATMs aren't ever holding a ton of clients money and crypto all at once and so can't "borrow" from their clients accounts for side bets/investments to further increase profits.

As you suggest, one potential use of ATMs could be to launder money. However, the ATMs have a transaction limit of I believe $900, and if you want to do a higher amount than that you have to provide an ID. I'm not sure if this transaction limit is daily, or weekly or what. So to launder any significant amount of money would take a lot of trips over a long period of time and every transaction from money to BTC you're taking that 10%+ hit and every time you turn it back from BTC into money you're taking that 10%+ hit.

On the other hand if you're someone who wants to be able to get a small amount of BTC in order to purchase a good or service as anonymously as one can, which was one of the original purposes and selling points of crypto, then an ATM can be useful.

[Dr.Sid]

Which would make it really useful to sell drugs .. and here we have the reason what this thing is doing in poor area ..

[FatherLukeduke]

You are all hung up on the fact that you can only deposit $900 at a time per phone number (though it sounds like you can do up to $5000 per day per provider). Pretty simple to get round that by having, say, 10 phones. With a $5000 per phone per provider, you could get a lot of cash turned into BTC. Even better pay a team of lackies to take your money and access hundreds of machines within driving distance and you could launder (or at least start the laundering process) substantial amounts in a single day - millions in a year.

There's tons of stuff out there on how these machines are being used for elicit purposes and they've been banned in plenty of places, including the UK and crypto friendly Singapore. New York that has stricter "BitLicense" rules has a fraction of the machines compared to other cities.

Anyway, I might be wrong about the extent of the laundering - seems the biggest elicit use is "call centre" scams that use it to get their victims money out the country.

Quote:

A study by Chainalysis found nearly 75% of all illicit funds leaving the ATMs wound up being used at fraud shops, sites on the dark web that sell stolen credit card information.

Cash in, fraud out: Criminals target bitcoin ATMs as crypto popularity surges

Obviously a bit out of date, as "crypto popularity" is definitely not surging, which will be the biggest issue for these machines.

Personally I suspect the majority of these machines will just end up gathering dust and the companies running the will go bust.

Quote:

The total amount of money funneled through crypto ATMs globally, expressed in dollars, fell to $230 million in October from $349 million in January 2021, according to data from researcher Chainalysis. The drop came even as the number of machines installed worldwide almost tripled in the period. That implies a roughly 75% decrease in the value the average unit generates.*

and

Quote:

Many ATMs now get little, if any, use. At the Smoke Shop convenience store in midtown Manhattan, there’s one tucked away between shelves of soda and snacks. Syed Alam, who works at the store, said he doesn’t pay much attention to the machine. At noontime on a recent Friday, he reckoned at least one person had used it that day. Every two weeks or so, someone comes to collect cash from the unit.*

What’s clear, though, is that usage has dropped off in the past year. “Now, it’s slow,” said Alam, 49.*

With demand waning, executives who had been used to plugging in units as fast as they could negotiate new leases are facing tougher choices.*

Coin Cloud, which runs about 5,000 ATMs across the US and Brazil, has tapped advisers to help it rework about $125 million of debt accumulated to fund an aggressive expansion, Bloomberg News reported in November. The company has been seeking additional funding from troubled crypto brokerage Genesis, people familiar with the matter said.*

Crypto’s Brutal Slump Has Finally Caught Up With Bitcoin ATMs

I mean, good luck with that. Not sure "troubled Bitcoin ATM operator needs debts paying" is where I'd choose to put my capital right now.

[Chanakya]

Originally Posted by FatherLukeduke

I don't think 25% is the norm, but it seems 11% is the lowest. Looks like 20% isn't unusual.

Apparently some have dynamic fees depending on how many people use the machine. So it depends on how many people are money laundering in your area.

It might be interesting to understand why.

Both why's. Why they charge such extortionate fees; as well as why those that use those ATMs pay those crazy percentages out.



eta: Well ok, one "explanation" would be to do with desperate money launderers and people trafficking in illegal stuff and other such low lifes. And sure, that explanation would hit home at least some of the time, I'm sure, maybe even for a signficant proportion of such transactions. Still, that kind of thing can hardly account for all of those transactions, and probably not even the majority of such transactions, right? So I'm wondering why, both why's.

[The_Animus]

Originally Posted by FatherLukeduke

You are all hung up on the fact that you can only deposit $900 at a time per phone number (though it sounds like you can do up to $5000 per day per provider). Pretty simple to get round that by having, say, 10 phones. With a $5000 per phone per provider, you could get a lot of cash turned into BTC. Even better pay a team of lackies to take your money and access hundreds of machines within driving distance and you could launder (or at least start the laundering process) substantial amounts in a single day - millions in a year.

Yes you could purchase 10 phones in order to up your transaction limit or hire lackeys to do it for you. Now you're paying for phones, for phone activate/service, the lackeys, and the ATM fees twice. Granted the phone and service part isn't very much. I'm not knowledgeable regarding money laundering so I don't know how this compares to normal non-crypto money laundering as far as ease and profitability.

Regarding the $5,000 per phone per provider, I didn't see that in the article but maybe I missed it. Could you either quote the relevant part or cite another source? If true that's really dumb. It doesn't make much sense to have a $900 transaction limit before needing an ID but then allowing multiple transactions.

Originally Posted by FatherLukeduke

Anyway, I might be wrong about the extent of the laundering - seems the biggest elicit use is "call centre" scams that use it to get their victims money out the country.

Quote:

A study by Chainalysis found nearly 75% of all illicit funds leaving the ATMs wound up being used at fraud shops, sites on the dark web that sell stolen credit card information.

Cash in, fraud out: Criminals target bitcoin ATMs as crypto popularity surges

I despise scammers and it's awful that this is yet another avenue for them to scam from. At the same time you have to be among the dumbest people to fall for this ****. The first giant red flag is that any company you've done business with having never used crypto is suddenly asking you for payment via crypto. Second, the machines have warnings about this exact thing in big bold letters on the machines themselves. Then when you go to do an actual transaction it has a big warning popup screen telling you all this again. If it wasn't crypto ATMs these people would probably still be getting scammed, just via gift cards or something else.

I find the Chainalysis quote dubious. I have never heard them called fraud shops. They are normally referred to as dark markets. Dark markets vary but mostly sell drugs. Some sell other things such as; personal information like SS numbers or credit card info, software like malware or cracked programs, even knock off products like handbags. Some sell all of the above on the same market, but it seems to mostly be drugs. I don't doubt that 75% of crypto ATM purchases end up at dark markets, I just don't think the majority of that is going to buy stolen credit card info.

Originally Posted by FatherLukeduke

Obviously a bit out of date, as "crypto popularity" is definitely not surging, which will be the biggest issue for these machines.

Personally I suspect the majority of these machines will just end up gathering dust and the companies running the will go bust.

Quote:

The total amount of money funneled through crypto ATMs globally, expressed in dollars, fell to $230 million in October from $349 million in January 2021, according to data from researcher Chainalysis. The drop came even as the number of machines installed worldwide almost tripled in the period. That implies a roughly 75% decrease in the value the average unit generates.*

There would not be a direct relationship between the number of ATMs and the number of transactions or money funneled through. If someone uses an ATM in their town and that provider adds a second one on the other side of town and a third one 20 minutes away in the next town over, that person isn't suddenly going to triple their use of the ATM. It also doesn't follow that you'd see a direct relationship to the number of people using them. The person that lived in the next town over that was into BTC drove that 20 minutes to use the one ATM. The fact that another one was placed in their town doesn't increase their transactions. They just don't have to drive 20 minutes now. Not only that, but if everyone within 50 miles was using the one ATM, and now they split their transactions between the 3 machines, the total transaction volume and amount could be the exact same and you could still report that the average unit generates only 1/3 the amount it did before.

As to the drop globally in money funneled through ATMs, that could be from any number of factors. Maybe in Jan 21 a larger number of people were interested in BTC and trying to get in on the speculation train, but by Oct those people already invested and there wasn't as much interest to purchase from new users. 6 months from now that could drop even further or have found renewed interest. Crypto is volatile like that.

In any case, if ATM providers made poor judgements and rapidly expanded beyond demand then they'll have to deal with the consequences like any other business making poor decisions.

[The_Animus]

Originally Posted by Chanakya

It might be interesting to understand why.

Both why's. Why they charge such extortionate fees; as well as why those that use those ATMs pay those crazy percentages out.



eta: Well ok, one "explanation" would be to do with desperate money launderers and people trafficking in illegal stuff and other such low lifes. And sure, that explanation would hit home at least some of the time, I'm sure, maybe even for a signficant proportion of such transactions. Still, that kind of thing can hardly account for all of those transactions, and probably not even the majority of such transactions, right? So I'm wondering why, both why's.

A lot of the transactions are likely related to a scam or other illegal activity and is mostly a bad thing. However, not all illegal activities are also immoral. Someone living in an authoritarian country may use it to anonymously fund activities against the regime that would be considered illegal and get them thrown into prison or killed. Someone living in the US in a state where abortion is illegal with an AG focused on finding and prosecuting women who get them could use it to hide the fact they paid for an abortion. Someone with a medical issue that is helped by marijuana, but who lives in a place where they would be prosecuted for it, may use it to acquire their medication while reducing the risk of being caught. Heck, even if they don't have a medical issue. In cases like these, I don't think a 20% transaction fee matters much to them.

[FatherLukeduke]

Originally Posted by The_Animus

Regarding the $5,000 per phone per provider, I didn't see that in the article but maybe I missed it. Could you either quote the relevant part or cite another source? If true that's really dumb. It doesn't make much sense to have a $900 transaction limit before needing an ID but then allowing multiple transactions.

It was mentioned in an article, I suspect it will be different for different providers and different states. However there must be some kind of upper limit - it's not like you can exchange $900 and then never use it again. So what is the max you can do in a particular time period?

Quote:

If it wasn't crypto ATMs these people would probably still be getting scammed, just via gift cards or something else.

Absolutely - I was just pointing out where a decent amount of revenue might be coming from in the machines. These call centre scams rake in billions every year in America alone. So even if only 10% went through these machines, it would represent decent revenue.

Quote:

I find the Chainalysis quote dubious. I have never heard them called fraud shops. They are normally referred to as dark markets. Dark markets vary but mostly sell drugs.

I think they are using that term to refer to (largely) Indian call centre scammers, not dark markets.

Quote:

As to the drop globally in money funneled through ATMs, that could be from any number of factors. Maybe in Jan 21 a larger number of people were interested in BTC and trying to get in on the speculation train, but by Oct those people already invested and there wasn't as much interest to purchase from new users. 6 months from now that could drop even further or have found renewed interest. Crypto is volatile like that.

Well, it's hardly global - the USA has 90% of these machines. The third largest number are in Spain and they only have 200 machines. As I said before, it's hard to imagine the crypto frenzy is going to get going again any time soon. Recent surveys show that only 8% of Americans have a positive view of crypto - my bet is within a year most of these machines will be gathering dust.

[marting]

Originally Posted by FatherLukeduke

It was mentioned in an article, I suspect it will be different for different providers and different states. However there must be some kind of upper limit - it's not like you can exchange $900 and then never use it again. So what is the max you can do in a particular time period?


Absolutely - I was just pointing out where a decent amount of revenue might be coming from in the machines. These call centre scams rake in billions every year in America alone. So even if only 10% went through these machines, it would represent decent revenue.


I think they are using that term to refer to (largely) Indian call centre scammers, not dark markets.


Well, it's hardly global - the USA has 90% of these machines. The third largest number are in Spain and they only have 200 machines. As I said before, it's hard to imagine the crypto frenzy is going to get going again any time soon. Recent surveys show that only 8% of Americans have a positive view of crypto - my bet is within a year most of these machines will be gathering dust.

That BTC ATMs charge 10% on up for transactions is an indicator that volume is low. Otherwise their would be BTC ATMs popping up all over. Not looking good for BTC replacing regular ATMs which charge far smaller fees or nothing at all like the ones I use to get occasioanal cash from my bank account.

[Chanakya]

Originally Posted by The_Animus

A lot of the transactions are likely related to a scam or other illegal activity and is mostly a bad thing. However, not all illegal activities are also immoral. Someone living in an authoritarian country may use it to anonymously fund activities against the regime that would be considered illegal and get them thrown into prison or killed. Someone living in the US in a state where abortion is illegal with an AG focused on finding and prosecuting women who get them could use it to hide the fact they paid for an abortion. Someone with a medical issue that is helped by marijuana, but who lives in a place where they would be prosecuted for it, may use it to acquire their medication while reducing the risk of being caught. Heck, even if they don't have a medical issue. In cases like these, I don't think a 20% transaction fee matters much to them.

So you're saying, basically the illegality thing, and the consequent lack of more reasonable, less extortionate options. On the user side.

Makes sense. Sometimes the simplest explanation is the correct explanation.


What about the other side of the equation, though? Why're they charging those crazy amounts? Just because they can?

(I guess the illegality thing, here as well? Because it jacks up their potential loss, their risk?)


If it's true that illegality that's the answer to the extortionate-fee question, on both sides of the equation, then this is a very unstable situation, and might crumble under any day. Maybe because other illegals get on into the act, like protection gangs and all, or maybe the law catches up with them.


eta: I take your point, not everything illegal is necessarily immoral. But that's more like a hypothetical, surely, an abstraction? Because in the US of today, I don't think there's too much of a disconnect between illegality and immorality. Even the weed thing, perfectly valid example that, is kind of passe now.

[jeremyp]

Originally Posted by Chanakya

It might be interesting to understand why.

Both why's. Why they charge such extortionate fees; as well as why those that use those ATMs pay those crazy percentages out.



eta: Well ok, one "explanation" would be to do with desperate money launderers and people trafficking in illegal stuff and other such low lifes. And sure, that explanation would hit home at least some of the time, I'm sure, maybe even for a signficant proportion of such transactions. Still, that kind of thing can hardly account for all of those transactions, and probably not even the majority of such transactions, right? So I'm wondering why, both why's.

I just did 30 seconds of Internet research. It looks like a Bitcoin ATM that can handle cash will cost you in the ballpark of $10k. Then you have got to pay to install it somewhere in such a way that somebody couldn't just come over in the night and load it onto their truck and drive away with it. Then you need to pay somebody to make sure it is stocked with enough cash and take surplus cash to a bank to be deposited. The corollary of that is you need a business account at the bank, which will also cost you money.

My guess is that the transaction fees are high because all of the costs have to be covered by a relatively small number of transactions.

[Chanakya]

Originally Posted by jeremyp

I just did 30 seconds of Internet research. It looks like a Bitcoin ATM that can handle cash will cost you in the ballpark of $10k. Then you have got to pay to install it somewhere in such a way that somebody couldn't just come over in the night and load it onto their truck and drive away with it. Then you need to pay somebody to make sure it is stocked with enough cash and take surplus cash to a bank to be deposited. The corollary of that is you need a business account at the bank, which will also cost you money.

My guess is that the transaction fees are high because all of the costs have to be covered by a relatively small number of transactions.

Heh, very time-efficient, your online "research".

While all of that makes sense, and your conclusion does not seem unwarranted; but still, there would appear to be further layers to it. (Said the guy who's not put in even those 30 seconds of research, haha!)

That is, much the same constraints apply to regular ATMs as well, and the low usage factor applied to them as well in the early days of ATMs. But no one went around charging you a quarter or a fifth of your withdrawal as "fee". And had they done that, then that in itself would have ensured that volumes would never ever have increased to more sustainable levels, and the ATM business itself would have dried off eventually, or remained a very minor niche thing.

Very fly-by-night, this whole thing appears to me. And in any case, if the others are right, and the reason why users consent to pay such high fees is primarily the illegality of their money ("primarily", as opposed to 'also', the main factor as opposed to one factor among many others): well then, no doubt the provider of the service also would share, to an extent, in the illegality, even if the law hasn't yet caught up with them.


...Anyhoo. At this point, the "why" question seems a matter of guesswork, as far as I can see. But the guesses do seem not completely uninformed, and are probably correct; or at least we can take it as such until we happen to come across more detailed analyses.

Very interesting, all of this.



There's some folks here who actually work with BTC, and crypto in general --- in a big way, and not just as some very exotic minor niche in their portfolio. For instance there's this guy who's made a fortune off of it, and actually makes a living off of it, and whom I've myself interacted with -------- If you're reading this, my apologies, your name/handle escapes me just now! It might be intersting to have their first-hand take on this. That is, do they ever use ATMs like these, or do they limit their BTC transactions only to online transfers, and use regular banking channels like everyone else as far as cash? (Although, if that is the case, then at what point does the BTC actually get converted into "fiat", in their case? Or do they maybe maintain a separate "fiat" stream for cash expenses?)

[FatherLukeduke]

Originally Posted by Chanakya

That is, do they ever use ATMs like these,

What possible reason would they want to pay these ridiculous fees to get some crypto? They can just use somewhere like Kraken.com and pay a fraction of a percent.

These machines aren't aimed at full time crypto gamblers, but the other end of the spectrum. The business model is: gouging the "unbanked" as they desperately tried to get in on the crypto extravaganza everyone was talking about and criminals who know that they will lose a good chunk of their capital as they clean it up.

Apart from people working in the (ever decreasing) cash economy who the hell walks around with much cash in their pockets anyway? I don't even take a card out with me anymore, just my phone. Even if you do have cash in your pocket, you're hardly going to go "ohh, I'll just stick that in this machine and pay 11% to get some BTC in my wallet". I'm also 10 clicks away from buying BTC on my phone with way less overheads and I can do it sat on the crapper, rather than finding some machine in a shopping mall.

[Chanakya]

Originally Posted by FatherLukeduke

What possible reason would they want to pay these ridiculous fees to get some crypto? They can just use somewhere like Kraken.com and pay a fraction of a percent.

These machines aren't aimed at full time crypto gamblers, but the other end of the spectrum. The business model is: gouging the "unbanked" as they desperately tried to get in on the crypto extravaganza everyone was talking about and criminals who know that they will lose a good chunk of their capital as they clean it up.

Apart from people working in the (ever decreasing) cash economy who the hell walks around with much cash in their pockets anyway? I don't even take a card out with me anymore, just my phone. Even if you do have cash in your pocket, you're hardly going to go "ohh, I'll just stick that in this machine and pay 11% to get some BTC in my wallet". I'm also 10 clicks away from buying BTC on my phone with way less overheads and I can do it sat on the crapper, rather than finding some machine in a shopping mall.

Basically, preying on the desparate, who just maybe sometimes still make a profit off of the volatility, and benefiting from laundering.

Surely only a matter of time, then, before the law catches up with this very dodgy business model, these weird-ass a-fifth-your-money-as-fee ATMs I mean to say.

[The_Animus]

You can't charge only a 3% fee when the BTC value could rise or drop by 10% the next day.

So let's say the provider buys BTC from an exchange to stock up their ATM. Then the price of BTC drops 8%. If the provider only charges say 5%, then any BTC that ATM sells is at a loss. Then a week later BTC rises by 10% and that person who purchased from the ATM comes back and sells that BTC back to the ATM at a profit for them, and a loss for the provider.

Crypto volatility necessitates higher fees to ensure you operate at a profit

[marting]

Originally Posted by The_Animus

You can't charge only a 3% fee when the BTC value could rise or drop by 10% the next day.

So let's say the provider buys BTC from an exchange to stock up their ATM. Then the price of BTC drops 8%. If the provider only charges say 5%, then any BTC that ATM sells is at a loss. Then a week later BTC rises by 10% and that person who purchased from the ATM comes back and sells that BTC back to the ATM at a profit for them, and a loss for the provider.

Crypto volatility necessitates higher fees to ensure you operate at a profit

That's not how it works. Bitcoin is not "stocked" in bitcoins. When you buy bitcoin you specify something like .0065 BTCs (about $100) or a dollar value. The transaction occurs while you optionally wait which can take half an hour or so before it's confirmed on the blockchain. The ATM provider buys from an exchange at current prices and adds the premium to it.

The premium of 10-20% reflects the low ATM volume and is needed to pay for the ATM capital and service costs.

[Gulliver Foyle]

Originally Posted by Suddenly

Designing a currency around the assumption of hyper-deflation is... interesting.

Designing a currency to be deflationary only makes sense when you expect your economy to be either static or contracting over the long term. Of course if either thing is happening you're in trouble.

[Gulliver Foyle]

Originally Posted by The_Animus

Have you looked? Do a quick google search for bitcoin atm near you and let us know your results.



You get it from mining, selling a good/service, or buying it from an individual or exchange. If your ATM is both buying and selling that helps it stock itself. The price is based on what people are willing to buy or sell for plus x% as a service fee. Exchanges have the highest volume of transactions and so have the best estimate for what people are willing to buy or sell for. From what I've seen ATMs generally update pricing about once a day based on the going rate at one or more exchanges. However, you can ultimately set your exchange rate at whatever you want.



Absolutely. Exchanges definitely make it easier.



Quite the opposite. ATMs are currently much safer than exchanges. Exchanges hold a massive amount at a time, which makes them much bigger targets for hacking, and far more lucrative for scamming. With an exchange you can have your transaction go through just fine and then come back two days later and the exchange was hacked or the owners close shop and ran off with everything in your account. With an ATM if the transaction goes through then it's done and your money/btc is safe. If the next day the ATM gets hacked, your money/btc is safe. If the ATM owner decides to close shop and run off, your money/btc is safe.

They could scam you at the time of transaction, but remember that these machines are located inside normal businesses like chain gas stations who have a legal agreement to receive a fee in exchange for having them on location. It wouldn't take many scam transactions before the store boots them and their machine and possibly refers them for criminal or civil action. It's frankly less profitable to scam than to just do legitimate transactions unless the store manager/owner is in on the scam with the ATM owner.

I did, four in the whole of Cork city. One in a Texaco service station where the cash ATM may get used once every few hours, one in a small local shop where they don't even have a cash ATM (and the pictures online are generic manufacturer photos), one in one of the few internet cafes left open (where the clientelle are too poor to own tgeir own computers, never mind hodl) and the final one in a Costcutter chain convenience store. That's c200,000 people being serviced by four machines.

PS not one of the four locations is going to see a volume of usage that would make these machines anything other than a novelty. The only reason the Texaco and Costcutter shops are carrying regular ATMs is that the provider is covering the costs and paying rent.

[Chanakya]

Originally Posted by The_Animus

You can't charge only a 3% fee when the BTC value could rise or drop by 10% the next day.

So let's say the provider buys BTC from an exchange to stock up their ATM. Then the price of BTC drops 8%. If the provider only charges say 5%, then any BTC that ATM sells is at a loss. Then a week later BTC rises by 10% and that person who purchased from the ATM comes back and sells that BTC back to the ATM at a profit for them, and a loss for the provider.

Crypto volatility necessitates higher fees to ensure you operate at a profit

Originally Posted by marting

That's not how it works. Bitcoin is not "stocked" in bitcoins. When you buy bitcoin you specify something like .0065 BTCs (about $100) or a dollar value. The transaction occurs while you optionally wait which can take half an hour or so before it's confirmed on the blockchain. The ATM provider buys from an exchange at current prices and adds the premium to it.

The premium of 10-20% reflects the low ATM volume and is needed to pay for the ATM capital and service costs.

Both of your theses, your analyses, your explanations, sound completely plausible, each taken stand-alone. On the other hand, obviously those are two very different explanations, contrasting ones.

I have to ask, are you simply guessing at this, one or both of you? Which is fine, informed guesses can be useful, and both explanations work: but do we actually know what is factually true, as far as these amazing "fee" levels? (The scare quotes, because it's difficult to wrap one's head around the concept of someone charging a fifth, sometimes even a quarter, of your money, just for the privilege of withdrawing your own money!)



marting, I do see one difficulty with this thing, one obvious difficulty with how you explain it, even though otherwise it makes sense. These people who're putting up these ATMs, presumably it's not just some guy with 10K to spare, who's trying to hustle up a small income stream by setting up a solitary ATM machine; but instead a firm, a company, that puts up multiple ATMs. Same as regular ATMs, except perhaps smaller in scope. So, why on earth would they ensure that their business never ever grows, by charging such extortionate sums? Any ATM, dealing in any currency, is guaranteed low volumes, ridiculously low volumes, should they go around charging $20 to $25 per $100 withdrawn. Why not do the common sense thing, and charge more sane amounts, in the expactation that volumes will pick up, to some extent at any rate even if not as much as regular "fiat", and that those higher volumes will offset the investment and hopefully earn a profit, eventually if not immediately?

(Again, I don't really know how these things work. Do they also 'buy' BTCs, that is, can you also withdraw cash off off your BTC holdings? I'd imagine so, if they're not, as you say, buying and stocking, but simply passing it on by buying/selling afresh. Because if so, then BTC investors can use these things sometimes to withdraw regular cash. Our fellow forum member, for instance, whose name/handle still escapes me, who makes a comfortable living entirely off of his BTC and other crypto investments. That itself can be one huge boost to volumes, such withdrawals, should fees be kept at sane levels.)

Of course, to say that this kind of business model militates against common business sense, is not to say that the explanation is wrong. I mean, it is what it is. Musk's doing completely weird things, insane things, with Twitter, that defy any kind of logic, and that doesn't mean he isn't doing them. Still, these ...holes, in this kind of a business model, seem so very standout, so very obvious, that one can't help wondering about them.

[marting]

Bitcoin Well is a public company in Canada with several hundred bitcoin ATMs. For the three months ending in September, they transacted about 13M which is a bit under $1,000/day per ATM.

This is from their latest quarterly filing:

Quote:

The Company purchases bitcoin and other cryptocurrencies from cryptocurrency exchanges and applies a margin before selling it to customers

[Chanakya]

Interesting. Clearly volatility is not a factor, at least for Bitcoin Well. Must be a combination, then, of their cost structure, and what they can get away with.

Incidentally, these guys, Bitcoin Well, seem to charge a flat 15%. (Looks like the mining fee and priority fee also get tagged on, so add $8 per..)

Link: https://help.bitcoinwell.com/hc/en-u...-the-ATM-fees-

[marting]

Originally Posted by Chanakya

Interesting. Clearly volatility is not a factor, at least for Bitcoin Well. Must be a combination, then, of their cost structure, and what they can get away with.

Incidentally, these guys, Bitcoin Well, seem to charge a flat 15%. (Looks like the mining fee and priority fee also get tagged on, so add $8 per..)

Link: https://help.bitcoinwell.com/hc/en-u...-the-ATM-fees-

Yeah. The daily total of one ATM's crypto transactions is pretty low. When I go to the local ATM to get cash/deposit checks, about 1/3 of the time there is another person finishing up. Usually takes less than 1 minute at the ATM. So for bitcoin ATMs they have to charge high fees just to support the cost structure.

[The_Animus]

There are numerous models of crypto ATMs. I've never owned one so I can't say for sure how they work but I would think they have a few features and settings that the owner can choose.

I don't doubt the machines Martin is familiar with work that way and he is correct that low transaction volume plays a part in the high fees. The information I provide is only based on what I've seen from a few machines around my area. For these, the exchange rate did not seem to be real time and instead appeared to only update once or twice a day. The transaction took the usual 30 minutes or so to get all 6 confirmation, but you could see the transaction was initiated pretty much instantly. That's why I assumed they pre purchased a certain amount of BTC to have "stocked" in a wallet so when someone does a transaction, it's immediate. It is possible though that they purchase BTC at the time of the transaction and just amp up the fee they pay in order to get their purchase done right away. If they did, that would get passed onto the customer, which would be another part of why the fees are high

[marting]

Originally Posted by The_Animus

There are numerous models of crypto ATMs. I've never owned one so I can't say for sure how they work but I would think they have a few features and settings that the owner can choose.

I don't doubt the machines Martin is familiar with work that way and he is correct that low transaction volume plays a part in the high fees. The information I provide is only based on what I've seen from a few machines around my area. For these, the exchange rate did not seem to be real time and instead appeared to only update once or twice a day. The transaction took the usual 30 minutes or so to get all 6 confirmation, but you could see the transaction was initiated pretty much instantly. That's why I assumed they pre purchased a certain amount of BTC to have "stocked" in a wallet so when someone does a transaction, it's immediate. It is possible though that they purchase BTC at the time of the transaction and just amp up the fee they pay in order to get their purchase done right away. If they did, that would get passed onto the customer, which would be another part of why the fees are high

Might depend on what the BTC ATMs are controlled by. The Bitcoin Well is several hundred ATMs so they likely cache enough BTCs in chunks from an exchange and still feed their machines reasonably frequently. But even with infrequent updating, charging 15% will still average out over time. BTC is volatile, but rarely changes more than a percent or two over a day.

[marting]

Interesting public radio piece on "Wash Trading." Not to be confused with "Wash Sales" which is a way of taking capital losses for tax purposes.

Wash trading is where there is collusion between parties or one party with cutouts to buy and sell at increasing prices to increase apparent volume and price. However, the trades are atcually zero sum with the colluding parties risking little or no actual money. Idea is to create buzz then sell when others jump in buying.

https://www.nprillinois.org/2022-09-...g-crypto-fraud

Quote:

People obsessed with cryptocurrency got some news from a recent headline in Forbes, which said "More Than Half Of All Bitcoin Trades Are Fake." Paddy Hirsch and Wailin Wong from NPR's podcast The Indicator say the culprit may be an age-old practice used to manipulate markets.

This dates back before FTX's collapse. One wonders what SBF was doing with those hundred or so subsidiaries Alameda bought. Perhaps FTT? I haven't seen anything attributing FTX to BTC wash trading.

[a_unique_person]

FTT is still worth something. Who the hell could be buying?

https://coinmarketcap.com/currencies/ftx-token/

[The_Animus]

Originally Posted by marting

Interesting public radio piece on "Wash Trading." Not to be confused with "Wash Sales" which is a way of taking capital losses for tax purposes.

Wash trading is where there is collusion between parties or one party with cutouts to buy and sell at increasing prices to increase apparent volume and price. However, the trades are atcually zero sum with the colluding parties risking little or no actual money. Idea is to create buzz then sell when others jump in buying.

https://www.nprillinois.org/2022-09-...g-crypto-fraud

I didn't know there was a term for this. This is basically what happened with all the NFT stuff too.