Closed Loop ATM

[calian]

So the word is that even with lots of cash you can't get most banks to talk to you if you want to run a bitcoin ATM business. However with some starting seed capital (cash and bitcoin) plus a local community of bitcoin users it seems that a 2-way ATM shouldn't require a bank account. If it were to dynamically modify its pricing based on the reserve levels of cash vs. coin and publish this info online then free market forces could help ensure it wouldn't run out of either type of money.

The main problem I see in trying this out is that the Lamissu machines that you actually buy free and clear are only 1-way bitcoin selling machines. The true 2-way Robocoin machines are sold with a contract that keeps Robocoin in control of many aspects of the operation of the machine. As far as I've been able to tell the open source ATMs such as cash2btc are also just 1-way machines. Is anyone aware of a solution that would allow this to be tried?

[ElectricMucus]

So the word is that even with lots of cash you can't get most banks to talk to you if you want to run a bitcoin ATM business. However with some starting seed capital (cash and bitcoin) plus a local community of bitcoin users it seems that a 2-way ATM shouldn't require a bank account. If it were to dynamically modify its pricing based on the reserve levels of cash vs. coin and publish this info online then free market forces could help ensure it wouldn't run out of either type of money.

In other words people won't use it.

[calian]

So the word is that even with lots of cash you can't get most banks to talk to you if you want to run a bitcoin ATM business. However with some starting seed capital (cash and bitcoin) plus a local community of bitcoin users it seems that a 2-way ATM shouldn't require a bank account. If it were to dynamically modify its pricing based on the reserve levels of cash vs. coin and publish this info online then free market forces could help ensure it wouldn't run out of either type of money.

In other words people won't use it.

What? http://www.coindesk.com/robocoin-bitcoin-atm-cad1m-29-days/

If the offer is good enough the ATM will provide a chance for buyers or sellers who would ordinarily use localbitcoins to either buy or sell at the machine. It's the same mechanism that keeps the prices of the various exchanges relatively in line: arbitrage.

[domob]

So the word is that even with lots of cash you can't get most banks to talk to you if you want to run a bitcoin ATM business. However with some starting seed capital (cash and bitcoin) plus a local community of bitcoin users it seems that a 2-way ATM shouldn't require a bank account. If it were to dynamically modify its pricing based on the reserve levels of cash vs. coin and publish this info online then free market forces could help ensure it wouldn't run out of either type of money.

In other words people won't use it.

What? http://www.coindesk.com/robocoin-bitcoin-atm-cad1m-29-days/

If the offer is good enough the ATM will provide a chance for buyers or sellers who would ordinarily use localbitcoins to either buy or sell at the machine. It's the same mechanism that keeps the prices of the various exchanges relatively in line: arbitrage.

That is an interesting idea.  Effectively, this ATM would become a method for localbitcoin traders to exchange with each other without directly meeting.

[HairyMaclairy]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it. 

That means I would make a profit on every trade.  Trading is a zero sum game so the machine would make a loss on every trade.  Eventually all value in the machine would be destroyed.
 

It cannot be any other way.  There is no such thing as a perpetual motion machine or magic sausage machine. 

Maybe someone more skilled than I can show this mathematically. 

[ElectricMucus]

So the word is that even with lots of cash you can't get most banks to talk to you if you want to run a bitcoin ATM business. However with some starting seed capital (cash and bitcoin) plus a local community of bitcoin users it seems that a 2-way ATM shouldn't require a bank account. If it were to dynamically modify its pricing based on the reserve levels of cash vs. coin and publish this info online then free market forces could help ensure it wouldn't run out of either type of money.

In other words people won't use it.

What? http://www.coindesk.com/robocoin-bitcoin-atm-cad1m-29-days/

If the offer is good enough the ATM will provide a chance for buyers or sellers who would ordinarily use localbitcoins to either buy or sell at the machine. It's the same mechanism that keeps the prices of the various exchanges relatively in line: arbitrage.

Lack of liquidity. Exchanges are profitable because they can work with high volume with very little cost.

If you are really into that here is an idea that could make it work: Set it up so that every machine is it's own ripple gateway then use arbitrage inside ripple to generate your profits. You can even set it up so that you can get your profits in either currency.  I'm sceptical that you'll make more money from the machines than it costs to maintain them but if you really think it would work take the idea and run with it.
But then you probably discard my idea because of the stigma here that ripple is evil/a scam/a moneygrab/will destroy bitcoin/etc..)

[calian]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it. 

That means I would make a profit on every trade.  Trading is a zero sum game so the machine would make a loss on every trade.  Eventually all value in the machine would be destroyed.
 

It cannot be any other way.  There is no such thing as a perpetual motion machine or magic sausage machine. 

Maybe someone more skilled than I can show this mathematically. 

During periods of low volatility arbitrage opportunities disappear. During periods of high volatility the machine would need to widen the spread to protect itself as we see coinbase occasionally do. To avoid going bust the machine may need to be programmed so that it does not provide near market prices at times but that wouldn't stop it from providing a valuable service, even then. Envision a machine at an airport that would convert the last remaining change from your pocket in a country you never intend to visit again into BTC. Even if you only get half the fair market value it's still more useful to you than coins you can never spend.

[piramida]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it.  

yeah right, with a 3% operator fee on every trade you would do well! also remember, that machine's operator can hedge large trades on an exchange, in real-time.

[HairyMaclairy]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it.  

yeah right, with a 3% operator fee on every trade you would do well! also remember, that machine's operator can hedge large trades on an exchange, in real-time.

I don't think the original proposal was for the algorithm to be market linked. If so, then that changes things.

[calian]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it.  

yeah right, with a 3% operator fee on every trade you would do well! also remember, that machine's operator can hedge large trades on an exchange, in real-time.

I don't think the original proposal was for the algorithm to be market linked. If so, then that changes things.

I don't see why not, the bitcoin exchanges aren't refusing to do business with other bitcoin businesses. I do see how you could say that shouldn't be called "closed loop" though.

[HairyMaclairy]

Yeah if it is just a spread off bitstamp and the spread varies whether the marine is low fiat / high BTC or vice versa than that sounds perfectly sustainable and not subject to arbitrage (except as an arbitrage play against Bitstamp).

[zachcope]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it. 

That means I would make a profit on every trade.  Trading is a zero sum game so the machine would make a loss on every trade.  Eventually all value in the machine would be destroyed.
 

It cannot be any other way.  There is no such thing as a perpetual motion machine or magic sausage machine. 

Maybe someone more skilled than I can show this mathematically. 

You are not an economist either!

You have just demonstrated why it would work! Imagine an urban area with real time info online on the price of all the machines. There would be apps to win form interested people when they were close to a machine that had deviated from the mean exchange rate. The would then sell or buy bitcoins, thus restocking the machine.
This arbitrage is not zero sum. It is actually a more opportunistic and decentralised way to replace a network of security vans who periodically withdraw and deposit money from banks, with all parties taking a cut on the way.

So you could do your arbitraging and be happy you are providing a useful service to the community!

[calian]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it. 

That means I would make a profit on every trade.  Trading is a zero sum game so the machine would make a loss on every trade.  Eventually all value in the machine would be destroyed.
 

It cannot be any other way.  There is no such thing as a perpetual motion machine or magic sausage machine. 

Maybe someone more skilled than I can show this mathematically. 

You are not an economist either!

You have just demonstrated why it would work! Imagine an urban area with real time info online on the price of all the machines. There would be apps to win form interested people when they were close to a machine that had deviated from the mean exchange rate. The would then sell or buy bitcoins, thus restocking the machine.
This arbitrage is not zero sum. It is actually a more opportunistic and decentralised way to replace a network of security vans who periodically withdraw and deposit money from banks, with all parties taking a cut on the way.

So you could do your arbitraging and be happy you are providing a useful service to the community!

Exactly! So the community are the delivery mechanism keeping the machine in equilibrium with the world markets. When are we going to get a truly open two-way ATM so this can be tried?

[calian]

Here are links to all the current ATMs and projects I could find:

Cash2BTC
http://motherboard.vice.com/blog/cash2btcs-briefcase-sized-atm-is-bitcoin-banking-made-portable
http://www.reddit.com/user/Cash2BTC

Open Exchanger
http://www.youtube.com/watch?v=A4KvAgJx4GU
http://www.reddit.com/r/Bitcoin/comments/1uj9u7/first_opensource_bitcoin_atm/
http://openexchanger.com/

Lamassu
https://lamassu.is/

Robocoin - the only available 2-way ATM, retains control over operation of the unit.
https://robocoinkiosk.com/

[calian]

The Skyhook - $1000 open source ATM, appears to be a one way machine
http://www.coindesk.com/skyhooks-open-source-bitcoin-atm/
http://www.youtube.com/watch?v=FPh3iAPK0V0

[HairyMaclairy]

I am most definitely not a mathematician. But I don't think it would work.

I would stand in front of the ATM all day and arbitrage it.  

That means I would make a profit on every trade.  Trading is a zero sum game so the machine would make a loss on every trade.  Eventually all value in the machine would be destroyed.
 

It cannot be any other way.  There is no such thing as a perpetual motion machine or magic sausage machine.  

Maybe someone more skilled than I can show this mathematically.  

You are not an economist either!

You have just demonstrated why it would work! Imagine an urban area with real time info online on the price of all the machines. There would be apps to win form interested people when they were close to a machine that had deviated from the mean exchange rate. The would then sell or buy bitcoins, thus restocking the machine.
This arbitrage is not zero sum. It is actually a more opportunistic and decentralised way to replace a network of security vans who periodically withdraw and deposit money from banks, with all parties taking a cut on the way.

So you could do your arbitraging and be happy you are providing a useful service to the community!

Look you can play this game in your own bedroom.  Put a pile of bitcoin (monopoly money) on your bed along with your spare change and pretend that is the ATM.  Pick the current market price as the starting point.  Then flip a coin and if it's heads increase the price of bitcoin by 10 USD and if tails reduce the price by 10 USD.

Every coin flip do an arbitrage trade against the machine (your bed).  The machine plays catch up and sets it's new price to match  the "market price" after the trade.  You will quickly find that the machine (your bed) runs out of money OR bitcoin and becomes stranded on the wrong side of the market price unless you run a huge spread which makes it unprofitable to trade.  

[calian]

Does anyone know anything about this one? Looks like a Robocoin clone for $13,000.

https://bitcoinatm.com/

The site itself was for sale here back in 2012

https://bitcointalk.org/index.php?topic=127328.0

         BitcoinATM      (For sale in its entirety)
 
California 'C' corp
Authorized Capital:  10 million shares, with 8 million shares of Series A Common Stock (voting) and 2 million shares of Series B Common Stock (non-voting)
 
Price: BTC2000  BTC1500 (negotiable terms)
 
Also included:
1.   One beta machine: Genmega GK1000 Kiosk (in good condition) running windows xp pro with ActiveX drivers for the bill acceptor, printer, card reader etc.
2.   Domain: www.BitcoinATM.com
3.   The brand: logo, miscellaneous artwork and decals designed in Adobe Illustrator, 2 commercials and extra unused video footage done by Digivid Media… pictures taken at the Vegas Consumer Electronics Show in MtGox booth.
4.   Business Plan: (Rough draft)
5.   Code: Client/Server both running on the machine for development purposes. Administrator’s password (control) for the code which was placed on Github as open source.
Version 1 is an executable but I am not sure what tools were used to create it because the source code has been lost, so it will need to be decompiled.
Version 2 is php, a bit more functional and easier on the eyes but needs some patching.
6.   Contact information for:

• Original programmers C++ and PHP.
• India based programmers who assisted.
• Alternate programming options who are well established in the ATM business but were not used due to lack of funds.
• Everyone who expressed interest as investor, collaborator or customer.

•   Buyer bears all shipping and legal transfer cost.
•   Buyer may request seller to file papers to dissolve, surrender, or cancel this corporation. This may be preferable in some situations.
•   Buyer should be aware of the minimum annual tax in California for corporations with no revenue is $800.
•   Third party escrow may be used if mutually agreed upon.
 
Contact:

Todd Bethell, CFM, MBA
toddbethell@fastscanning.com
toddbethell@BitcoinATM.com
tbethell08@merage.uci.edu
Work: (949) 340-5438
Cell:949-394-5932

[P_Shep]

Look you can play this game in your own bedroom.  Put a pile of bitcoin (monopoly money) on your bed along with your spare change and pretend that is the ATM.  Pick the current market price as the starting point.  Then flip a coin and if it's heads increase the price of bitcoin by 10 USD and if tails reduce the price by 10 USD.

Every coin flip do an arbitrage trade against the machine (your bed).  The machine plays catch up and sets it's new price to match  the "market price" after the trade.  You will quickly find that the machine (your bed) runs out of money OR bitcoin and becomes stranded on the wrong side of the market price unless you run a huge spread which makes it unprofitable to trade.  

You're still not getting it. The ATMs don't JUST use the market price, it also uses the amount of cash it has left. Hence the 'closed loop' part. So the last $10 it has, might, for instance, cost you 200% market value. Add to that a 3% service charge there won't be much, if any, scope for arbitrage.

[spin]

You're still not getting it. The ATMs don't JUST use the market price, it also uses the amount of cash it has left. Hence the 'closed loop' part. So the last $10 it has, might, for instance, cost you 200% market value. Add to that a 3% service charge there won't be much, if any, scope for arbitrage.

You probably also need something for when the machine get's full of USD (can they get full?).  Probably need to start making the BTC more expensive then because you may need to go empty it.  

I guess you could put in dynamically increasing margins over the market price in each transaction up to being full or empty such that it would cover (or more than cover) the cost of physically emptying/refilling the USD?  

You could probably (!) get a statistical distribution as to how each marginal transaction would affect the probability (machine empty or machine full) and load that as a minimum margin (over the market price).

[HairyMaclairy]

Look you can play this game in your own bedroom.  Put a pile of bitcoin (monopoly money) on your bed along with your spare change and pretend that is the ATM.  Pick the current market price as the starting point.  Then flip a coin and if it's heads increase the price of bitcoin by 10 USD and if tails reduce the price by 10 USD.

Every coin flip do an arbitrage trade against the machine (your bed).  The machine plays catch up and sets it's new price to match  the "market price" after the trade.  You will quickly find that the machine (your bed) runs out of money OR bitcoin and becomes stranded on the wrong side of the market price unless you run a huge spread which makes it unprofitable to trade.  

You're still not getting it. The ATMs don't JUST use the market price, it also uses the amount of cash it has left. Hence the 'closed loop' part. So the last $10 it has, might, for instance, cost you 200% market value. Add to that a 3% service charge there won't be much, if any, scope for arbitrage.

Make up your mind.  Is the ATM market linked or not?  Only if it is market linked with a premium then yes it will work.  If it is running off a pure internal demand and supply algorithm then it will fail.