It's on the cutting edge of the already-cutting-edge world of Bitcoin entrepreneurship: the first Bitcoin ATMs in the U.S. Kyle Powers (pictured, left), and Chris Yim (right), co-founders of the startup Liberty Teller, launched the first of what they anticipate will be many such machines, in Boston's South Station in February 2014. Their second ATM's ribbon cutting was on March 17, 2014, at the Clover eatery in Harvard Square. The ambitious duo first met as students at the Wharton School of the University of Pennsylvania; the company name and cracked-bell logo are a nod to the partners' Philadelphia ties.
How does the Liberty Teller ATM work? Customers can create a "Bitcoin wallet" - a virtual wallet for carrying Bitcoin - to use the ATM. They can also use a "'paper wallet," which is a hard copy version of the information needed to execute a transaction. Either type of wallet will have a QR code. You scan the code into the ATM, insert cash, and within 30 seconds, your Bitcoin gets deposited directly into your digital wallet. Enjoy the magic. Don't wait for Bitcoin to come rollling out of the slot; that's not how it works.
Investopedia interviewed Powers about this daring venture.
Q: Tell us a bit about how this Bitcoin ATM came about. What is Liberty Teller's origin story?
In mid-2013, Chris [Yim] texted me that he was going to a secluded area of Philadelphia to sell Bitcoin for cash to a stranger. I texted him back, “It’s a trap!” Then I thought about it for a bit and how exciting it’d be, so I offered to be his “muscle.” The other Bitcoiner turned out to be a really kind person, but the transaction was way more slow, awkward, expensive, and potentially dangerous than it needed to be. Fast forward to today and we’re are offering a safe, simple, instant, and cheap way to get Bitcoin through Liberty Teller.
Q: What are the most common public misconceptions about Bitcoin?
- "You need to buy a whole Bitcoin": You can buy as little as $1 worth with at our machine; the dollar is the limiting factor for divisibility, not Bitcoin.
- "Mt Gox (or other disastrous news) = Bitcoin": One company does not equal an entire currency (or whatever Bitcoin is classified as).
- "We’ve seen most of what Bitcoin has to offer": Bitcoin today is like the internet in the early 90s; there is a massive wave of new companies and use cases that are coming.
- "Bitcoin can be shut down": Companies can be shut down, but Bitcoin can only be shut down by shutting down the internet, which is not going to happen.
- "Bitcoin is used for illicit activities more than cash is": Bitcoin is more trackable and less anonymous than cash, so criminals prefer cash and investigators prefer Bitcoin.
Q: Does a Bitcoin ATM dispense those physical yellow Bitcoins we’ve seen in the media?
Haha, that would be a lot of fun, but then Bitcoin would be just like analog, fiat currency. By not having physical weight, Bitcoin transactions can be instant, essentially free, and divisible into 100 million pieces per Bitcoin. That’s what’s so cool about Bitcoin.
However, for people who don’t already have digital wallets on their phones, we do offer Liberty Teller paper wallets to get them started. Those paper wallets have two pieces: an address and a private key. The address is for receiving Bitcoin, and the private key is for importing the Bitcoin on the paper wallet to a digital wallet, so they can then go send or spend that Bitcoin. Some people like getting paper for paper.
Q: Explain the money trail: Where does the money come from; is it like a bank? If so, where does the bank get the Bitcoin from?
A limited amount of Bitcoin will be released into circulation at a precise and predetermined rate. That Bitcoin is released every 10 minutes to “miners” to reward them for auditing and maintaining the blockchain, which is a permanent, distributed, and public ledger of every transaction that has ever happened. Miners also get very small fees for clearing each transaction, and these small fees will continue after new Bitcoin stops getting released. Miners are much cheaper and faster than our current methods of clearing transactions.
Bitcoin that is released into circulation then has value because it is useful and scarce. Bitcoin is useful in that it makes transactions instant, essentially free, and is accepted by a significant and rapidly growing global community. It’s a lot like oil in that way. Oil is useful in that it provides energy, and there is a limited amount, so it has value.
Q: What do you think the future of Bitcoin is, given the Mt. Gox scandal and other setbacks?
The Mt. Gox scandal was unfortunate, and in the short-term, some may conflate Mt. Gox with Bitcoin. However, just as [the now-defunct derivatives broker] MF Global went bankrupt [in 2011] and the dollar was fine, Mt. Gox went bankrupt and Bitcoin recovered within days (and without a bailout). Bitcoin has been through more than its fair share of negative news cycles, but the number of transactions has always continued its exponential growth.
The real impact may be that consumers increasingly value solutions that offer instant settlement, and where they hold their private keys. That removes the counterparty risk. That’s what Liberty Teller offers.
Q: Is Dorian the real Satoshi Nakamoto [as claimed in the controversial March 2014 Newsweek cover story]?
Haven’t spent much time thinking about it. It’s entertaining, but largely irrelevant. Most people that use the internet don’t know or care about who Tim Berners-Lee is (he’s the “Satoshi” of the internet).
Q: Why do we need a digital currency, other than the lower transaction fees?
Just like the early days of the internet, we don’t need it today, but a decade or so from now, it we may feel like we do. It’s not just lower fees (which alone is a great reason for Bitcoin to exist); it’s speed and functionality.
Lower fees are important because they make us all pay less for everything. You and I may one day save a few percent on everyday purchases, but more importantly, the world’s unbanked billions may finally have access to financial services.
For speed, think of the last time you had to send money quickly. If you did a free ACH [Automated Clearing House, as in a direct debit], it probably took almost a week before the receiving party could withdraw the funds. If you did a wire, it took an entire day and cost $20-$50. It gets much worse if you send large amounts of money, or if you send money internationally. That’s just not how transactions should work in the Internet Age. Bitcoin is instant, no matter the transaction size.
Finally, for functionality, we’ve barely scratched the surface. Entire new industries are being created right now that use microtransactions, smart contracts, the Bitcoin protocol to transfer assets other than money, or any number of other new capabilities. When the internet was in its early stages like Bitcoin is now, we didn’t have sites like Google (Nasdaq:GOOG), Facebook (Nasdaq:FB), or Wikipedia (or Investopedia!). Right now there is a small army of entrepreneurs and investors that are vying to create those companies for Bitcoin.