Crypto On-Ramps and Off-Ramps: The Bottleneck for DeFi Economic Energy

Have you ever tried to buy crypto on an exchange and had to wait days or even weeks before gaining access to your crypto? Yeah, me too. This is one of the ugly side effects of the crypto on-ramps problem. 

Converting fiat into cryptocurrencies, and vice versa, is a complex process which typically involves lots of middlemen and regulation.

Even worse, crypto on-ramps are the key bottleneck which allows economic energy to flow into DeFi ecosystems. 

Fortunately, there are many projects working to solve this problem to make a brighter future for all DeFi investors alike. 

Let’s dive right into it. 

What are Crypto On-Ramps?

Crypto on-ramps allow users to easily buy crypto with fiat. As more payment methods are available, more people buy coins like Bitcoin and Ethereum. Equally important are the opposite, crypto off-ramps.

It’s never been easier to buy cryptocurrency. Yet, there are only about 300M crypto users worldwide. If you thought the top cryptocurrencies are already priced in, think again.

Crypto-on ramps refer to all payment processors and platforms that ease the exchange of fiat for crypto. They’re easy to take for granted after making hundreds of trades. But imagine how different market prices would be if there were, say, 3B users instead of 300M.

Cryptocurrencies gain value when more people use them (law of supply and demand). Plus, if your platform becomes that place where people buy their first Bitcoin, those future traders could become long-term customers. That’s why companies spend so much effort to partner with payment processors, build Bitcoin ATMs, sell cryptocurrencies online, or promote how easy it is to buy with them (ever heard of Crypto.com?).

What you’ll notice is that there are far more on-ramps than off-ramps. So how do you know which one to choose?

Cheapest Crypto On-Ramps

As a rule of thumb, the most convenient methods are the most expensive. For example:

• An ATM allows anyone with cash to buy or sell Bitcoin. But fees are 10%, and they’re not always available.
• A good P2P marketplace can cost <1% instead. But trades aren’t instant, and not all users are secure.

The most common way to buy crypto is through exchanges. Generally, the largest ones are the cheapest and have the most payment options (e.g., Binance). As an exception, some exchanges specialize by country and offer special, cheaper payment methods. Like:

• IDEAL payments in the Netherlands (e.g., Bitonic)
• Interac e-transfers in Canada (e.g., NDAX)
• OSKO, POLi, or PayID in Australia (e.g., SwyftX)

By default, global exchanges accept bank account transfers, credit cards, and some debit cards. While not always available, the cheapest are transfers from interbank networks (SEPA in Europe, ACH in the USA, EFT in Canada…).

The absolute cheapest is to trade cash with a friend who can send you crypto.

What Is a Crypto Off-Ramp?

Cryptocurrencies aren’t replacing fiat anytime soon. So if you’re going to buy, at least you want the option to convert back to real currencies. Off-ramps are a very attractive feature, and without them, Bitcoin might have never taken off.

These services are rarely available for two reasons. (1) Companies don’t benefit when you withdraw your money, and (2) governments don’t want to merge fiat with currencies they can’t regulate. Because of that:

• Expect cryptocurrencies to become more regulated to create those off-ramps
• Expect companies to offer goods and services instead of fiat money
• Don’t expect DeFi off-ramps to appear anytime soon

When you think about it, it’s not that problematic. Fiat money is an exchange medium, and you can hold it in the form of stablecoins (USDT, USDL, USDC…). If you were able to buy anything with crypto, would it matter?

That’s more realistic than trying to regulate decentralized blockchains (e.g., some countries banned crypto without success). That’s why more and more businesses accept crypto payments. Some of those products you buy can easily be flipped for cash.

Best Fiat to Crypto Off-Ramp

In practice, there are two types of exchange platforms: crypto on-ramps or both. Off-ramp providers have no reason not to accept crypto deposits, as they have the technology, and it benefits their liquidity. So while many on-ramps have no off-ramps, all off-ramps have on-ramps:

• Crypto ATMs allow you to access your wallet and sell Bitcoin for cash
• Centralized exchanges use 3rd-party processors and banks for withdrawals
• Peer-to-peer marketplaces (P2P) have as many cash-out methods as the supplier chooses

The cheapest off-ramps are competitive P2P marketplaces. When there’s a lot of liquidity, suppliers may improve their offer to capture more orders. Like reducing their fee or offering more payment methods.

If you don’t trust these platforms, your best options are exchanges. While you shouldn’t store your crypto there, it’s worth looking into debit cards if they offer any. They’re one of the best off-ramps because it’s easier to transfer from a card to a bank, and you earn cashback based on your average balance (so it’s a win-win).

For example, Binance increases card privileges when you hold large quantities of their coin. 

Why Are On-Ramps Important?

In the world of cryptocurrency, on-ramps and off-ramps are self-reinforcing. It benefits users and businesses to link fiat with crypto, whether it’s to save money, protect it, or leverage it. Many regulators want this merge to happen, as they both have incompatible differences, which can put at risk money as we know it.

Traditional money is about trust and the legal binding of contracts. Cryptocurrencies are trustless and impractical to regulate. While looking for a way to connect both, the current easiest solution is to integrate cryptocurrencies as much as possible. Eventually, crypto might have so much utility and privileges and there’s no interest in switching in the first place.

FAQ

Are crypto on-off-ramps free?

It’s not free to exchange fiat for crypto. There are network costs when buying coins and banking fees when withdrawing. But there are ways to spend almost $0:

• Get from the exchange a debit card with +2% cash back to compensate for withdrawal fees
• Find a friend or someone willing to trade at real market rates (P2P exchange). You exchange crypto for fiat money or cash (depending on whether it’s online or in person)

How does fiat on-ramp work?

Fiat on-ramps are different from crypto on-ramps. They allow you to buy fiat currencies using any other currency:

• When you pay in crypto on fiat on-ramps, it’s the same as crypto off-ramps
• When you pay another currency on fiat on-ramps (like GBP for USD), it’s a foreign exchange (Forex) or USD on-ramp

It’s recommended to buy other fiat currencies to hedge against national inflation.

Can I deposit fiat in Metamask?

Metamask is a Web3 wallet, and decentralized platforms don’t support crypto ramps yet. To deposit fiat in Metamask, you would need to first buy crypto, send it to your wallet, and convert it to a stablecoin like USDT. The only way to deposit fiat directly is if Metamask partnered with a payment company.

According to the news, Maker DAO has partnered with several since 2018. Still, crypto ramps are nowhere to be found in their dApp.