Cryptocurrency can open up a whole world of exciting opportunities, but it also comes with its own set of particular financial workings, nuances, and vocabulary. These technicalities and terminology can often get in the way of making cryptocurrency accessible and understandable to the average user, if they’re not sufficiently explained.
On-ramping and off-ramping are simple processes that any buyer or seller of cryptocurrency completes. But, many beginner investors aren’t aware of these terms, and that they actually on-ramp every time they buy crypto. So, what does this actually mean?
What does on-ramp and off-ramp mean?
When buying cryptocurrency, it must be exchanged for something else. And like buying any good or service in your day-to-day life, this is often exchanged for a currency, such as dollars or euros. We call this day-to-day currency fiat currency, which is typically opposed to cryptocurrency.
Simply put, on-ramping and off-ramping refer to the processes of exchanging fiat and cryptocurrency.
When we talk about on-ramping, we’re talking about exchanging fiat currency for cryptocurrency. For example, buying bitcoin by exchanging them for your U.S. dollars is a form of on-ramping. It’s effectively like entering a motorway: exchanging your dollars for crypto is using the on-ramp to allow you to access the crypto motorway.
On-ramp also refers to the platform or service that completes this process for you. An online crypto exchange, for example, can be known as an on-ramp. It can also be used as an adjective, to refer to a particular asset that is in the form of bitcoin (i.e. my funds are on-ramp).
Off-ramping refers to the opposite process, where you exchange your cryptocurrency for something other than crypto. After all, crypto was created for this purpose. Off-ramping can include both exchanging back into fiat currency, or buying a good or service directly with your crypto. But, it doesn’t refer to buying NFTs with your crypto, because NFTs are still on the crypto ramp and therefore there’s no off-ramping.
On-ramps and off-ramps are important to cryptocurrency as they provide a way for investors to access and make use of cryptocurrency. Making cryptocurrency exchangeable for fiat currency has made it attractive to new investors, and greatly increased its popularity.
It’s easier than ever to try out crypto investing with the current ease of on-ramping and off-ramping. And, of course, this is great for increasing public trust and interest, benefiting all cryptocurrency users.
How to on-ramp
There are a variety of ways that buyers of cryptocurrencies can get on-ramp:
Centralized exchanges: The most popular way to on-ramp is through centralized exchange programs or applications. Common examples include Coinbase and Binance. They accept card payments in return for cryptocurrency, therefore completing the on-ramping process for you by exchanging your fiat currency into cryptocurrency. When most people buy cryptocurrency for the first time, this is the form of on-ramping they use.
Decentralized exchanges: With a decentralized exchange, you can on-ramp with fiat currency while still making sure that your crypto goes into a non-custodial rather than custodial wallet. This is good for crypto users who want more control over their funds. These exchanges generally take care of simply the documentation and KYC regulation, allowing a decentralized on-ramping.
NFT markets: Like buying cryptocurrency directly with fiat currency, it’s also possible to directly purchase NFTs with fiat currency. Certain online marketplaces allow you to purchase an NFT with dollars, without the need to exchange to crypto first. This provides a new and exciting way to on-ramp without having to purchase cryptocurrency in advance.
How to off-ramp
Similarly, you have a range of ways to off-ramp, when you want to exchange your cryptocurrency for goods, services, or fiat currencies:
Exchanges: As with on-ramping through cryptocurrency exchanges, you can also off-ramp through these same exchanges. The most common (and often the only) form of exchange is back into fiat currency. The exchange will likely charge a small transaction fee and then pay the money into your chosen bank account.
You can exchange whatever chosen proportion of cryptocurrency you own back into fiat, and this could take between hours and days to be processed. You can off-ramp through a centralized or decentralized exchange, depending on how you originally on-ramped.
Buy goods or services: In some circumstances, it may be possible to exchange your crypto directly for goods or services, allowing you to off-ramp without a fiat exchange. Certain large corporations do currently accept direct crypto payments, including Microsoft, Chipotle, Starbucks, and Etsy.
It’s always worth checking before you make a purchase whether the company accepts crypto. This kind of exchange is still quite new and under development, so don’t always expect it to be possible. But, it’s quickly becoming popular and businesses are increasingly looking to introduce direct crypto transactions.
Crypto debit cards: A number of fintechs and banks are now increasingly introducing crypto debit cards, allowing you to off-ramp as easily as if you were spending fiat with your debit card. The crypto is exchanged to fiat at the moment of purchase, allowing you to purchase anything quoted in fiat currency given that the vendor accepts debit card payments.
Crypto debit cards are an accessible way to off-ramp your cryptocurrency without having to exchange to fiat first, or go to a specific crypto-accepting store.
Cryptocurrency with Hydrogen
Hydrogen offers physical and virtual cards that consumers can add to their digital wallet, allowing them to off-ramp effectively by spending their cryptocurrency in shops or online. The merchant doesn’t need to accept cryptocurrency for the transaction to be approved; the cards can be used at over 10 Million U.S. merchants!
Contact us to learn more about how Hydrogen can help your customers manage their cryptocurrency, and much more.
