There are many reasons why the cryptocurrency industry is booming and attracting hordes of new users. Due to crypto’s unique rules and dynamics, newcomers are comfortably immersing themselves in learning more about crypto by attempting to learn its finer points. However, many may be unfamiliar with where you enter and exit the ecosystem. This is where on-ramping and off-ramping come in.
An Introduction To On-Ramping
On-ramping simply refers to the act of using regular, fiat money, which is used through debit cards in order to purchase crypto. During on-ramping, you leave the state-controlled monetary ecosystem in favor of a decentralized, blockchain-based ecosystem. Alternatively, off-ramping is when you exchange your cryptocurrency for fiat money, or sometimes goods and services.
It is necessary to provide some basic documentation no matter how you on-ramp into crypto. Depending on what platform you are using and your account activeness, you may be required to provide identification. This is to prevent the use of crypto for criminal activities; as this is meant as a way of tracing the source of crypto transactions.
The Options For Crypto On-Ramp
The best way to describe on-ramping is to look at the process of leaving the fiat monetary system and entering the decentralized, blockchain-based monetary system. It is important to know how we can move from one dimension to the other. This can be done through a number of options;
- Centralized Exchanges
New crypto users on-ramping via centralized exchanges (CEX) is by far the most common method. CEX platforms let users accept credit card payments in exchange for coins and tokens, and are typically the first stop on people’s crypto journey. It begins with opening an account when on-ramping through a centralized exchange. You are required to upload a picture of your government-issued ID, a selfie, your address, and your signature for this. Although you can create an account on some CEX’s without undergoing KYC procedures, most exchanges restrict your access until you provide this information.
Wallet ownership is made transparent to minimize fraud and money laundering across platforms, regardless of how the process is implemented. Your account will be created once you have provided this information. You will be able to buy an array of coins and tokens using your debit or credit card, and your crypto will be sent to the platform’s custodial wallet, which was automatically created when you set up your account.
- Decentralizing Exchanges With APIs
As the crypto ecosystem expands and becomes more decentralized, users expect on-ramping options to keep pace. One of the main advantages of decentralization in this context is that newly purchased coins will go directly to your own personal wallet, rather than a custodial exchange wallet. This enables you to retain full control of your crypto immediately after buying it.
- Connect With A Blockchain-Based Monetary System Seamlessly
When it comes to on-ramping, there are a lot of factors to consider. These include security, gas fees, and the type of wallet your funds will go into. A centralized exchange, for example, will require you to use their custodial wallet, which means you don’t have full control over your funds. Moreover, moving your funds to a wallet you fully control is another step that requires your time.
- NFT Marketplaces
On-ramping through non-fungible token (NFT) exchanges is another interesting recent development. Users can take their first steps into crypto by purchasing crypto on NFT platforms using credit cards.
It says something about the industry as a whole that this new on-ramp offers another way for users to enter the cryptocurrency system. New users increasingly enter through NFTs – and not cryptocurrency itself – which speaks to how the industry has evolved from a financial niche to something more culturally mainstream.
- Bitcoin ATMs
Bitcoin ATMs are arguably the oldest form of crypto on-ramping. In Bitcoin ATMs, cash is accepted and converted into Bitcoin; a new wallet is created at each transaction, allowing your newly purchased Bitcoin to be circulated on the blockchain.
The only time you do not need identification to access Bitcoin ATMs is when you are using an exchange. Bitcoin ATMs, however, do not seem likely to be the go-to solution due to the limitation on how much Bitcoin you can create each time, as well as the obvious problem of finding a machine.
The process of on-ramping into crypto can be performed through a decentralized platform or on the other hand, a decentralized exchange as well as by an NFT exchange, or a Bitcoin ATM. However it is important to know that almost all of these methods require you to provide documentation to comply with anti-money laundering regulations. This also depends on where you buy your coins and understanding that the method of payment varies.