The ATM at Boston’s South Station snatched the money from my hand and didn’t even give me a receipt. But my smartphone’s green glow let me know I had just invested $5 in the world’s most controversial, questionable, and exciting new currency, the bitcoin.
The machine, which is the first of its kind in Boston, was officially plugged in Wednesday morning — right next to Pinkberry — and began spewing bitcoins, virtually.
“You can think of it as Internet cash,” said Chris Yim, cofounder of Liberty Teller, the Boston company that operates the new bitcoin ATM. “This is just a more secure way of buying things online.”
It is also confusing to many people. That’s why a Google search turns up such posts as, “How to explain bitcoin to your grandmother,” and, “What the heck is a bitcoin?”
The five-year-old currency is not backed by any central government, but can be spent just like dollars in a small but increasing number of places, including some local restaurants and the popular online retailer Overstock.com.
Bitcoins are stored by users in so-called digital wallets, and each coin has a unique online address. Transactions are managed by thousands of computers linked in a worldwide network, helping to ensure their integrity.
There is also the benefit of privacy. While purchases are shared with the entire network, creating a permanent record, users don’t have to personally identify themselves — the same way someone handing over cash at a register doesn’t have to provide the clerk with a name. The hackers who stole millions of credit card numbers from Target during the holiday season would have a much tougher time cracking the bitcoin code.
Bitcoin’s promise of anonymity has proved attractive to criminals. It was the favorite currency of the now defunct outlaw website Silk Road, a global trading post for illegal drugs and worse. But now much of the bitcoin action comes from legitimate — and greedy — financial speculators. They have helped drive the value of a single bitcoin from a few dollars in 2011 to as high as $1,242 in November. Since then, it has plummeted, and as of Wednesday the price was about $630.
Buying bitcoin through a bank can take several days. But Liberty Teller’s ATM, developed by a Manchester, N.H., company called Lamassu, will quickly sell up to $500 worth at a time. A Liberty Teller competitor, Robocoin, is planning to launch machines soon in Austin, Texas, and has one in Vancouver, British Columbia.
Liberty Teller plans to install and operate more of the machines.
Unlike an explanation of the bitcoin, the directions for the new ATM are simple. I used an Android app called Mycelium to get my small fraction of one coin. It displays a barcode containing a unique digital signature that identified my bitcoin account. You press the barcode against a scanner on the front of the ATM, which reads the digital code to determine where to send the bitcoin. Next, feed in cash, press the touchscreen, and the deal is done. It takes the global bitcoin network about 10 minutes to confirm the transaction.
Unfortunately, your new currency may be worth less than you thought, thanks to the rapidly shifting value of bitcoin. Last week I spent $100 for 144 millibits. Ten minutes later it was worth only $97.61.
Bitcoin has freaked out many a bureaucrat. It’s banned in Russia and Chinese banks are barred from accepting it, for instance. But US government officials have been pleasantly open-minded. Companies that agree to standard federal financial regulations are free to deal in bitcoin. Which is why I could walk into South Station and give Liberty Teller my money.
On Wednesday, Davis Foster, an electrical engineer from Wellesley, was an early adopter of the new device. But he’s also a bitcoin veteran.
“Previously, I’ve bought anywhere from a couple of dollars to a couple of hundred dollars,” said Foster, who spent $20 at the ATM and considers the virtual currency an investment.
Another passerby, Jay Kelly of Dorchester, committed an entire dollar to Bitcoin, then broadcast his digital code over Twitter so anybody could cash in. Kelly, who called himself an “information activist,” said he loves the idea of a free-flowing digital currency.
“If you can send a dollar” over the Internet, he said, “you can send a million.”
And you can do it cheaply. It costs my wife $12 to send $100 to a relative in the Democratic Republic of Congo, via Western Union. An equivalent bitcoin transaction would cost next to nothing. Sending money between nations is a $500 billion global business, enough to make bitcoin a major success, even if it were used for nothing else.
But most consumers aren’t ready for bitcoin. They’re frightened by a currency whose value can fluctuate wildly from hour to hour. Besides, what can they buy with it? Few retailers accept bitcoins, even though they could save a fortune on credit and debit card fees and offer customers greater security.
South Station’s ATM will certainly thrill passing geeks, but it’s the nearby merchants who will really decide the fate of virtual money. When I can spend my freshly purchased bitcoins at the yogurt stand next door, I’ll become a true believer.Hiawatha Bray can be reached at firstname.lastname@example.org.
Corrections: An earlier version of this story gave an incorrect figure for the scale of global money transfers. It also misspelled the name of one of the founders of Liberty Teller, Chris Yim.