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April 18, 2014

Bitcoin ATM & Other Uses For a New Infrastructure

Posted by Rajashekara V. Maiya (View Profile | View All Posts) at 6:01 AM

BITCOIN ATM OPENS IN HONG KONG - Get your Bitcoin in cash: World's second Bitcoin ATM [Source: http://www.youtube.com/watch?v=JmpQyIKuW2s]

It was a spectacle enough when one of the top luxury hotels in the United Arab Emirates offered its well-heeled guests a gold ATM. Just slide in your cash and out pops a small, solid gold bar. With the economy in the shape it's in and the public's penchant for investing in precious metals, that ATM proved to be a hit.

After the first ever Bitcoin ATM at Canada last quarter, now there is a Bitcoin ATM in Hong Kong - the first of many planned for Asia. The ATM's owner is hoping that the financial world's fascination with Bitcoin will make them well received and even more of a go-to source for the crypto-currency than online exchanges such as Mt. Gox. Whether you're a fan of Bitcoin or not, one thing is undeniable: The technology that makes this new type of currency a reality is here to stay, and it might have more uses than just Bitcoin.

The financial markets continue to wrestle with Bitcoin. Investors aren't sure whether it's the best thing since paper money or little more than a speculative bubble not unlike the tulip boom in 17th century Holland. But the technology that gives Bitcoin viability is what might be the most enduring thing about any of this. One expert I recently read about is convinced that the same kind of encryption that makes a Bitcoin an agreed-upon unit of commerce could be used very effectively by Web retailers.

We live in an online world where enterprises are now revamping the way they market their products and services to us. Because of beacons on mobile devices, we can receive advertisements that are custom-tailored to our expectations. Instead of inundating Web sites and search engines with pop-up ads, they can focus on what we're shopping for and what kind of socio-economic demographic we fit into and tailor ads from there. That said, can you imagine how well a crypto-currency would work if it were issued by a retailer? In exchange for, say, the amount of time you spent shopping on its Web site, you could get bonus "cash" in the form of its own crypto-currency.

Not only would you have to spend that specialty money at the store in question; the retailer would know exactly who it is that holds each unit of money and how they're spending it. The retailer gets valuable insights into consumer behavior. That's part of the appeal of the new Bitcoin ATM. You walk up to the machine, put in your cash, and then scan your mobile wallet over a sensor. The ATM also verifies who you are through chips in your passport or government-issued ID. The Asian ATM even has a facial recognition device.

When the transaction is finished, the Bitcoins are stored in your digital wallet and you avoid credit fees. Big-name companies such as the Marriott hotel chain accept Bitcoin payments from digital wallets. To be sure, the Hong Kong Monetary Authority has said that Bitcoin, which has skyrocketed in value to $1,200 from $13 in just a year, does not fall under its purview. "Bitcoin is not regulated by the HKMA and members of the public should be mindful of the risks." That's well said. But many people who are drawn to crypto-currencies are dabbling because of the very fact that a government's central bank does not have any regulatory powers over it.

Another concern is security. During a recent television show, a talk show host showed his Bitcoin ATM receipt on the air and a hacker watching the show was able to detect his code. Showing your receipt to someone is tantamount to showing him your email or bank account's username and password. Not something you want to do. Still, the fact that your Bitcoin ATM receipt is a digitally unique thing, you can actually rest assured that without that information, as well as all the security protocols, would-be criminals would have a far more difficult time skimming money from you than they commonly do on conventional ATMs.

What we have with Bitcoin and related market entrants is much more than just a new kind of currency. We have an impressive, thoroughly modern infrastructure that's set up to host a brave new world of digital commerce. Worst-case scenario? Even if Bitcoin proves to be a flash in the pan, that infrastructure will remain and be there for the digital commercial tools that do emerge and endure.

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