Bitcoin ATM planned for Bardon

April 1, 2014

kobblers_scott_duncan_bitcoin_atm

A Bitcoin ATM will soon be installed at Scott Duncan’s Bardon cafe

Bardon cafe Kobblers is preparing to host one of the country’s first Bitcoin ATMs.

Scott Duncan, owner of the Brisbane cafe, currently accepts cryptocurrencies as alternative payment. Customers can pay for coffee, food, clothes and artwork via Duncan’s Bitcoin QR code, which allows them to transfer Bitcoin directly to his web-wallet.

But in coming months the cafè will get it’s own Bitcoin ATM.

Software developer Paul O’Keeffe and his associate Greg Davis bought the ATM fromLamassu, which makes and distributes the machines worldwide.

Currently, there are three other machines either installed or on order for Australia; one in Perth, one in Sydney, and one more in Brisbane.

“When the ATMs hit the street, I think there’ll be a bigger demand for Bitcoin,” said Duncan, who reckons Brisbane is likely to see more of the machines in the near future.

Bitcoin ATMs work differently to their regular counterparts in that no banks are involved and transactions occur almost-instantaneously between a customer’s “web wallet”, their Bitcoin account.

Bitcoin transactions are publicly listed under “block chains”, a sort of online ledger, but accounts are listed under pseudonyms and are privately-accessible.

According to O’Keeffe, this system is in place to ensure transparency and encourage regulation, as Bitcoin “miners” work to ensure the legitimacy of transactions in exchange for transaction fees and new Bitcoins.

“That ledger sits on lots of computers over the world; as transactions are made, they’re sent to these computers holding this chain,” O’Keeffe says. “These people are regulating [and] confirming transactions.

“They’re given an incentive to follow the rules,” he says. “A reward of BTC25 is given to the first person who confirms a transaction in a block, and they also get a small amount of the transaction fee.”

This reward creates completely “new” Bitcoins, as not all Bitcoins were released when the system started in 2009, and as more of the cryptocurrency is released this reward diminishes.  Bitcoin trading site Blockchain estimates there are currently just over 12 million Bitcoins.

O’Keeffe says that this system is designed to reduce the risk of inflation.

“The fixed fee started at 50, now is 25, and is set up to gradually decline until we get to zero,” O’Keeffe says. “It’s the way they’re slowly bringing new Bitcoins into existence; it’s worked out that eventually there’ll be 21 million Bitcoins.”

While some Bitcoin ATMs enable deposits and withdrawals, the machine to be installed at Kobblers will only allow cash deposits.

“There are devices that go in both directions but we’re bringing this in to encourage the adoption of Bitcoin,” says O’Keeffe. “We’re wanting to provide a way for people to easily obtain Bitcoin.”

The machine will exchange cash for Bitcoin based on the daily rate, tracked via Blockchain. O’Keeffe and his partners will take some of the exchange rate to cover administration costs.

The investment by O’Keeffe and Davis coincides with both an overall growth in Bitcoin, currently valued at US$6.9 billion, and a crash in the world’s previously largest, currently bankrupt Bitcoin trading site, Mt Gox.

In February, the Tokyo-based Mt Gox halted withdrawals amidst fears of cyberattacks and later announced that, after a loss of its customers’ Bitcoins valued at $480 million USD, it would file for bankrupcy.

O’Keeffe and Davis bought the Bitcoin ATM for BTC5,000 from Lamassu, although O’Keeffe says it was a risky for them because they didn’t know the vendor.

While they are enthusiastic about the cryptocurrency, O’Keeffe is cautious about security risks.

“There are Bitcoin exchanges in place at the moment that are in some ways not as solid as the systems in our normal economy,” he says. “When you make a trade you have to give your Bitcoin or dollar currency to the exchange; they make the trade, then give you back the equivalent.

“But at all times you’ve got what’s called counter-party risk. Which means the exchange is holding the money and could run off with it.

“Mt Gox is an example of a really amateur attempt at doing this stuff; all this news coming out that they have their private keys stored in their source code, they’ve got other things that are wrong on a technical level, they don’t manage change of their software very well”.

Still, both O’Keeffe and Duncan are excited at the possibilities Bitcoin and other crytocurrenies, such as the free Auroacoin, soon to be released in Iceland.

“The whole world is, essentially, likely to go this way I think,” O’Keeffe says. “That’s my prediction but it’ll be a really rocky road for the next couple of years, while this all gets sorted out.”

Duncan thinks it’s a bit like the wild west but hopes cryptocurrencies get the the chance to develop.

While O’Keeffe is yet to receive a confirmed arrival date for the ATM, he expects to, “get it in a month or so” from late February.

This story was originally published at The Tech Street Journal.

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