An on-ramp is any platform that facilitates users to acquire crypto assets or enter their markets. On the other hand, an off-ramp is a platform that facilitates a user to dispose of crypto assets or exit their markets. Some platforms perform both of these two functions.
Crypto On-ramps
The platform or facility one uses to acquire a crypto asset depends on the nature of the asset in question. For example, fungible tokens (digital coins and utility tokens) and non-fungible tokens (NFTs) on the blockchain are purchased in different types of markets. The former is on exchanges like Coinbase and the latter on NFT marketplaces like OpenSea.
It is also common for someone intending to acquire crypto assets to be guided by their ultimate goal. For example, someone who wants day trade cryptocurrencies might prefer to use an exchange that offers them additional services such as market charting tools. Meanwhile, those who HODL don’t really need such tools.
The technical know-how of the user is also a factor in the on-ramps they choose to use. For example, more tech-savvy individuals will likely use decentralized exchanges (DEXs) such as Uniswap. At the same time, those who are not are likely to be more comfortable using centralized custodial wallet exchanges such as Coinbase.
It is also common to consider the cost involved. Some on-ramps charge more fees than others.
With that stated, the following are the common crypto on-ramps:
Exchanges
The easiest way to acquire cryptocurrencies and fungible tokens, in particular, is to buy them on exchanges. Indeed, most people get their first cryptocurrencies through exchanges.
These marketplaces facilitate the process of acquiring crypto in several ways. On some, you send fiat money to the bank account of the entity that manages the platform, and in return, it sends an equivalent amount of assets based on the reigning market exchange rates to your wallets.
On other exchanges, you are matched with a seller, and the platform only facilitates the transactions. At no point during the execution of the transaction does the exchange control either the fiat currency or the crypto asset. Marketplaces of this kind are known as peer-to-peer (P2P) exchanges, and the most used are Localbitcoins, Paxful and Bisq.
There are exchanges built on blockchain networks, and smart contracts manage their processes and liquidity. Those of this kind are known as decentralized exchanges (DEXs), and Uniswap is one of them. These exchanges are not controlled by a single entity but by a community of users.
It is important to point out that at the moment, no DEX can facilitate conversions between crypto assets and fiat currencies. This makes it difficult for someone completely new to crypto to use this platform, especially as their initial onramp.
Mining
Mining is the process through which computers on the blockchain peer-to-peer network find consensus on how to update a shared ledger of transactions and smart contract states.
In essence, the nodes on the network participate in maintaining the ledger. In return, those who own and run these nodes are rewarded with newly released coins and the fees users pay. This is known as the mining reward.
Indeed, it is through mining that the first holders acquired crypto assets. Indeed, mining essentially allows you to convert fiat money into cryptocurrencies by buying hardware and paying for energy.
However, this is only applicable on blockchains that use the Proof of Work (PoW) consensus mechanism, like the Bitcoin blockchain.
It has become difficult for the average person to join mining on Proof of Work blockchains and earn crypto. That is because the process has become highly competitive and consumes significant energy.
There are alternatives to proof of work, though. The most used is proof of stake (PoS). This consensus protocol requires nodes on the network to lock or keep coins in a wallet attached to a validating node instead of engaging in energy-intensive hashing of transaction data. Nevertheless, the nodes still earn new coins and fees users of the blockchain pay.
Play-to-earn (P2E)
Blockchain has grown as a technology to support numerous other innovations besides crypto. One of the emerging innovations in the space is the concepts of the metaverse and decentralized video gaming.
Metaverses are virtual worlds on the blockchain that can augment the real world. These virtual environments allow users to acquire sovereign assets, otherwise known as non-fungible tokens (NFTs).
These assets are sovereign as they exist independent of any centrally controlled platform, which means when you acquire them, you get true and complete ownership.
An aspect of gaming on the blockchain that is becoming popular is play-to-earn. In this model, players engage in activities that lead them to acquire and earn digital assets and coins that they can sell on exchanges and other marketplaces for real-world currencies.
An example of a play-to-earn game on the blockchain is Axie Infinity. This game runs Ronin, a sidechain on the Ethereum blockchain.
To compete, players put together teams of animals known as Axies and then engage in strategic wars. The winning team gets tokens known as Smooth Love Portion (SLP), which can be used to buy more assets in the game, such as Axies. The tokens can also be converted to other cryptocurrencies and fiat currencies on exchanges.
Work-to-earn
This concept is close to play-to-earn, but instead of users engaging in playful activities, they perform work-related tasks that help an organization or a project achieve defined goals. This could be tasks such as collecting and providing data.
In software development, this concept is implemented as bounty programs, where individuals get compensated for reporting bugs. The payment can be native tokens or other cryptocurrencies in the blockchain space.
In this category, we also have faucets, where individuals get paid in crypto for doing tasks such as watching ads and filling out survey forms.
NFT marketplaces
The assets that can be created and managed on the blockchain include digital artworks and individual digital files. These assets are turned into non-fungible tokens (NFTs).
It is through marketplaces such as OpenSea, Rarible, and SuperRare that you can buy the assets. Through these same platforms, you can also create (mint) your own digital artwork on the blockchain.
The minting process usually involves uploading a digital file such as a photo, video, or digital art onto the blockchain using a portal that the NFT marketplace provides. Once the asset is minted, you can sell it to other users and get paid in cryptocurrencies.
Airdrops
Tokens are often created to perform utility functions on blockchain platforms and applications. Some development teams sell these tokens to users of their decentralized applications through token sales such as initial coin offerings (ICOs) and initial DEX offerings (IDOs).
Others choose to sell some and issue others free of charge. Then some projects decide to issue all their tokens free of charge to their communities. Issuing tokens free of charge or as a reward for users joining the platform or subscribing on social media channels is known as airdropping.
Off-ramps
Offramps often happen to be onramps also. Examples of the platforms that fall into this category are exchanges and NFT marketplaces. On these two platforms, one can buy and create crypto assets, sell them to others, and get paid in other crypto assets or fiat currencies.
Offramps that are not on-ramps
With that stated, there are a few crypto off-ramps that do not serve as onramps. A good example of a platform in this category is crypto debit cards. They are primarily designed to help you spend your crypto assets in stores that do not accept crypto.
Behind the card is an exchange that converts the crypto assets into the fiat currency merchants accept. An example of a crypto payment card is the Club Swan HODL card.
When you sign up for the service, you are issued a debit card supported by popular payment rails such as Mastercard and Visa. Through an online portal, you can access a crypto wallet through which you load the card through an online portal.
On-ramps and regulations
A general understanding has been that users of crypto remain anonymous. Some also believe that this anonymity makes it easy for some to use the technology for criminal activities.
However, the fact that most users have to go through on-ramp and off-ramp points makes it difficult for them to become completely anonymous in their dealings. That is because on-ramps and off-ramps like exchanges are often regulated businesses that must be licensed and meet regulatory requirements such as Know Your Customer (KYC) and Anti Money Laundering (AML).
Even when decentralized on-ramps and off-ramps are emerging on the blockchain, such as DEXs, crypto users have to, at one point or another, use those that are licensed and regulated.
It is important that a user knows how crypto on-ramp and off-ramp work and the existing options. It is also helpful for them to understand the benefits, risks, and fees involved when using any available options.
Image courtesy of Pixabay.
