People are buying digital currency in what might seem unlikely places. Unlike banks and currency exchanges, where people can trade foreign currency and US dollars, a Naperville vape shop, an Aurora gas station, and bars in Elgin and St. Charles are some of the spots where people are purchasing cryptocurrency, which some see as the future of money.

“People typically go online to purchase bitcoins. This is a physical manifestation of that,” Northern Illinois University media studies professor David Gunkel said.

Gunkel, who lives in Chicago and teaches in DeKalb, said he has encountered only one bitcoin ATM himself. “Coincidentally, it was on my way to a TV interview about bitcoin. The one I saw was at a currency exchange in the Thompson Center in downtown Chicago,” he said.

The machine at Vape N Tobacco in Naperville is provided by CoinFlip, a three-year-old Skokie-based business started by Daniel Polotsky and a few of his friends, the company’s chief compliance officer, Larry Mascolino said. The machine in Van Buren Place is from four-year-old Chicago-based Digital Mint, company co-founder and president Marc Grens said.

Mascolino said CoinFlip founders saw a need in the growing cryptocurrency market for an easy, convenient way for the average consumer to get involved.

CoinFlip’s machine in Naperville allows people to buy bitcoins along with ethereum and litecoin. Grens said his business deals almost exclusively with bitcoin, the oldest and most widely-known type.

While bitcoin has been around since 2009, interest in the cryptocurrency sparked in December when the price of coin peaked at $20,000 after starting 2017 at less than $1,000.

NIU’s Gunkel said, “Cyptocurrency is a form of decentralised digital money where cryptographic techniques are utilized to control the generation of units of the currency and to verify the transfer of funds. It is therefore a kind of virtual cash that operates without the need for trusted third-party intermediaries like a central bank, a government treasury or credit card company.”

“We believe it’s the future,” Mascolino said of cryptocurrency.

“It’s important to note that all financial systems are supported by one fundamental pillar: trust. Instead of placing trust on governments, banks and other escrow services to handle our daily transactions, bitcoin paved the way for a new math-based trust system,” he said. “It is now possible to facilitate payments and execute contracts by using computer code as our new autonomous escrow.”

Naperville vape shop manager Jay Gadhiya said he was eager to get a machine after he was approached by CoinFlip and researched the market. “This is the next movement,” Gadhiya said. “I wanted to get ahead of the crowd. I saw it coming.”

He said he got involved in the vaping business early, opening the Odgen Avenue shop in 2011, and he wanted to get into the world of cryptocurrency before everyone else hopped on the bandwagon.

The machine was installed last May and stands adjacent to a regular ATM machine. “It was super slow at first; now I get 50 people a week,” Gadhiya said of his CoinFlip machine.

Gadhiya believes so much in the future of bitcoin, he said he’s reached out to see if he can develop a method that allows customers to pay for items in his shop via bitcoin.

Only a handful of companies in the United States, such as Overstock, Expedia and gift card seller eGifter, accept bitcoin for payment. There is a website for ordering pizza using bitcoin, but the service is not available in Naperville.

CoinFlip has 36 machines up and running across the country, with 25 in Illinois and others in Las Vegas, Charlotte, and Nashville, Mascolino said. One machine in Champaign and one in Chicago allow people to obtain US currency from bitcoin; the rest are for people to purchase digital money with actual cash.

Grens said Digital Mint currently operates in 14 states and has 120 locations that include either machine kiosks, iPad-equipped tellers or point-of-sale setups.

Mascolino said CoinFlip rents space for its machines in businesses for $100 a month and sometimes shares the machine’s profits with the location’s proprietor.

Gadhiya earned the flat monthly rate for six months as the shop built up clientele. Now he’s earning a percentage of the profits, though he wouldn’t say how much he collects.

“The best part is I don’t have to do a thing” other than provide the space and electricity, he said. “If (the machine) goes down, (the company) will send someone out. And it’s back and running within a day.”

To fund the machines, CoinFlip charges a 6.9 per cent transaction fee, which Mascolino said is lower than that 12 to 16 per cent CoinFlip has seen its competitors charge.

Grens said the percentages on Digital Mint transactions can vary from 5 per cent to 12 per cent, depending on the amount deposited. He likened that to the exchange rate model that travelers experience when they swap one nation’s currency for another’s.

According to the CoinFlip website, those who use machines first have to have an app on a cellphone for a digital wallet. Such wallets are needed for transactions in the digital currency world, Gunkel said.

For buying amounts up to $500, purchasers must input their cellphone numbers, with the purchase verified through a text message that contains a numeric code. For amounts between $500 and $3,000, a one-time registration is required, and a Social Security number and other enhanced verification is required for purchases from $3,000 to $7,500. That process involves having the machine’s camera take a photo of the buyer’s state-issued ID and the buyer’s face.

Digital Mint requires a government issued ID and a cellphone with text messaging, Grens said. Its daily ATM limit is $8,000 while the maximum teller transaction is $10,000.

Mascolino said the company looks for places that are open long hours, if not all day.

Grens said Digital Mint machines mostly are located in currency exchanges and “places where people are used to doing transactions.” One of its first spots was in Naperville in the Van Buren Place office building, he said.

Other Fox Valley locations with crytocurrency ATMs include the Amstar Gas Station, 12 Hill Ave., Aurora; Rookies sports bar, 1545 W. Main St. in St. Charles; and the CFSC New Chicago State Currency Exchange, 8 S. State St., and Eaton’s Redwood Inn, 118 W. Chicago St., in Elgin.

NIU’s Gunkel mentioned that bitcoin and other digital currencies have been used for nefarious purposes, including paying off ransomware attacks on computers and transactions related to dark web activities, such laundering money related to drug dealing, illicit sex and human trafficking.

Naperville Police Cmdr. Lou Cammiso said he’s not heard of any cases occurring in Naperville in relation to the machines.

A common theme when new technologies emerge is how criminals are putting them to use, Mascolino said. Criminals have been laundering money in numerous was before bitcoin existed and will always find ways to do so, he said.

Because people have to register to obtain digital wallets and conduct online exchanges where bitcoin is bought and sold, there is information authorities could access by warrant to track, he said.

Concern about the potential for scams and deceptive practices led Facebook this week to announce it would ban ads that promote cryptocurrencies, and India’s finance minister called for the government to “eliminate the use of these cryptoassets in financing illegitimate activities.”

The news sent the price of Bitcoin into a tailspin.

As with the stock market or any other sort of financial matter, Grens said he strongly suggests people do their homework first and research digital currency in advance of buying. “We’re in the second inning of the maturation of an industry,” he said. Despite the losses in January, Gadhiya is confident bitcoin will rebound.

“If you put $100 in a bank for a year, how much would you make? Not much. If you invested that $100 in Bitcoin, you have the potential to make a lot more, and people do,” Gadhiya said.

He said most of his customers are investing their extra cash with the hope the market will spike again.

For others, they’ve become virtual day-traders, following the ups and downs of the cryptocurrency market and buying and selling as the market ebbs and flows.

The risk is always there, Gadhiya said. “A guy can go down the street and spend $20 on a lottery ticket, or he can do the same with bitcoin,” he said.

Grens said he doesn’t seen digital currency as replacing other types of currency but as becoming “the back-end settle layer to authentication and protection against fraud.

Mascolino said the underlying technology referred to as the blockchain is what makes bitcoin special.

“The best way to think about it is to envision a spreadsheet on your computer,” he said. “This spreadsheet keeps track of every transaction that occurs on the network. Anybody can support the network if they want to. All they have to do is dedicate computer resources and some electricity and they will receive a copy of the spreadsheet,” Mascolino said.

“The genius of the blockchain design is what makes bitcoin inherently valuable and it has many different applications outside of currency. Other projects apply the blockchain to data storage, programmable contracts, and arti?cial intelligence. The world will be very different in the coming decades, as the exciting potential of this new technology unfolds.”