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When the world’s first Bitcoin ATM went live in a Vancouver coffee shop last fall, it created a global media buzz and racked up over $100,000 of transactions in eight days. Still, I thought, what a dumb idea.

While intrigued by Bitcoin, I didn’t see the point of putting an ATM in a place like Canada, which has a stable banking system and where you can easily obtain the crypto-currency by other, cheaper means. In a few months, I predicted, the bitcoin ATM would end up forgotten in a corner of the coffee shop like a cobweb-covered Frogger game.

But I also resolved to go see firsthand how the ATM was doing once the initial hype had died down. In late December, that’s what I did.

The Bitcoin ATM, 3 months later

At 7:30 on a dark and dreary Friday morning, I installed myself at Waves, a nondescript coffee shop in Vancouver’s business district where the bitcoin ATM has sat since late October. I didn’t tell the ATM owners I was coming.

Sure enough, the ATM, was sitting by the front door. The machine, which looks like an oversized arcade game, is manufactured by Nevada-based Robocoin and is owned by local investors who pay the coffee shop to park it there. Customers can exchange Canadian cash for bitcoins (and vice versa), paying a five percent commission for doing so. Those withdrawing bitcoins can receive the digital currency via a QR code to their smartphone wallets or else obtain a temporary paper “wallet” printed by the machine:

In the first hour, no one came to use the machine and the coffee shop was basically deserted — this was hardly a surprise as I had come on one of the slowest business days of the year when the usual downtown crowd of stock brokers and lawyers were not around. Soon, however, people starting coming to visit the machine, one every 20 minutes or so. Some just gawked at it but others put money into it.

Also, at around 9 o’clock, a young woman sat down at a table beside the ATM and offered to answer questions and help anyone with the machine. At one point, I overheard her explain that Bitcoiniacs (the ATM owners) had decided it made sense to pay someone to staff the machine. She talked to dozens of people over the course of the day. Some were newbies and others were veterans of the ATM veterans; a few were just drug-addled cranks demanding an explanation of Bitcoin.

ATM keeps humming

The Vancouver bitcoin ATM opened for business on October 30 and, 29 days later, its operators claimed the machine had processed $1 million (about $920,000 USD) over the course of 1,500 transactions. At the time, I had my doubts. Given the air of evangelicalism that surrounds so many things Bitcoin, it seemed possible that the ATM operators were puffing up the numbers.

I still don’t know if the $1 million figure is accurate, but I can say that, on December 27, people plunked thousands and thousands of dollars into the ATM. I know this because the ATM screen, which I could see from my table, shows how much money someone has inserted for any given session. I also discovered that serious bitcoin buyers pull up a chair:

I saw several people put in C$3,000, which is the most the ATM will accept at a time (it’s also reportedly the maximum daily amount permitted by Canadian financial services regulations). I asked one fellow why he had just bought three grand of bitcoins, and he simply said he wanted to invest some money he had made up north.

Nearly every ATM user was male, and most were under 40. But some were a lot older, including this guy who had brought along his teenage daughter, who told him “Dad, don’t invest all your money in bitcoins.”

While few of the ATM’s dozens of customers that day bought or sold anything close to $3,000, most of the transactions were between $100 and $1,000. This was apparently pretty typical, according to Bitcoiniac representative Alex Robertson, who took over table duties in the late afternoon.

Robertson told me the ATM attractes around 50 customers on a busy day, and as many as 100 when during price spikes like the one in early December, when bitcoins sold for US$1,200.

This volume is part of the reason the ATM operators are planning to open their own exchange to carry out the machine’s back-end transactions. Right now, the ATM operators rely on Bitstamp, a Slovenia-based exchange to handle the swaps between $CDN and bitcoin — a process that can lead to long transaction times.

In my case, after I bought $20 worth of bitcoin to test the machine, I had to wait over an hour for the digital swag to be delivered to the address printed on the paper wallet that the ATM spat out. (Disclosure, I now own 1.02 bitcoins which are stored in a Coinbase wallet; I bought a single bitcoin in June for an earlier assignment).

As for the ATM, it has a quick, intuitive interface and worked just fine.

Time to buy your own Bitcoin ATM?

The Vancouver ATM owners say will plan to install more Robocoin ATMs, which sell for around $20,000 a pop, in other Canadian coffee shops — possibly in Toronto and Calgary — sometime this month. The expansion plans have been cooking for a while, but it sounds like it might actually happen this time.

All of this raises the original question of whether Bitcoin ATMs make sense in the first place. Leaving aside the question of whether Bitcoin itself makes sense, the apparent success of the Vancouver ATM suggests it’s a good business bet — maybe.

While a five percent commission sounds like a quick way to make money, ATM operators must also pay a cut cafe owners to park the machine and, presumably, to Robocoin for use of the software. There is also the ongoing specter of regulatory trouble.

In the case of the Vancouver ATM, the machine comes with a biometric handprint system to ensure the same person doesn’t make multiple visits to the machine and violate the $3,000 daily limit set by Canadian law. When I visited, however, the system was disabled; it’s unclear if financial authorities knew or cared. (To be fair, I didn’t see anyone use the machine twice and, in any case, I’m not sure why the government should require biometrics in the first place — after all, you can visit regular currency exchanges all day long without providing ID).

In any case, if Bitcoin does prove to be a permanent fixture — and many smart investors say it will — that doesn’t mean Bitcoin ATMs will also be permanent. I still believe that online exchanges are a cheaper, more logical way to obtain an online currency but, for now, the booming business at Waves coffee shop shows that a lot of people disagree.

Another test for bitcoin ATM’s is the same as for bitcoin itself: will people ever start spending it? While companies like Coinbase, Bitpay and Gyft are racing to create incentives to encourage shopping with bitcoins, most people are just hoarding them instead. Call it a chicken-or-egg problem if you want, but until there’s an easy way to spend bitcoin, there’s no real need for a bitcoin ATM.