Introduction to Cryptocurrency ATMs Part 1

Introduction to Cryptocurrency ATMs Part 1

Cryptocurrencies vs regular currencies. Issues with the centralization of financial systems.

 

ATM is an abbreviation that means automatic teller machine. A cryptocurrency ATM allows a person to exchange cash for a cryptocurrency. Some cryptocurrency ATMs have two-way functionality: they allow exchanging cash for cryptocurrencies and cryptocurrencies for cash. Cryptocurrency ATMs are not ATMs in the regular sense of the term “ATM”. Companies use the term “cryptocurrency ATM” to describe the machines that allow to buy and/or sell cryptocurrencies because of the absence of a better term. The way cryptocurrency ATMs work is very different from how regular ATMs work. To explain how they work and what makes them so different, you first need to understand the difference between cryptocurrencies and regular currencies. Then, you need to understand how regular ATMs work. Only then it will become clear what makes cryptocurrency ATMs so different.

 

Cryptocurrencies vs regular currencies

These are several commonalities that most important currencies in the world, such as the United States dollar, the Euro, the Japanese Yen, and others have. They are issued and controlled by the governments of their countries. This is the first big difference between regular currencies and cryptocurrencies, because with cryptocurrencies, there is no central authority and no central bank. Because there is no central bank, cryptocurrency ATMs simply can’t work in the same way that regular ATMs work and this difference brings a lot of advantages to people because as history shows, governments can be very unreliable. Politicians can be saying something and then doing the complete opposite. Oftentimes, they would like to keep their promises, but they simply can’t do that because moving a political system in a certain direction can be very hard, if not impossible.

When it comes to finances and money, one of the concepts that has been behind the actions of governments in many countries all across the globe has been the concept of “too big to fail.” This is the idea that there is a point where businesses become so big that allowing them to go bankrupt would cause extreme harm to the economy. Because of this, it is better for a government and for a country to bail such a business out by providing it with finances to pay the creditors than it is to let such a business go bankrupt.

This idea played a critical role in how the government chose to solve the financial crisis in the United States in the late 2000s.

 

Problems with bailouts. Financial crisis in the United States.

There are two main problems with the bailout approach. The first problem is that when corporations receive the money, their executives typically keep their high-paid jobs and sometimes even receive additional bonuses, which mean that they are getting paid very well despite not doing their jobs the way they were supposed to do them.

The financial crisis in the United States has occurred in part because the banks were making wrong assumptions about the real estate market.

They were basing their business models on an assumption that the prices of real estate would be going up for a long time. Because of this assumptions, banks were allowing anybody and everybody to get a mortgage for a home or several homes.

Here is an example that illustrates why and how they were able to do that. Let’s say a home is worth $250,000 and a person gets a mortgage for $250,000, with no money down. No money down was a very common practice during the bubble. If the home is going to be worth $275,000 say, in a month, then even if the person can’t pay the mortgage, the person will be able to sell the home for $275,000, pay back the $250,000 plus interest to the bank and keep the profit.

Banks were giving out the mortgages and then packaging then as investment vehicles and selling them to other banks. This is one of the reasons why the government of Iceland had to take over three out of the largest banks in the country: the banks were buying investment securities that turned out to have no value.

The flaw in the logic in the example above is very simple. People that could not afford mortgages were getting mortgages in hopes of selling their homes shortly and making a profit. There came a point where the number of homes for sale was too big and there were not enough qualified buyers. The timespan that the properties were spending on the market started to increase and the prices started to go down. The people could not afford to pay the mortgages and they also couldn’t sell the homes, which means that banks started to lose money.