Starting a Bitcoin (ATM) business by Zach and Josh Harvey, Co-Founders of Lamassu

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In the following video from the Bitcoin meetup held on 1 May 2017 in Zurich, Zach & Josh Harvey, Co-Founders of Lamassu talk about their company, why they started a Bitcoin business and what it’s like.

Lamassu Inc. is one of the first bitcoin ATM producers and oldest Bitcoin companies still operating today. Their Bitcoin machines are among the most popular (top 3 manufacturer list), with almost 400 machines deployed all over the world.

In the first part of the video, Zach and Josh talk about the history of Lamassu and a general overview of the business, while in the second part they answer the questions from the audience.

General Overview

It was in 2010 when brothers heard about Bitcoin. At that point, it was just a crazy idea that somebody created a decentralized currency that could mean a lot to the world. At the time they had a guitar store in Tel Aviv and just tracked it a bit. At one point when Bitcoin made a surge from 50 cents to 30 dollars, they decided to accept it in their guitar store. Surprisingly enough nobody bought a guitar with Bitcoins. Shortly afterward they decided they had enough with Israeli bureaucracy. They moved to New Hampshire and joined the free state project which is a very cool project for libertarians. They opened another guitar store there and started to handle orders in Bitcoin.

In July 2012 Josh had an idea to start a Bitcoin meetup in New Hampshire. To this day it is the longest lasting meetup ever. After that, they started a project to build a bitcoin ATM. The idea was very well accepted. People were excited at how easy would be to get bitcoin. So they decided to abandon everything else they were doing and devote their selves to producing a first commercial bitcoin ATM.

Their big target at that time was the San Jose conference in 2013. They weren’t sure what they are going to do since all that they had was an orange box that looked like a science project.

Lamassu Bitcoin ATM Prototype
Lamassu Bitcoin ATM Prototype, 2013

So they looked for industrial designers all over the world, and eventually, find one that they were impressed with in Portugal. He did something miraculous, which was to create a steel prototype from scratch in 1-2 weeks time, where all the components fit perfectly. At that conference, people were delighted with their project, which gave them the motivation to continue with the production.

In late 2013 they shipped their first ATM and been doing it ever since. Their machines are all manufactured in a small facility in Portugal, and pretty much handmade. At that point, they are been working on a new model while the first model they designed was the one that was selling.

There were some easier times, like when the first time Bitcoin hit a 1000 dollar mark. At that time it was easier for people who bought Bitcoin at a price of 50 cents, to by ATMs. Brothers figured that someone that is interested in Bitcoin and has a Cafe, Library or a Convenient Store would buy a bitcoin ATM for their place.

As things started to slow down with Bitcoin in 2014, something interesting started to happen. People had a lot more time to stop and plan for the long-term and how to make a business out of this. A lot of people that had single machines started selling them to operators that had 4, 5 or even 15 machines.

With that different needs came to life. One of them was regulations. They want to operate in this jurisdiction and for that, they need to know the identity of the person using the machine. Another one was that perhaps someone has 5 machines but their system is designed to have a server per machine. These were some of the things that they needed to figure out midway and realize how to plan for the next level.

At the earlier stages, they wanted to figure out a way to get the bitcoin ATMs to ones that aren’t sure what Bitcoin is but might use it. The first thing that came to mind was remittance, which is a very tricky issue for bitcoin ATMs because if you are sending anything between 20-50 dollars and you have a 15% fee on each side it is not going to be worth it. After several months they realized that this was a waste of time and had to go back to the core purpose of their machine, which is making it as easy as possible for beginners or people who choose to use cash instead of online exchange to use their machines.

Q&A Section

  • How much does one of this things cost?

Our base model the Douro is 6000 dollars and it is cash to bitcoin only. The two-way solution Santo Tirso would be 11000.

  • Do you make something on each transaction or do you just sell them?

The answer is no. Some manufacturers that have centralized servers do that. But we choose to have a decentralized system. We do not run any servers that are in charge of sending the money or seeing any of the user data. So we cannot have any of the money because we do not have access to it.

  • Since you came from the business of selling guitars, how do you have any IT experience?

Josh is a software engineer, and to this day he has done pretty much all of the software development for Lamassu.

  • What wallets do you use for the machine?

The answer is mobile wallets. The users scan the QR code into the machine. Our next model will actually have NFC support which will not be necessarily easier than scanning the QR code.

  • Have you found the way to monetize from the machines you sold?

No, we haven’t, because it was so important to us to separate from the operators as much as possible.  Basically, there is no info about the machines on the field that is available to us apart from the info operators are willing to tell us.

  • Why did you decide to have a large gap of info between you and the customers?

One of the reasons is that this is Bitcoin. If someone hacked us they will get the info of all of the operators.

  • In transactions that are bitcoin to cash what do you do about the confirmations?

It gives the operator the two options. They can accept 0 confirmations up to a certain amount. If it is over that amount it will ask you to put your phone number and it will send you a code that you need to put into the machine. After the confirmation is done, it will send you another code, you go to the machine, put in the code and it will start to give you the money.

  • Whether you are selling the ATM’s as an industrial product and is there a warranty for the machine. Also is there any global transaction limit for your machines?

So the first question is yes, we sell them as commercial devices and there is a 12-months warranty. The second question is we do not set anything. The operator set the limits themselves.

  • What is an average amount of transactions per day at your knowledge?

I would say it is between 20-30 transactions per day. The average amount is usually around 250 dollars.

  • What currencies can you do on your machine side?

Fiat currencies. The problem is that in most cases they do not support two currencies at the same time.

  • How do you do with new currencies?

It is not something that we do as much as the manufacturer of the bill validators. So we will get a notification that there is a new firmware and we will notify the operators.

  • Can these machines handle counterfeit money?

Since our machines use the same system as the gambling machines we have had 0 cases of any counterfeit money used in our ATM’s.

  • Are there any governments buying your product or just private investors?

Not that I know of, as far as I know, these are just private entrepreneurs. We haven’t been contacted by any governments.

  • What does Lamassu mean?

It is an Assyrian deity that was used as the protector of households.

Summary

As the Bitcoin started to rise, two brothers owning a guitar store, came up with a great idea of designing a bitcoin ATM and make it easier for everyone to exchange Bitcoin for cash and vice versa. After presenting their idea in San Jose conference in 2013 and receiving a great feedback they started their production in a small facility in Portugal. Lamassu is now one of the major manufacturers in the cryptocurrency business and has almost 400 machines deployed worldwide. Bitcoin ATM’s adoption is starting to increase because they offer the commodity to easily make an immediate bitcoin to cash transaction.

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