What is Bitcoin?
Bitcoin is a digital currency that was created in 2009 by an unknown person using the name Satoshi Nakamoto. Bitcoin was the first and is the most commonly used digital currency, also called a cryptocurrency. One of the key characteristics of Bitcoin, or any cryptocurrency, is that there is no central bank that controls the value of the currency. There are no banks that facilitate transactions. Instead, every transaction is direct – from one person or company to another. Since there are no banks in cryptocurrencies, instead of a bank account, digital currency holders have what are called digital wallets. A public record/ledger, also called a transaction blockchain, is maintained that documents every transaction.
Cryptocurrencies Are Anonymous – for now
While every Bitcoin transaction is documented, identifying information (like names and addresses) is not used, making digital currency popular for illicit transactions, like the sale of drugs or weapons. But Bitcoin increasingly continues to be used for very legitimate purposes and major companies (OkCupid, Whole Foods, Subway, Microsoft) now accept Bitcoin as a form of payment. While Bitcoin isn’t mainstream yet, many believe that it’s on its way there. (As it becomes more mainstream, more regulations will likely be put in place.) After reading this, you may now begin to notice the little orange Bitcoin logo as a method of payment on the checkout pages of many websites.
How Do You Obtain Bitcoins?
First you have to create a Bitcoin wallet and then you can obtain Bitcoin by selling goods or services and being paid in Bitcoin. Otherwise, if you want to convert traditional currency, like dollars, into Bitcoin, you can use a handful of online exchanges. Or, you can literally put cash into an ATM machine that will instantly convert your cash into Bitcoin. They’re called Bitcoin ATMs. Bobby Sharp calls them BTMs. Aside from the easy sound of the new acronym, it comes with some considerable authority as Sharp is co-founder of Coinsource, the largest Bitcoin ATM operator in the U.S. He started it just over two years ago in 2015 with co-founders Sheffield Clark and Travis Gough. Coinsource has 16 employees with offices in Fort Worth, TX and New York City.
Interview with Bobby Sharp
What got you interested in Bitcoin?
Sharp: My partner and I were looking for a space to get into that we thought we could be a disruptor in. We kept reading about cryptocurrencies in general, and my partner used to have a large ATM network… ATMs are a pretty saturated business, so we elected to morph the phenomenon of Bitcoin and ATMs, and we’ve been holding the tiger by the tail ever since.
Why should people care about using Bitcoin?
Sharp: Absolutely people should care. Do you want to be the person that can’t program your VCR in 1980? Regardless of what you believe, fiat currency (government issued) is going away. Fiat currency is expensive to secure, to hold. It’s easily replicable, it could be fraudulent. So, if you’ve noticed, with Apple pay and Droid pay, and even Starbucks, with their card, everything is going away from cash. If you’ve gone to a bank, they push you to the ATM machines to deposit your checks.
Now, is Bitcoin the only digital currency in the future that’s going to be worth something? I don’t believe so. I think it’s going to be more like a commodity, like having a gold bar, or an original Babe Ruth card. I do think that Bitcoin is going to hold its own for the long term, but I also think there will be other digital currencies that will come about – probably specific to a country or maybe [a group] of countries. I don’t know. But I do know that [we’re] going away from cash.
Do you think Bitcoin, or other cryptocurrencies, is the future of commerce?
Sharp: Absolutely. I think it was only a year and a half ago that the total market cap for Bitcoin and others like Etherium, Zcash, Dash and Litecoin was $14 billion. And now the market cap has topped $400 billion. So that’s a pretty significant increase and I believe that in the following year that’s going to even double for a potentially $800 billion market cap. That’s pretty impressive.
Are there other major cryptocurrencies that you might consider dispensing from your ATM machines?
Sharp: We’d love to onboard some other currencies, [but] there are a lot of backend and compliance mechanisms that are necessary to do that. Not to mention the liquidity of owning that to be able to sell it. So there are some hurdles, but they’re not too hard to overcome. Right now, our focus is making sure that people are just aware of Bitcoin and how to utilize it. And, importantly, how to utilize our ATMs for it.
New York City has the most Coinsource ATMs than any other city in the U.S. – 30 of the your roughly 130 Bitcoin ATMs country-wide. Why are there so many in NYC?
Sharp: A lot of it is because of the sheer volume of people in the city, but also because there are a lot of people that have family in other countries that can utilize this commodity to send money to relatives like an email. As opposed to having to go through the traditional method of going to a Western Union and paying some obnoxious fee.
Do a large percentage of Coinsource ATM customers use the machines to deposit cash to send money to family overseas?
Sharp: It’s a larger percentage [than in other cities]. What I love about [Bitcoin], and what’s fascinating, is the spectrum of people that are learning about finance in general through [using Bitcoin]. Instead of having that coffee can in your house with a few hundred dollars, a lot people have converted that into Bitcoin and have made [money] because the value of Bitcoin has increased significantly.
Did I read correctly that 1 bitcoin = $2,100?
Sharp: You probably read that a few weeks ago. It’s a little over $3,000 for one bit coin right now.
So can you buy fractions of a Bitcoin?
Sharp: Certainly. And that’s one of the reasons that people use Coinsource ATMs – because you could buy a dollar worth of Bitcoin if you want. Whatever you’re comfortable with. You don’t have to buy an entire Bitcoin.
How are you similar to and different from a bank?
Sharp: So a bank is a middleman. The government says what our money is worth and we go to a bank and store it and pay whatever it is to store it. The difference between us and a bank is there’s no middleman. You are your own bank…You could buy a boat and if the guy on the other side has his own bitcoin wallet, you could literally say “will you sell your boat for three Bitcoin?” And if he says, “absolutely,” [then] you could do that entire transaction without having to go to a bank and get a cashier’s check and say what it’s for.
So how do you make money?
Sharp: Through the transaction fee of converting the cash to Bitcoin. When you convert money – cash in general – to a commodity like Bitcoin, there’s a ton of compliance [issues and policies to comply with]. The barrier to entry in this business is very high. So, we make money through that initial fee when we convert the cash to digital currency.
Where are your Coinsource BTMs located?
Sharp: They’re in stores or bodegas that have cameras and are well lit. Places where people feel comfortable bringing cash to. It’s very important to us not to just put it out there on the sidewalk…So, [it’s] imperative that we find great locations.
Who uses Bitcoin?
Sharp: Some parents buy Bitcoin because their kids are able to buy different characters through Microsoft games on play station – and [sometimes] the only way you can buy upgrades is with Bitcoin. Some people like to day trade [with Bitcoin]. One of our busiest machines is the one off Wall Street. And that’s a bunch of Wall Streeters that come out and diversify.
If I’m an early stage startup founder, should I consider accepting Bitcoin? And Why?
Sharp: Yes, you should because merchant services on average are anywhere from two to four percent…If you took in Bitcoin, your merchant services will be way less that one percent. So, as far as profit to your bottom line, instead of paying a few hundred thousand dollars to a merchant services company, that could be money potentially to your bottom line by just accepting digital currency from your customers.
By Todd Stone