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The blockchain is public, yet a Bitcoin wallet can be created anonymously. So are Bitcoin transactions anonymous? Not at all…

Each transaction into and out of a wallet is a bread crumb. Following the trail is trivial. Every day, an army of armchair sleuths help the FBI. That’s how Silk Road was brought down.

The problem is that some of that money eventually interacts with the real world (a dentist is paid, a package shipped or a candy is purchased at a gas station). Even if the real-world transaction is 4 hops before or after hitting the “anonymous” wallet, it creates a forensic focal point. Next comes a tax man, an ex-spouse or a goon.

The first article linked below addresses the state of tumblers (aka “mixers”). They anonymize an open network by obfuscating the trail of bread crumbs.

Mixers/tumblers aren’t the only way to add a layer of privacy to Bitcoin transactions. The Lightning Network spec includes an optional 17-hop onion routing (just like TOR’s 4 step onion routing). I have not yet seen the feature expressed in wallets or services, but if implemented, it will be even more private and trustworthy than a mixer, because there is no middle party to trust (by you) or squeeze (by investigators). It has the potential to makes any crypto Bitcoin even more anonymous than cash.

Certain cryptocurrencies (not Bitcoin) have anonymity baked in by design. Monero, ZCash and Dash are privacy tokens that use very different approaches to eliminate the bread crumbs. Monero appears to have one distinct advantage: Like the TOR network, it is trustless. But there are benefits to each approach.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

Owning one full bitcoin is becoming a recognized attainment goal. And thereby hangs a tale.

Is it just a numbers game? Isn’t the unit a bit arbitrary and meaningless?…

The logistics and the math are compelling. I recognized the importance of reaching this personal milestone more than 8 years ago. But I was a nobody. No one cared. Then, in April 2019, we started to see articles in legitimate venues about this concept—and articulated in exactly this way. I borrowed the title of this post from this article in Medium.

Who Says So?

In the Before Time, the drum beat came from me, Charlie Shrem and Andreas Antonopoulos. In the Middle Age, Tim Draper, Craig Wright and the Winklevoss twins contributed to the siren call. But in the Modern Era (the past few days), it has become a mainstream mantra. Coinbase CEO, Brian Armstrong, added his voice to the idea that owning one full Bitcoin is not just an exercise in numerology.

“For better or worse, I do think owning one whole Bitcoin will increasingly become a big deal. Only 21M will ever be produced. Some people already own much more than one.”

—Brian Armstrong, Aug 25 2019

“If you own 1 BTC, you are mathematically guaranteed to be top 3/1000 richest in the world, in BTC terms. (21m / 7B).”

—Changpeng Zhao, Aug 25 2019

“If you own 0.28 BTC and HODL, you can be certain no more than 1% of the current world’s population can EVER own more BTC than you. A modest investment of $1,830 today can ensure you are a 1%er in a future Bitcoin world.”

—Steve Lee, Aug 25

In a March editorial, Xapo CEO, Wences Casares advised investment fund managers: “Most portfolios should allocate up to 1% to Bitcoin”. He also said:

“If Bitcoin succeeds, 1 Bitcoin may be worth more than $1 million in 7 to 10 years.”

— Wences Casares, CEO of Xapo; PayPal Board of Directors

Despite getting religion early on, I have mixed feelings about this. The investor mindset— HODL, flipping and converting to Fiat—is the biggest threat to adoption, ubiquity, fluidity and utility. Currently, 98% of all transactions are driven by people buying or selling bitcoin, rather than using bitcoin to buy lettuce, a new SUV or a family vacation. That’s the problem. Bitcoin will fail to gain mainstream appeal and adoption until the fraction of transactions driven by purchase & sale, salary, debt payment, real-estate and buying groceries dwarfs the fraction driven by traders or conversion into and from Fiat.

Yet, it is impossible to resist the lure of a deflationary commodity during the early adoption era. The supply cap and adoption math clearly points to a rising unit value. What is the point in having the capacity and foresight to recognize a new technology or a radically transformative paradigm if you cannot treat it as an investment asset, while waiting for adoption?

I don’t know how we will push through the chicken-and-egg problem of volatility–utility–adoption–ubiquity. But I am confident that Bitcoin will ultimately reign supreme—not just as a payment instrument—but as a store of value and a leading international currency.

For now, this opinion is still in the minority. Otherwise a commodity with only 18 million units in circulation would have a far higher value than the current exchange rate. It is from this certainty and disparity that opportunity arises.

For those that don’t quite get Bitcoin, owning one full bitcoin seems like an arbitrary goal to achieve. After all, it is a useless token that can be imitated by other—better—cryptos. To these folks, Bitcoin is a fad, a fools gold, or an outright scam.

Do you own a whole Bitcoin? Few will own more than a fraction

What they don’t get is the legitimate, organic, two-sided network that buttresses bitcoin and no other currency. A new-age intrinsic value that surpasses the utility & scarcity of gold, but with benefits that outstrip gold and fiat. The inherent value and the pillars that support value are unlikely to be eroded or transferred, even during periods of technical crisis, hacking or regulatory hysteria.

If something better than Bitcoin comes along, two things will happen to ensure supremacy:

  • Improvements will be folded into Bitcoin. After all, a trusted crypto is open source, transparent and license free. The leader can snag any feature or improvement.
  • If another chit is more fluid, flexible, friction free or private, Bitcoin will remain the background reserve through which other “instruments” derive value. This is already occurring.

So, should you buy into the hype? Should you accumulate one full bitcoin while you still can? At the risk of obnoxious immodesty, here is one more quote. Add it to the list at the top of this article. Then, decide for yourself!

“The handwriting is on the wall. Popular adoption is a work in progress. But it is, nevertheless, fait accompli. This handwriting is indelible.”

—Phil Raymond, Lifeboat.com

Related:

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

Today, I was co-host of an online cryptocurrency symposium—taking questions from hundreds of visitors. A common question goes something like this:

Can Bitcoin be used in person—or
is it just for internet commerce?

Our panel had a moderator, and also an off-screen video director. As I cleared my throat in preparation to offer a response, a voice in my ear reminded me that it was not my turn. The director explained that another panelist would reply. It was a highly regarded analyst and educator in Australia. Realizing that that she was calling the shots, I deferred.

I was shocked as I listened to a far off colleague suggest that Bitcoin is not useful for in-person payments. I wonder how he explains this to the grocers, tailors, lawyers, theme parks and thousands of retailers who save millions of dollars each year by accepting bitcoin—all without risk of volatility and even if they demand to instantly convert sales revenue into Fiat currency.*

“Of course it can be used in person, Numb-nut!” (I kept the thought to myself. I know better than to criticize another speaker).

An in-person transaction, such as paying for a meal after consumption, is an ideal use scenario. It benefits everyone: The seller captures greater value and the buyer is unlikely to need bank-brokered arbitration. He only needs a receipt. He will never demand a 90-day return warranty, claim that he was shipped an empty box, nor complain about the amount charged.†

But, this isn’t about my clueless colleague. It is about the ease of using Bitcoin in person and the interesting stuff that happens in the background. Let’s look at a simple purchase scenario — and then we’ll dig in to marvel at the settlement process. This is a true story, told in 7 bullets. It occurred in the summer of 2015—just 5 years after the very first use of bitcoin to purchase anything (Bitcoin Pizza Day was May 22, 2010).

  • It’s 2 AM on a moonlit Sunday morning. Driving from Boston to New York I rehearse the Bitcoin presentation that I will deliver at a startup clinic hosted by LaGuardia Community College and the Cryptocurrency Standards Association. I pull off the last exit in Connecticut and find the Darien Diner. My meal costs $12.
  • As I take one last bite of midnight quiche, I realize that I forgot my wallet! No cash; no driver’s license. I have a smartphone, but it is brand new. I have not yet loaded it with credit cards. But, I do have access to my account passwords.
  • I scope my surroundings. My waiter is the only one on the main floor. He is also the cashier. Seeing no other customers or staff, I figure that the owner or cook is in the kitchen; probably the only other person on premises. I approach the cash register, hoping that the waiter will accept my apology—and trust that I will pay on my return trip in a few days. Before I launch into my poor-man’s excuse, I spot the placard shown at right. Bitcoin is among the diner’s accepted payment methods!
  • I ask the cashier how I can pay with Bitcoin. His response catches me off-guard: “I have no idea…They told me that you would know.” What?! Does this guy recognize me? Does he know that I am on my way to give a Bitcoin lecture? This seems very unlikely. Gradually, I understand what he means, and I know what to do…
  • I point my smartphone at the QR code (It’s taped to the cash register next to the words: “We accept Bitcoin”). In fact, this restaurant is fully on board. I am amazed to see that a display on the register offers a custom code that is encoded with the exact meal cost. That’s really cool! So, I shift my camera to that code.
  • Immediately, my wallet asks if I would like to add a tip. (It’s hosted by an online exchange, but an application wallet will also work). I add $3 and press SEND.
  • A thermal printer next to the till spits out a narrow receipt. At the very bottom, where it would typically say “Paid with MasterCard ending in −3862”, it says “Paid with Bitcoin”. The buzzing sound of that receipt printer tells the cashier that I am good to go. Good food in the tummy and a bill has been paid. Case closed; Return to car; Drive to New York.

What Really Happened?

In the few seconds between the authorization and the printed receipt, some fascinating things occurred around the world. Seriously Fascinating! This is almost magic — and it is transforming the way payments work, and—eventually—the way we view, understand and manage cash. ‡

  • When I clicked SEND, a limited subset of Bitcoin credentials was presented to a massively distributed, worldwide network of miners. In effect, I informed the bookkeepers that I wish to have $15 transferred to the restaurant’s public address.
  • Seconds later, the original credentials were voided (this solves the ‘double spend problem’) and a new transaction was added to public ledger that we call the blockchain. It now reflects my slightly reduced wealth.

But wait! It gets even more fascinating…

The “miners” that settled the transaction and provided new Bitcoin credentials needn’t have any awareness that they just facilitated payment for a meal at a diner in Darien Connecticut. From their perspective, these individuals and large server farms in Iceland, China, Israel, and South Africa — and in college dorms spread across the world — are engaged in a massively distributed gaming competition. They are competing for rewards based on solving a math problem.

As you review that last paragraph, imagine the elegance of the global network. Imagine the power, robust nature, and benefit that comes from it’s redundant and decentralized architecture. Imagine the ongoing incentive for bookkeepers to play a critical role in balancing a world-wide ledger. Imagine that authorities cannot shut down the network or even slow it down. Imagine the trust that individuals, businesses, NGOs, banks and governments can put in the monetary supply and the mechanisms of accounting. Imagine a world where this trust benefits everyone uniformly, fairly, and without susceptibility to graft or inflation.

Bitcoin and the blockchain, introduced together, are not minor, incremental contributions to economics, bookkeeping, trust, and commerce. They are overwhelmingly significant contributions to the future of human society and its institutions.

† You may have heard that bitcoin transactions are immutable. This is a simplification. The public ledger is immutable, but transactions are reversible, if terms are clear to both parties. Just as with Ethereum, smart contracts are built into the technology. So are hooks to centralized mediation, if that’s what the agreement calls for. Charge-backs, refunds, warranty demands and other arbitration are all possible. These features are built into Bitcoin, but rarely used in this early era.

Most Bitcoin transactions today are payments; they are not charges. Although they do not typically accommodate bank-brokered returns, rescission and charge-backs, these are all possible, and often without requiring an authority to broker the dispute.But these traditional safeties or mitigation must be agreed upon in advance. No longer does the seller have all the power, or the buyer need to run to a credit card processor to complain. Sales are either immutable or brokered by a 2-party contract.

This is not your grand-daddy’s payment mechanism. It is so much more evolved!

‡ In 2017, Bitcoin went through a period of intense growing pain. Transactions became so slow and costly, that in person transactions became impossible, especially for any amount less than $500. If you needed a transaction to complete in less than an hour, you would need to enlist in a bidding contest. A quick confirmation could cost upwards of $30 US.

The restaurant payment related above was an on-chain transaction. Today, transactions that use the Lightning Network overlay may occur within a private channel apart from the blockchain. But ultimately, every change in bitcoin ownership results in an individual or aggregated entry onto the blockchain.

Crisis in late 2017 and 2018

Sadly, in researching this article, I learned that the Darien Diner no longer accepts Bitcoin. Problems associated with transaction cost and delays in 2017~2018 discouraged acceptance by a great many retailers. No one eating a $12 meal would ever pay $30 in fees, and a cashier is not going to wait 2 hours to validate payment from a customer who has already eaten a meal and wants to hit the road.

That glitch sparked a terrible reversal of retail adoption. Even now (Q3 of 2019), retail penetration is sharply off its peak. We are barely beginning to recover the early adoption rate. Vendors lost faith, and many don’t yet realize that their POS investment can now be safely be reactivated. Lightning Network to the rescue!

he Next Crisis

Another crisis is looming, but it too will be solved.

Although the Bitcoin network is fast and inexpensive, the proof-of-work method used by miners to arrive at a distributed consensus consumes far too much power to scale. Mass adoption would consume more power than the world currently generates.

And here’s the kicker: The mining incentive ensures that any new, inexpensive energy that might be discovered in the future would be gobbled up by miners with no additional benefits to society (or even to the Bitcoin network). All the new, free (or cheap) power would be diverted away from homes, businesses, manufacturing and public works. The incentive for grabbing every cheap watt is very much like a cancerous growth.

Clearly, this is not sustainable. Bitcoin mining already uses more power than all of Argentina. But great minds are working on the problem and alternative methods of guaranteeing a fair, crowd-sourced accounting consensus are being tested, analyzed and debated. We will get through this complex problem, and hopefully—this time—without demoralizing a key factor in the tetrad: Consumers, developers, vendors & miners.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

This afternoon, an automated bot at Quora suggested that I answer a reader question. Quora is essentially an “Ask the expert” web site. It is the world’s largest, cataloged and indexed Q&A repository.

This is the question I was asked to answer:

Some pundits believe Bitcoin is a fad, while others seem to feel that it is better than sliced bread. I like sliced bread.* Is Bitcoin really that cool? —Or is it just a lot of Geeky hype?

One other columnist answered before me. Normally, I pass on an invitation, if a question has already been answered. But in this case, the individual answering the question has yet to see the light. He has wandered into the Church of the Blockchain, but he just didn’t realize that the man sweeping the floor is the prophet.

Here then is my answer, regarding Bitcoin, the blockchain and sliced bread…

I respectfully disagree with Jim Euclid. He answered this question too. Perhaps it is arrogant of me to state with confidence that he will change his mind, if he is still around in another 30 or 40 years. So will everyone reading this.

Bitcoin and the blockchain were introduced together in a white paper by a quasi-anonymous developer in October 2008. He or they used a pseudonym, but communicated with a broad group of developers before and after unveiling the solution to an age old problem of math, logistics and cryptography.

Just over 1 year later, Bitcoin began moving between individual owners. And then it began to re-write the history of economics, bookkeeping, consensus, trust and the very democracy that is so precious to us. It is changing what we understand about so many things. But its true contributions have barely even begun.

Bitcoin is as ‘cool’ an invention as there can be. Like the steam engine, vacuum tube, automobile, television and the internet, it is radically transformative. Each of these inventions has (or will) contribute enormously to human progress and happiness.

The problem that Satoshi solved goes back to Aristotle and has profound social implications for the future of humanity. There is no poetic license or potential for overstating the importance of both Bitcoin and the blockchain. It will impact your life—probably in very positive ways—with a punch that matches the rise of agriculture, indoor plumbing or airline travel.

Sorry, Jim. I respect your opinion, but I see the future a bit more clearly than you. The internet is a vehicle. It is certainly important. But it is only the highway. Bitcoin is the marvel that the internet’s instant, inexpensive and ubiquitous communication was meant to spawn.

I have always felt pride over the fact that I was alive when man first landed on the moon. I was a child and I had nothing to do with that achievement—but somehow, I am gratified that this event intersected with my life.

Unlike the moon landing, Bitcoin has no Jules Verne or cave paintings from past generations yearning to conquer something that is tangible. We have only Aristotle’s insight that money was not yet perfect—and his recognition that issues of democracy and governance seem to have insurmountable impediments. But the problems that Bitcoin and the blockchain address are just as real as the moon overhead. And the solutions they will spawn are even more relevant to our civilization.

I have even more pride that I have witnessed the birth of decentralized, permissionless, distributed consensus—and specifically Bitcoin. It will impact my health, wealth and happiness even more than everything that NASA and space technology have spawned.

Am I smug that I recognized the importance of Bitcoin and the blockchain just 4 months after its unveiling? You bet I am! And even if Jim doesn’t recognize it yet, someday I will rub this fact in his face.

(Kidding…but it is personally comforting to be on the right side of history!)

* Note: In America, the expression “sliced bread” refers to something that is really clever, desirable and coveted. It is often paired with the word “since” like this: That new iPhone is the best thing since sliced bread.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

Here is another economics/policy question that I was asked to address at Quora. It provides great fodder for a quick Lifeboat economics review.

The US used quantitative easing to deal with one monetary crisis, and a bailout of the automotive and banking industry to deal with another. If nations, economies or individuals begin to embrace a decentralized currency, they will inevitably shift away from government issued money. Won’t this hinder a nation’s ability to intervene in a crisis?

Answering this question goes to the very heart of the ethics and politics of cryptocurrency.

Yes. Without centralized control over monetary policy, government options for intervention in a money crisis would be severely limited. But this fact may lead to a false impression…

First, most money crises begin with government, and so there are likely to be far fewer monetary emergencies.

Here’s how the options would be limited:

  • Governments would have fewer ways to manipulate a public resource. They will still have the ability to budget, tax, borrow, build infrastructure and even wage war. But…
  • Governments could no longer amass debts that outstrip their ability to be accountable. That’s because they can no longer covertly tax via rampant printing of money.
  • They could not “raise the debt ceiling” without demonstrating fiscal responsibility, because they no longer control what everyone uses as money.
  • Government spending (and intervention, such as quantitative easing) would have to be balanced by revenue. Borrowing would be limited to creditors who truly believe in their will and ability to repay debt.

All of these “limitations” are good things—even for the governments and banks involved. It only seems limiting, because our understanding of what is money is tainted by millennia of authoritarian systems.

A capped, open source, transparent, traceable, immutable, decentralized, distributed and permissionless money supply is both fair and more robust than Fiat paper, promises or credit.

Let’s explore that last bullet, above. The point is subtle—yet, it is the key to answering your question…

Every individual, household, business, state and NGO must balance its books. If one cannot cover bills, they must find a creditor who believes in their ability to get back to fiscal health. Even nations are eventually forced to balance their books or seek a bail-out from neighbors.

But, this is not the case for the United States. We have had an ability whitewash our largess and declining industrial productivity by printing more money. How has this been possible while retaining a strong dollar?

The US dollar has been the world’s reserve currency for 47 years. This development was one of the most clever, yet potentially damaging developments of the post war order. It led other nations and consumers to treat it like gold (even though the link to any underlying asset or promise was severed by Richard Nixon in 1972).

Now that other nations are shifting this special status away from the US, we are gradually becoming just as susceptible to a house-of-cards collapse as Venezuela, Argentina, Zimbabwe, or Germany between the wars. Our massive consumer market cannot protect us. Eventually, we must ship the fruit of our sweat and intellectual bounty to serve others. After all, for more than a half century, we have been giving them pieces of paper (dollars or treasury bonds) for their TVs, underwear, sneakers, toys and sheet rock.

This unbalanced trade must be reversed. Building walls at the boarder and stiff tariffs are desperate acts that fail to recognize cause or containment. They are certainly not the way to restore a robust economy. There must be a better way for nations to get their houses in order. Fortunately, there is.

A distributed currency built on math, trust and transparency—rather than the integrity of transient elected officials from one nation is far less susceptible to manipulation, inflation or any form of shock. It won’t solve all problems immediately, be it will prevent us from getting further mired in a debt that blows up like a balloon.

The decoupling of a money supply from government will yield benefits that are difficult to imagine today. Money doesn’t need authoritarian oversight like airline safety. The situation is more analogous to the deregulation of telephone and package delivery services. Without those blockbuster decisions of the 1980s, we would not have Smartphones or the internet today.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

I find it encouraging that so many people want to know if they should get into Bitcoin. But, I am discouraged when I discover that “getting into” is a euphemism for investing, trading, flipping or HODL (Buy, then hold on for dear life).

Sure, Bitcoin is deflationary. If widely adopted, it is likely to increase in value. But adoption is being thwarted by traders. Today 95% of cryptocurrency transactions are by individuals or organizations buying or swapping cryptocurrency rather than using crypto to buy apples, a new car, or a family vacation.

Many people consider Bitcoin to be risky and not just as an investment! They think its risky to use a payment instrument. The perception of risk is associated with its widely fluctuating exchange rate. In the end, the exchange value won’t matter at all, because Bitcoin will be the money and not the dollar, yen, euro or pound. But, unfortunately, even though the argument for widespread adoption is compelling, it will not occur while we continue to see spikes and plunges on a graph.

If you are waiting for volatility to abate, then we need adoption beyond bleeding edge adopters (so called Geeks and nerds). And I am not referring to traders. We must arrive at a day when the fraction of transactions driven by purchase & sale, debt payment, salaries, memberships, fees, and settlements and big companies quoting grain, oil or ships dwarfs the fraction driven by speculators & investors. This is the only way to trigger the series of reactions that will lead to stability, ubiquity and public trust.

Trading is only one way to profit from the cryptocurrency market—and it is, by far, the most risky. In fact, if you employ the tools and techniques of technical analysis (i.e. you study graphs of performance over time), then you certainly won’t make money. In fact, you will lose your shirt.

I don’t recommend trading as a core strategy for building a career around cryptocurrency. You can make a decent living with a real crypto career, or a consulting sideline. We will get to a few suggestions below. But, if you wish to invest, day trade or HODL, stick to gradual, dollar-cost-averaging instead. Choose a small, monthly budget that doesn’t take food off the table and that you can afford to lose. This is the method of anyone who built great wealth through equities, including Warren Buffet.

Other ways to profit from cryptocurrency

In conference presentations at which I am a speaker, I often dedicate a few slides to eight different ways to derive income from cryptocurrency. I never share my conference slides beyond the presentation. When I need to give information to my sponsor or an attendee, I require non-disclosure and I give them an encrypted link to just a small set of knowledge. After all, my presentation slides are my bread & butter (more about this in Slide #2, below).

But, in response to this question, I will share 2 slides, and I will add an explanation of two bulleted opportunities…

Slide #1, Item 3

The highlighted opportunity in the middle of slide #1, POS Integration, provides a BIG bang for your time, and with little training needed. But, the window of opportunity won’t last long—perhaps just 1½ years.

What you will do is train small-to-medium retail proprietors with the tools and training to accept cryptocurrency as easily as they accept Visa or American Express, but without commission. Little or NO fees at all. A retail cashier doesn’t need much training—he just directs a shopper to a QR code on the cash register.

The process can safely operate through the existing POS receipt printer, so that the cashier knows that a purchase has just been completed. Even the accounting books are updated in real time, and the vendor is paid immediately.

I recommend using your existing relationships and focusing on small, locally owned businesses with 3 to 8 retail outlets. Small, 1-store operations may not be worth your sales & set-up time. Larger operations (like McDonald’s or Walmart) do not make this type of decision at a local level and they have directors and IT departments that dictate and implement policies dealing with handling money.

Ideally, you want a restaurateur, grocery store, professional service (medical, legal, tax prep, seamstress, etc) with More than 1 but fewer than 8 locations. That’s because your going to play “good guy”. Instead of charging them a commission that is small compared to a credit card (say 0.5%), you will charge them a one time fee of $300 for every person in the room. With this method, you can make several thousand dollars in under 2 hours.

Set-up

Ask the owner to meet at any of his retail sites with one cashier or associate from each store. I prefer to do this on a weekend morning—but its best to avoid a time of heavy customer traffic. You need a check out aisle to be available.

Your training and tools integration can be completed in 20 minutes. The retail sales process is that easy. It’s no different than a credit card. The shopper will know what to do when they see the “Bitcoin Accepted” placard and a QR code. You are simply helping the cashier and bookkeeper that the process is trivial and the company till is even safer than with cash or credit cards.

You will need another 20 minutes to up-sell a nifty floating holographic display of the QR code. And then 30 more minutes for questions from individuals who just don’t believe in the future of Bitcoin or crypto. They want to know more than the only question that matters. “How much will I save”.

But the owner/operator and the numbers guy will definitely get it. Retail stores, and especially grocers deal with a razor thin margin. You will give them the opportunity to pick up business from early adopters and with ZERO fees and even instant conversion to Fiat if they wish. That’s why IGA Supermarkets announced this week that they will accept Bitcoin across all supermarkets this month.

The most common question will be “Doesn’t it cost to switch revenue back to dollars?” –or similarly– “I don’t want Bitcoin. How long must I wait to get dollars?” With just a little analysis of the APIs and services from which you build your consulting tool set, you will learn that the answers are very retail-friendly! In fact, payment processors will give you a much better deal than their own exchange clients, and even better than huge institutional traders. They all want to get their foot into retail, before credit card processors add it to their infrastructure.

I do not plan to provide step by step instructions in this Quora answer. You can begin by googling the companies that offer retail POS tools and then find a clever way to integrate them seamlessly into the most popular accounting tools used by small business (First Data, Veriphone, Square, PayPal, Quicken). If you or the exchange that you integrate into your crypto-processing add-on covers just these providers, you will be able to focus on your sales pitch and relationships. Now go make a killing, tiger!

Why is this opportunity still available?

Why doesn’t First Data, Citibank or Veriphone add Bitcoin to their payment options, along with Visa, Mastercard and Discover?

They will, eventually. But only after you and hundreds of other Bitcoin consultants chip away at their profits.

The card processors know that Bitcoin is almost friction free. For many retailers, it is completely free. With recent addition of Lightning Network, it is also fast. So it undermines the commission that legacy processors get from credit and debit cards. They try to harden their POS printers and accounting reports from out-of network utilization and they put doubt into business owners, telling them that cryptocurrency has no recourse or arbitration.

You will have great answers for each critique and you will win. But do it soon!

Slide #2

Of course, you can do what I do. Study Satoshi, learn a little code, try mining for yourself, research governments and their policies, learn about Aristotle and the evolution of money, dig into the forums for developers, miners and critics. Then make your presence known.

As your stature rises above the background of armchair speculators (without any agenda except to get rich), create a blog and do your best to attract attention. Market yourself as an industry pundit, expert, courseware developer, keynote speaker and a top writer at Quora.

You won’t find a sponsor for every blog post or paper that you publish, but eventually—if you are engaging, knowledgeable and entertaining—you can make a living from live events and on sight training.* Perhaps you can even earn royalties by selling courseware at Udemy or developing courseware for Diginomics.

I was fortunate. I left my career and got involved with Bitcoin shortly after the original whitepaper in 2009. Few people had heard of Bitcoin and even fewer believed it could ever be viable, even as just a payment instrument. I have turned my interest into a career. I don’t make nearly as much as Andreas Antonopoulos, but I am on the short list for paid presentations and am sought by government legislators, legal organizations, and accounting firms. All of these groups urgently need to understand crypto.

Conclusion: Is it too late to get into Bitcoin?

In the late 1930s, many individuals thought that it was too late to get into television. The first Televisor technologies were demonstrated 15 years earlier, in the 1920s. Since then, Philo Farnsworth unveiled what we now call a TV and RCA had already begun broadcasting in big cities. Many people knew someone on their block that had a TV.

Yet, with historical perspective, we can see that all of the major players of the 20th century got involved later. Few people today have heard of these early television manufacturers or the studios that made shows. Have you?

So, is it too late to build a career or a business around a new technology that was demonstrated only 10 or 15 years ago and is already being commercialized? Has that ship already sailed? Of course not! That ship hasn’t even docked. Seats are empty. Opportunities are just beginning. Crypto titans of this century are still in primary school or have not yet been born. (But for opportunity #3 on slide #1 above, get act together quickly).

* It’s difficult to get paid by a conference. For a big expo, its almost impossible, even for the headliner. For an educational workshop, it is almost as hard. The host may cover travel and hotel, but typically tries to avoid paying speaker’s a stipend.

Show organizers want you to pay them! They want you to value a few minutes on stage, because they assume that you want to sell something. Just as with attendees, they see you as a customer. With a bit of effort, you can reverse the value proposition.

Convince the organizer or host that you are the product and not a customer. Explain the value that you bring to the conference. You enable them to sell more VIP seats.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

The title of this post is intentionally misleading. We frequently discuss the traits that lead to value here in the Lifeboat Blog. But today, I was asked a more nuanced question: “What things will hold their value?”

And there is a ulterior motive in being a columnist for Lifeboat. Analyzing the dynamics of durable value leads to some surprising conclusions about the money supply and what a society chooses to use as money. We’ll get to this at end of this post.

We know that value comes from supply and demand. There are no exceptions. But, we have not addressed the properties that make an asset hold value over the long haul. Let’s consider some examples…

Cars

In an affluent, mobile society, most people desire personal, point-to-point transportation — and so there is clearly a demand for automobiles.

But style & technology change rapidly and automobiles deteriorate with use and weather. After 8 to 10 years, their cost and maintenance rise dramatically, and owners lust for a new model. So cars don’t get our award for assets that hold value.*

Popular Toys

In the 1970s, the Cabbage Patch doll from Calico Industries, and later, Tickle Me Elmo in the 1990s created a buyer frenzy that rivaled a lemonade stand in the desert. Shoppers fought each other to grab a limited supply. Clearly, demand was very high. The one shown below is listed at Ebay this week with a starting bid of $5,000. Other, less popular styles can be found for $4.99.

At first, this demand was driven by clever marketing and crying children in the week before Christmas. Demand was driven by a parent’s love. But at the peak of frenzy, demand shifted to buyers without children who felt certain that they could profit from selling the dolls that they snatched up first.

But the demand was not durable. Fads driven by frenzy don’t hold value for the long haul—especially when a manufacturer can simply turn the spigot back on.

Stocks & Bonds

A share of stock represents ownership in a corporation. A municipal bond represents a lien against a city—or the fees generated by an infrastructure project.

In both cases—especially bonds, which are a limited promise—no one expects value to last forever. It is a time-sensitive bet with the intention of expiration, redemption or exchange. So, these things also fail our criteria for durable value.

Houses & Real Estate

Like cars, homes require ongoing maintenance. But, most people weigh the maintenance cost against the benefit of having shelter, rather than comparing it to their gain or loss in value.

On the other hand, real estate value fluctuates in the long run due to things that are difficult to predict — population density, demographics, and quality-of-life issues related to infrastructure: weather, seismic events, politics, and access to health care and education.

Some real estate rises enormously in value over 50 or 100 years. Yet, we have seen boom-and-bust cycles that wipe out substantial wealth. So, real estate does not cut it in our contest for durable value.

Gold

The allure of gold and other precious metals is that their supply is capped — or limited by slow and predictable growth. The asset is difficult to find. It is acquired only from natural phenomena.

So, if we can also make it fungible, divisible, portable and difficult to counterfeit, then it meets most of Aristotle’s requirements for a functional currency. Theoretically, this can lead to widespread demand.

Gold certainly has exhibited its ability to hold value throughout thousands of years. But it is not so easily tested and divided in the field, and the impression that it has intrinsic value is an illusion. That’s because the fraction of gold acquired by investors dwarfs the amount actually needed for dentistry, electronics and even jewelry. In this modern era, even gold is becoming a house of cards, because its value is built upon speculation and emotion.

Oil (aka “black gold”)

With the rise of the automobile and power plants that burn fossil fuel, oil became a reserve currency of the 19th and 20th centuries. But there are two problems with it holding value over the long haul.

First, unlike gold, oil is a consumable in every market. Therefore it is difficult to think of it as an asset. Also, we now live in a century in which energy and transportation is rapidly switching away from oil, while at the same time, new technology is making it cheap to acquire new oil. This (along with a history of violent political theater) dramatically deteriorates its potential as a store of value in coming years.

Money

The supply-demand dynamics of money is widely misunderstood. More than 2,300 years ago, Aristotle defined the properties of a functional currency.

Earlier, we stated that all value comes from supply and demand. But, it is fair to ask “What creates the demand?” or “What backs the expectation of future demand?” Surprisingly, even if we limit our scope to just one country (USA), the value of government-issued currency has been tied to different things over time:

  • Gold
  • Promise of redemption
  • Legal tender (public must accept it for all debts)
  • Settlement of taxes
  • The “good faith and credit” of workers

Ultimately, demand is influenced by oversupply and by public perception more than government promises or laws. The perception that the US dollar has no cap and that its supply can be inflated whenever a body of transient politicians decides to raise the debt ceiling may eventually cause its value to collapse. Although it has not happened yet, at some point consumers (or those holding our debt), will begin to question if Americans have the capacity and will to produce and export the goods & services necessary to balance their mass consumption of the past half-century.

And so, government-issued Fiat does not pass our smell test for durable value. Sooner or later, all national currencies collapse. On a personal level, the only question that matters is if you will be caught by surprise—with a fraction of wealth tied to your favored currency.

What has the potential to meet all requirements for holding value?

Wouldn’t it be fascinating if we could find an asset that is a product of pure mathematics? A perfect asset would be fair, fungible, immutable, and capped. It could never be inflated or manipulated by politicians. It would decouple governments from monetary policy. It would be politically agnostic.

If correctly designed, it would be capable of absorbing and incorporating improvements developed by any copycat or pretender nipping at its heels. Most important, it would be open source, peer-to-peer, massively distributed, redundant, and completely permissionless.

This perfect asset would derive trust from mathematics and crowd-sourced consensus. It would not require that anyone believe in a government, a bank, a land mass, or the uncertain supply of precious objects. Authenticity could tested easily and its value transmitted instantly. The history of each unit would be completely transparent. With free tools, anyone, anywhere could trace its history of moving from one owner to the next.

Ten years ago, such an asset was unleashed into the wild by a person or team of developers under the pseudonym, Satoshi Nakamoto. It not only meets all of these requirements, it has built-in immunity from competition. It even resolves a technical problem that troubled Aristotle more than two millennia ago.

I won’t name this radical yet natural evolutionary development in this answer—but, I can confidently state that it passes our test for an asset that will hold value over time. Despite a wildly fluctuating exchange rate with Fiat currency, its inherent value has never dropped. Ultimately, you will no longer asses value based on the exchange rate of an anachronistic currency that fails all of the other smell tests. Instead, you will assess value on how many heads of lettuce you can buy or how much that new sailboat costs.

* A classic car avoids the problems associated with use & maintenance—and it can hold value over a long period. But like a Picasso painting, the market for classic cars has a limited audience, especially for the florescent green ’63 Mustang that I found in in my great uncle’s garage. Additionally, it is subject to the whims of popular perception. Styles go in and out of vogue and so we cannot predict how long that car will hold value. (Please call me if you value my uncle’s Mustang at more than $150,000).

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

As with other recent articles, this one was originally published as an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. And just like the previous one in this Lifeboat series (also posted today), this is a Q&A exchange with a newbie—a bitcoin beginner.

The question is simply: “How can Bitcoin be divided into units smaller than one?” While the answer may seem obvious to someone versed in math, statistics or economics, I see this question a lot—or something very similar.

I can explain by asking a nearly identical question; one that the enquirer can probably answer easily. The goal is to provide the tools to answer the question—and in a manner that helps the reader recall and make use of the answer in the future. This is how I approached an answer…

Puzzle me this: Can you divide 100 into smaller pieces? Of course you can! You just divvy it up. After all, it’s just a number.

  • Let’s say you divide 100 by 10: You get 10 pieces of 10 each.
  • Now, starting with the same 100, say that you divide it by on hundred. This gives one hundred pieces of ‘1’ each.

Until now, we have been talking about a number—not a real thing. Next, lets say that you start with $100 (a single bill with Ben Franklin on the front). You are in a casino, standing next to a bill/coin change machine. No counterfeit bills; no funny stuff.

Can you divide it into smaller bills? Sure! The change machine gives you one hundred crisp notes with George Washington. on the front.

Now, about your question: You are already down to pieces of just 1 unit each (i.e. one US dollar). Is this the limit of granularity? Is there no way to divide the units any further?

Of course you can! You can exchange each dollar for 4 quarters, or 10 dimes or even 100 pennies. One cent is just another way of saying 0.01 dollars.

And don’t stop there. Just because the government doesn’t bother with coins of a smaller denomination, a processor that deals in micro-payment or a seller that holds credits for small, cumulative purchases (i.e. web visitor clicks) could easily track your credits based on much smaller units—say one millicent, or 1/1000 of a penny.

Example: Suppose that a natural gas pipeline crosses the territory of an indigenous population in the interior of a country. The government enters into an agreement that pays the tribal authorities 1/30 cent for each 500 BTU of gas energy equivalent that passes through the pipeline. Micro payments, contracts and quotations are of this kind are crafted frequently.

Bitcoin is even more flexible than a dollar, because it is a virtual ledger that is stored across many bookkeepers. The ability to deal with small units is simply math. The protocol was designed to support 8 decimal places, but this can be extended to even smaller units.

In fact, the total number of Bitcoin that can ever exist (21 million BTC) could have just as easily been called 1 BTC (or 10 trillion BTC). It really doesn’t matter. That decision was arbitrary. To make things convenient for buyers and sellers, we will all eventually refer to the units that put our everyday purchases in the range of 1-to-100.

Pieces of Eight: Divisibility by design

For example, on the USA east coast, a wrapped head of fresh lettuce costs 0.000166 BTC.* That’s an awfully small number to remember or to work with.

But wait! Bitcoin already has a unit name for (1) one-hundred-millionth of a bitcoin. We call this a “satoshi”. Each satoshi is equal to 0.00000001 BTC.

So, that same head of lettuce costs 16,583 Satoshis. But this is also a difficult number to work with. It sounds more like the amount of money you spend on a car and not a small consumable.

So, if Bitcoin were in wide use today at the grocer and other retailers, we would probably be quoting and comparing units of 1/10,000 BTC. Let’s call each unit 1 DC, for “deci-milli”.

At today’s exchange rate, a head of lettuce costs 17 DC and a basic Toyota Camry without the expensive options will set you back 16,700 DC.*

Will you get used to it? Sure! It’s no different than moving to France. Your intuitive feel for the cost of things will become second nature when vendors begin quoting goods and services in units of bitcoin. Soon, even advertising and catalogs will display prices this way.

When this happens, all sorts of good things follow. For example, the volatility that we perceive today (because we are comparing Bitcoin to the US dollar) will disappear. Prices in BTC (or DC) will seem quite stable, even though the US dollar will seem to have unpredictable spikes and dips.

* Assumptions / Exchange Rate

  • On the USA east coast, a head of lettuce is $1.99. (New York is far from California and Mexico where lettuce is less expensive)
  • At the time of this post, 1 BTC = about $12,000 USD
  • A base model Toyota Camry without tax or extra features sells for about $20,000

Related:

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

This article was originally an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. The reader is a “Bitcoin beginner”. If you understand the nature and purpose of a blockchain, the political leanings of Satoshi or the economics of a capped cryptocurrency, then this reviews things that you already know. But sometimes, a recap can be fun. It helps ensure that we are all on the same page…

In a previous post, we have already addressed a fundamental question:

It has nothing to do with how many individuals can own bitcoin or its useful applications. It simply means that—if widely adopted as a payment instrument or as cash itself—the number of total units is capped at 21 million. But each unit can subdivided into very tiny pieces, and we can even give the tiny pieces a new name (like femto-btc or Satoshis). It is only the originally named unit (the BTC) that is capped.

But, this article addresses a more primitive question. (Actually, it is a naïve question, but this adjective has a negative connotation, which is not intended). I interpret the question to be: What prevents me from creating, earning or being awarded an amount that brings the total circulation above 21 million BTC?

The question is a bit like asking Why there are only two solutions to a quadratic equation? — Or (a metaphor): Why can’t you own a new Picasso painting?

In the case of Picasso, it’s because we know the ownership and location of the 1,885 paintings created during his lifetime. The Old Guitarist (shown at bottom) is at the Art Institute of Chicago. Unless there has been a serious error in record keeping, there cannot be any more paintings, because he is no longer around to produce new art.

You cannot create more bitcoin than the 21 million scheduled for release because that’s all the math yields. It is the capped quantity that Satoshi wanted in circulation—because he/she sought to create a deflationary token that could never be gamed by politicians or anyone else.

Consider the alternative. The Zimbabwe dollar had no cap. When the government needed more cash, they simply printed more. (This is exactly what the US does today). Eventually, they had 4 recalls and “official” devaluations. But, of course, the value of a Zimbabwe dollar (just like a US dollar, bitcoin or a Picasso painting) is not established by edict. It floats with supply and demand.

Eventually, 100 trillion Zimbabwe dollars was worth US 16¢. Then, it collapsed completely. You can still find a few 100 trillion dollar notes on Ebay. Ironically, they cost far more than 16¢, because western collectors are fascinated by them. Just as with a Picasso painting, all value boils down to supply and demand.

Of course, no citizen of means used the local currency even before it collapsed. They simply couldn’t trust their treasury. Today, Zimbabwe uses US dollars, rands (SA), British pound and euros.

What about the US dollar? Only the most arrogant citizens believe that we control such a vast consumer market (and that we are such a huge debtor) that the world must continue to value our paper. But is this realistic? Is it sustainable? Does U.S. debt ever have to be repaid with real sweat and real products sought by creditor nations? Of course it does. The alternatives are unthinkable: We would go the way of Zimbabwe, the Roman empire—or worse. Think of the Wiemar Republic between world wars.

The US dollar has no cap. A trillion or so new dollars are printed ever year, in a series of emergency measures that transient politicians call “raising the debt ceiling”, or an “emergency requisition”, or humanitarian, infrastructure, disaster relief, military necessity, debt repayment—or whatever. This leaves us 20 trillion in debt and with no path to recovery. Our own president openly asked why we can’t just print even more money to square up with our creditors.

With Bitcoin, we will never face that problem. Will adopting Bitcoin as legal tender interfere with a government’s ability to tax, spend or enforce tax collection? Not at all! But one day, it will decouple governments from control of their money supply. And that will be a marvelous thing—for both individuals, organizations and governments. It will force nations to balance their books—just like every household, business, NGO and municipality.

When this happens, governments can still raise money (from taxes) and they can even borrow. But just as with an individual or corporation, they will need to find:

  • Creditors (or shareholders) who truly believe in the ability to repay
  • This means they are creditors that believe in a nations institutions & ethics
  • And this leads to a conclusion: What better way to move our institutions and ethics in the right direction than through the accountability owned to our creditors.

Bitcoin is the embodiment of radical technology, but it is not a radical concept. It is the simple and functional embodiment of free-market economics. It addresses a market need that Aristotle fervently researched 2050 years ago, but failed to resolve. Gradual adoption is analogous to denationalization of telephony, airlines and package delivery services. Imagine the positive fallout when this occurs! Hopefully, we will around to witness a society in which governments are decoupled from monetary policy & control!

Related:

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.

A new section: Bitcoin ATM business model
has been added. Jump to “2019 Update”

The good news is that building a Bitcoin ATM is easy and less expensive than you might expect. But, offering or operating them engulfs the assembler in a regulatory minefield! It might just be worth sticking to selling bitcoin on PayPal (visit this website for more information on that). You might also wish to rethink your business model —especially user-demand. That’s the topic of our 2019 update at the bottom of this article.

A photo of various Bitcoin ATMs appears at the bottom of this article. My employer, Cryptocurrency Standards Association, shared start-up space at a New York incubator with the maker of a small, wall mounted ATM, like the models shown at top left.

What is Inside a Cryptocurrency ATM?

You could cobble together a Bitcoin ATM with just a cheap Android tablet, a camera, an internet connection, and [optional]: a secure cash drawer with a mechanism to count and dispense currency).* A receipt printer that can also generate a QR code is a nice touch, but you don’t really need one. You can use your screen for the coin transfer and email for a receipt.

Of course your programming and user interface makes all the difference in the world. And your ATM must interface with an exchange—yours or a 3rd party exchange.

If your plan is to sell Bitcoin and not exchange it for cash, then you don’t need a currency dispensing component at all. You only need a credit card swipe-reader and an RFI tap reader. Some models are smaller than a cookie and sell for under $30. They can be attractively embedded into your machine. In fact, some bank card processors offer them without cost.

I Have Built a Prototype. Now What?

Desktop ATM. No cash dispensed

Once you have a working prototype, you will need to test it with focus groups (alpha test) and at prospective public sites (beta test). You must also harden the production model against tamper and theft and find paying businesses or property owners, so that you can achieve economies of scale. (A reasonable business model requires that you produce dozens of devices each month).

Parts Cost: Bill of Materials

At scale, you can achieve a unit production cost of less than $200. But that’s for a desktop unit that does not accept or dispense cash. A high-quality and attractive machine that accepts cash and is free standing or ready for outdoor installation into a building exterior might cost you $650. You could sell these for $2,500 plus recurring fees to the property owner, depending on venue, or you might simply lease them, just as Xerox did in the early days of office copiers. (In a hotly competitive market, such as Las Vegas, you may need to pay a portion of your profits to the site, rather than profiting from ‘renting’ the ATM).

Regulations: A Threat to Your Business

But wait! Before you run off and create an ATM venture of your own, with visions of a 350% profit margin, all is not as easy as it seems!…

Cryptocurrency ATMs intersect with a minefield of regulatory licensing and compliance standards. In many regions, they are not even legal for placement in a public area.

In most countries (including all of USA), you must be a registered Money Transmitter. You will need separate state licensing and—since you are moving cash in or out of the banking system—you must be partnered with a federally chartered bank. You will also need to post a hefty insurance bond—perhaps even for each machine and each municipality in which it is placed! These laws convey liability to both your client (a property owner) and to you. Many courts will hold the manufacturer of financial or medical products accountable for ensuring that their customers are licensed and compliant with regulations. That is, you may not be able to legally sell your ATM to organizations that have not demonstrated that they qualify to operate one.

Why is There a Camera in my ATM?

In all cases, you must capture photographs of your user and their state-issued ID, because you are required to know your customer and adhere to a slew of anti-money laundering practices. For example, with transactions larger than $2,000 (from anyone who is not known to you and a regular client), you must generate a Suspicious Activity Report. For transactions larger than $10,000, you must comply with RICO (Racketeer Influenced and Corrupt Organizations Act). This requires a camera, interview, and reporting process. You will be generating forms with data supplied by your user and possibly even a real-time verification of the facts they provide.

If you wonder why you needn’t do these things this when buying or selling your own cryptocurrency, it is because: (a) You are trading your own assets and are not the custodian of customer accounts; and (b) You are a consumer. It is likely that the exchange is required to do all of these things.

With Regulations, Can Bitcoin ATMs Generate Profit?

For the reasons described above, the operational cost of deploying and operating an ATM network (or your equipment for sale or rent) is significantly higher than the up front hardware cost. When you add the need to protect your venture from legal claims arising from process glitches or users that claim they lost cash or Bitcoin, you may arrive at an operational cost that makes your business model unworkable.

Of course, Bitcoin ATMs are profitable in some cases. I have consulted with a few start ups that operate them successfully in Las Vegas casinos, a few airports and race tracks, and at large outdoor fairs. But, for everyday use, the heyday of ATMs is most likely 5 or 10 years off. Before this happens, we need a more uniform and functional regulatory & insurance framework, and a higher volume of users per ATM.

Check out various Bitcoin ATM models below. Few manufacturers turn a profit. In the end, it boils down to location (high volume sites with the right people) and location (legal jurisdiction).

* One ATM startup found inexpensive hardware for dispensing currency by recycling mechanisms from bill-change machines used in game arcades or in hotels next to vending machines. These machines are being discarded, because newer vending machines accept credit cards and smart phone payment. But again, if you only plan to accept a credit or debit instrument for Bitcoin, then you don’t need a cash counter or dispenser.

2019 UPDATE: ATM Business Model Requires Urgency

The economics of Bitcoin ATMs is thoroughly uncompelling, unless you own or administer a public area with high foot traffic. Even with lots of traffic, the business model has a problem…

Bitcoin is easily acquired and exchanged online—both legally and illegally. Often, I urgently need to find a bank ATM, especially when travelling. But, despite being an avid proponent and adopter of cryptocurrency, I can’t imagine needing a crypto ATM. Needing virtual exchange is rarely urgent, and there are better alternatives than standing in front of a machine. After all, we each have a better machine in our pockets.

Online trading is easier and safer than via ATM. Even user anonymity is better online than standing in a public place and using a kiosk equipped with a camera.

Therefore, an ATM placement business needs clients with urgent needs. In the internet era, urgency and expert installation are the values that support the bottom line. But again, there is a problem…

The problem with using urgency to build a local delivery model for ATMs, is that Bitcoin is a virtual product. Even a seller or exchange in China can deliver an online money exchange instantly.

Consider this reverse analogy…

Suppose that you are responsible for setting up a video projector in a hotel ball-room. The conference is already in progress and hundreds of people are looking toward a blank movie screen. You suddenly discover that your video cable is defective and wireless options will not work . You need an HDMI cable and a thunderbolt adapter immediately. It must be at least 18 feet long and be a recent model to support the audio channels and resolution of your presentation.

QUICK—Find an exact match!

The local Best Buy store has the cable in stock. It’s $89.99 and the store can have it at the front desk in the next 10 minutes. Your frugal partner finds the same cable online for $29.99 (2-day delivery) or $9.50 shipped from China (about 2 weeks).

Which do you choose? Is it just a cable that you need? No! The value that you require is a compatible cable in your hands within minutes — preferably from a local and experienced vendor, in case there is an installation or application problem.

In almost any scenario—even catering to impulse buyers—a Bitcoin ATM can’t match the value of someone delivering a compatible cable instantly. If it is a commodity that you are selling (Bitcoin is a commodity), then a profitable business model requires that you sell speed, convenience or privacy. Cryptocurrency ATMs lose on all three fronts.

That last paragraph above is my freebie to the next ATM vendor who seeks consulting services. Test your model, before seeking help in penetrating a market that is tough to define and defend.

Philip Raymond co-chairs CRYPSA, hosts the Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is a top writer at Quora.