Bitcoin buffs say bitcoin is booming. In the first three quarters of 2018, the number of verified cryptocurrency users doubled, according to the Cambridge Centre for Alternative Finance at Cambridge University. And bitcoin’s value has been steadily on the rise since the start of 2019. For many newcomers, investing in cryptocurrencies such as bitcoin can seem, well, cryptic. But Lee Hansen, CEO of Byte Federal, wants to make buying cryptocurrency as easy as using an ATM.
“The market is gigantic, and people are embracing bitcoin by the droves,” Hansen said.
Founded in 2016, Byte Federal is a bitcoin ATM operator based in Venice, Florida---just a jump, hop and skip away from Tampa Bay. Byte Federal ATMs let customers buy bitcoin by depositing cash into machines at one of its 59 locations in 13 states. All users need to do is show up to a Byte Federal bitcoin ATM with an ID and a pocket full of cash. After verifying their identify, customers deposit cash like they would at a traditional ATM, and Byte Federal sends bitcoin directly to their digital wallet.
Although cryptocurrencies have become household names over the past few years, not everyone knows how they work or what all the fuss is about.
“[Cryptocurrencies] allow the transfer of value between two parties without a central party you have to rely on and trust,” explained Lennart Lopin, CTO of Byte Federal. By “central party,” Lopin means a traditional bank or institution, which serves as the broker of most financial transactions. These central parties usually shave a little off the top of each transaction. One of the major appeals of cryptocurrency is there is no centralized broker—transactions are made directly between parties.
Another benefit is that cryptocurrencies use a technique called blockchain to track transactions. Blockchain makes transactions easy to track and difficult to reverse, cutting back on the possibility of fraud. However, cryptocurrencies demand more responsibility from individuals since they require a special key to access the network.
“If you lose the key, you lose access to the network,” Lopin said.
Byte Federal has faced a few challenges as a bitcoin ATM startup. For one thing, larger companies such as CoinFlip and BitStop already operate in the space. And Hansen said a repeated challenge is an unwillingness of traditional banks to work with the startup.
“We’ve interviewed more than 450 banks and lost dozens of accounts in the process,” he said. “Having to deal with the legacy banking system is probably the biggest nightmare of running a bitcoin ATM company.”
Hansen and Lopin launched Byte Federal with $15,000 in 2016 and said they have built the company to a revenue of more than $8 million. They’ve raised close to $830,000 in investments and are looking for $7-10 million in a Series B funding round.
Bitcoin might be booming, but cryptocurrencies have experienced newsworthy volatility that have caused some experts to predict a bust.
“We get pushback all the time from investors who questions the validity and value of bitcoin,” Hansen said. “But I have no question that the technology has enormous value. Sure, it’s volatile, but that’s part of what make bitcoin exciting. You can lose money but you can also make money. The volatility is part of the excitement.”
