Crypto on and off ramps are an important part of Web3 that aims to attract more people to the crypto world. As you know, traditional finance and DeFi are two different worlds with their own approaches and methods of asset management. That is why it has become an important task for many developers to come up with a solution that would allow TradFi and DeFi to work together and offer innovative new experiences for Web3 users.
This is how crypto on and off ramps appeared - various methods and services that allow you to buy and sell cryptocurrencies using fiat money. It is crypto ramps that allow users to perform various operations in the crypto space. Thanks to them you can use fiat to buy coins and tokens or convert them back into fiat currency. Today's article from Notum will help you understand what crypto on and off ramps are, how they work, what services they offer, and how they are used in the ever-evolving Web3.
What Is a Crypto Ramp?
With over 400 million people around the world using cryptocurrencies and the number is constantly growing, there is a need to know how to purchase tokens and exchange them back for fiat. The easiest, safest, and most proven way is a crypto ramp, specifically on- and off-ramp crypto solutions. In simple words, the crypto ramp is a kind of bridge that connects the Web3 and DeFi ecosystem with traditional finance.
In order to get started in the crypto space, you first need to have at least some amount of cryptocurrency. For the user to purchase it, there’s a need to use a crypto on-ramp. Technically, a crypto on-ramp is any exchange that can convert fiat money like dollar, euro, and others into cryptocurrencies on different blockchain networks. Thus, cryptography makes this method as simple and effective as possible. So, crypto on-ramps are a convenient and safe way for users to purchase the necessary cryptocurrency using fiat money.
How Do On-ramps Work?
The principle of crypto-on-ramp operation is quite simple. To turn fiat into a digital currency, three steps are required:
- Application for crypto purchase. First of all, the user must fill out an application for buying cryptocurrency, choosing among various currency pairs, such as EUR-BTC, USD-ETH, and so on. In addition, they must enter the address of the crypto wallet, as well as indicate the number of purchased tokens.
- Choice of payment method. After filling out the application, they need to choose one of the proposed payment methods - Visa, Google Pay, Apple Pay, Mastercard, and others. Next, you need to complete the payment.
- Checking the crypto wallet. After making a payment, they will need to go through a wallet verification. Even though the purchase of tokens or coins may be instant, the blockchain will still need to process the transaction, which takes from a couple of minutes to an hour.
What Are On-ramps Used For?
In 2023, crypto-on-ramp has numerous applications. For example, many companies that are somehow connected with DeFi and Web3 are implementing this technology so that users can buy cryptocurrency. Also, they are widely used in crypto wallets, as well as centralized and decentralized exchanges (CEX and DEX). Moreover, this service has also been widely used in crosschain bridges, swap services, different NFT platforms, DeFi games (like L2E) and more.
Another integral part of the crypto world is a crypto off-ramp - a way to convert cryptocurrency into fiat money. “Off-ramps are often used by people who want to sell their cryptocurrency and withdraw the proceeds in the form of currency that is more widely accepted in the real world.” – Utorg. However, users should be aware that off-ramps have their own rules and fees, so it is important to explore the various options and choose the best one.
How Do Off-ramps Work?
As you know, off-ramps are necessary so that users can sell their cryptocurrency assets and receive fiat money in return. How does this conversion take place? Let's also look at three simple steps:
- Crypto selling order. The first thing to do is to choose a currency pair, namely the available cryptocurrency and the fiat that the user wants to receive in the end. In addition, for the sale, users must specify the number of convertible tokens or the amount that the user wants to receive.
- Withdrawal method. When entering card details, it is needed to provide such information as first name, last name, IBAN, and address of the token recipient. Next, the site will ask the user to check all the specified information about both the order and the withdrawal method.
- Transfer of cryptocurrency. The last step is to transfer the user's tokens or coins to another user on their crypto wallet. After confirming the receipt of assets by the second party, the user receives a certain amount in fiat currency.
What Are Off-ramps Used For?
Off-ramps are just as important in the Web3 world as on-ramps. They are also widely used on DEX and CEX crypto exchanges as users trade and convert various digital assets into fiat currency. Another way to use off-ramps is with e-commerce platforms. Some stores accept cryptocurrencies as payment for goods and services, so off-ramps also help in converting assets. What’s more, companies and freelancers who receive payments from abroad often use crypto as a cheap way to make cross-border transactions, after which they can convert it into any currency. Other use cases for off-ramps include what was listed in on-ramps, namely wallets, swap services, cross-chain bridges, NFT platforms, and so on.
What Is the Importance of Crypto On- and Off-ramps to the Web3 World?
On- and off-ramps is the very tool in the cryptocurrency world that allows users to easily purchase and sell tokens. Moreover, the mass adoption of crypto will also be impossible without ramps, which already now perform important functions in Web3.
Ease of use
On- and off-ramps is a convenient and easily accessible opportunity for users, companies, and businesses to try their hand at cryptocurrency trading. Thus, without the existence of crypto ramps, the process of acquiring and selling digital assets would be much longer and more laborious.
- Providing liquidity
Liquidity is referred the ability to easily buy or sell an asset without major changes in its value. Thus, on- and off-ramps directly contribute to increasing the crypto liquidity, which facilitates the interaction between buyers and sellers and helps to complete transactions. Moreover, thanks to crypto ramps, market makers and liquidity providers can also participate in the crypto market. This step has a positive effect on the stabilization of the price of a particular crypto asset.
- Management of risks
With a variety of platforms and methods for buying and selling cryptocurrencies to choose from, investors can look for the most suitable options that suit their needs and level of risk. While CEX is more prone to hacking, it has more liquidity. DEX, in turn, offers privacy, but a greater risk of fraud. In any case, on- and off-ramps give users the opportunity to choose the most convenient option for them.
The ability to use on- and off-ramps also makes it easier to comply with government regulations related to tracking financial transactions and income. Although this feature may not seem as important as others, it still guarantees the legitimacy of all transactions.
Since on- and off-ramps allow the fastest and most comfortable exchange of cryptocurrency back to fiat, users have a sense of security and safety. Since crypto is still a volatile and risky investment for beginners, the ability to get money back makes it easier to buy tokens and interact with the crypto world. Moreover, the process of using crypto ramps is pretty safe itself.
On- and off-ramps are an important aspect of the expansion of the world of cryptocurrency and the use of digital money in everyday life. They are a kind of bridge between the traditional financial sector and the DeFi space. Thus, on- and off-ramps in the Web3 world give users the opportunity to exchange fiat money for digital currencies and vice versa. Since the process of using crypto ramps is as simple and accessible as possible, each user gets the opportunity to try interacting with cryptocurrency and learn the specifics of the blockchain. The ability to quickly convert crypto to fiat also helps users feel secure, knowing that they can always return to TradFi if needed.
In the future, it is expected that on- and off-ramps will become an even more integral part of Web3 and will directly help the introduction of cryptocurrency into mass daily use. Continuing to be a bridge between the traditional monetary system and the world of decentralized finance, crypto ramps directly popularize and seamlessly implement cryptocurrencies.
Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.