There’s a new kind of ATM in town and it doesn’t spit out dollar bills. It’s a Bitcoin ATM – you put in dollars and it gives you a trendy digital currency that’s generated headlines. Several have launched in North Texas.
The Bitcoin ATM at Pop Diner in Uptown is just one of several Bitcoin ATMs in Dallas. It's about the size of an old payphone. It’s a box with a small screen and a slot to deposit cash which gives you a trendy cryptocurrency -- money that only exists on computers.
High school senior Michael Lewellen runs a Bitcoin consulting company.
In the back room of Pop Diner, Lewellen scans his QR or quick response code on his phone, which contains the web address to his Bitcoin wallet. He puts in the cash and within seconds, the Bitcoin pops up in his digital wallet.
So, you might be wondering what Bitcoin is all about. Lewellen explains why all the young techies and entrepreneurs are so attracted to the new digital money.
“Bitcoin is cash for the internet," he said. "It allows you to pay for anything instantly pseudo-anonymously which means I don’t have to give out my real name and you can do so without going through a payment service or a bank or a credit card."
Bitcoin was created about five years ago and it made headlines last fall when the FBI arrested Ross Ulbricht, a University of Texas at Dallas graduate student. He was charged with narcotics trafficking, computer hacking and money laundering in running a black market website called Silk Road. Some thought that would be the end of Bitcoin. Lewellen says it actually helped clean up the market.
“It has been used a lot to kind of cloud Bitcoin's usage to make it look like an illegal currency," he said. "But U.S. dollars have been the predominant usage for illegal transactions and that hasn't stopped the U.S. dollar and it shouldn't stop Bitcoin."
Worldwide, there are more than 13 million Bitcoins in circulation. That works out to $6 billion in U.S. currency.
Some North Texas businesses have even started accepting Bitcoin. There’s an antique shop in Dallas, a Chinese restaurant in Carrollton and even an urgent care clinic in North Richland Hills.
Now bars can take it too, thanks to a ruling earlier this year by the Texas Alcohol and Beverage Commission. So can politicians, including Greg Abbott, the Republican running for Texas governor.
“We’re just seeing this trend. It’s now catching on. So it should be interesting to watch,” said Marie Vasek, PhD computer science student at Southern Methodist University.
Vasek's professor, Tyler Moore, teaches cybersecurity at SMU. He points out some one of the downsides – a small user base and security issues.
“There are serious risks in Bitcoin and there are by no means the same level of consumer protections in Bitcoin that there are in traditional electronic payment,” he said.
Moore warns people to avoid cryptocurrencies until these security problems are solved. Still, he sees an upside.
“I think the real promise of Bitcoin is that it allows for the potential of more efficient payments and it can really threaten the entrenched payment card networks that we have,” he said.
That’s why some Bitcoin fans say this currency in 2014 is about where the internet was in 1994.