Over the last decade, the cryptocurrency industry has become increasingly complex and varied, with an explosion in the number of innovations and the range of platforms built around them.
It has also developed an entire decentralized financial landscape of its own, with the advent of hundreds of platforms that replicate and expand on the capabilities of traditional financial infrastructure — including peer-to-peer lending platforms, decentralized exchanges, liquidity aggregators, and stablecoins.
Between these two spheres are the cryptocurrency on-and-off ramps. These act as bridges that allow users of traditional currencies to gain exposure to digital assets and blockchain-based infrastructure while giving cryptocurrency holders a way to move value back into the real world via fiat currencies.
These platforms can vary considerably in the range of features that they offer, as well as their complexity. Here, we take a look at some of the most common types of on/off ramps and examine their differences.
Things to Consider
Cryptocurrency on and off ramps are designed to make it easy to enter and exit the crypto economy using traditional currencies.
These are essential services that boost the liquidity of cryptocurrencies and act as a crucial bridge between traditional and blockchain-based financial infrastructure. Similar to foreign exchange offices, they allow fiat to cryptocurrency conversions (and vice versa) at a fixed (or variable) exchange rate.
It’s important to note that not all on/off ramps are equal and there can be substantial differences between the quality of the services they provide as well as the fees they charge. As always, cryptocurrencies are notoriously volatile, so these platforms generally need to factor this into their fees — which is partly why fiat <-> crypto exchanges generally come with higher fees than crypto <-> crypto exchanges.
They can also vary based on the payment and withdrawal methods supported, ease of use, and the range of countries they offer services to. In general, individuals from any country that have been sanctioned by the US will find it difficult to find an on/off ramp, whereas those from the US and China also have limited options.
Broadly, cryptocurrency on/off ramps can be separated into three main categories — each with its pros and cons:
A large proportion of cryptocurrency enthusiasts first gain exposure to digital assets through a broker. These are platforms that act as an intermediary between cryptocurrency buyers/sellers and cryptocurrency marketplaces, facilitating exchanges on their behalf.
As you might expect, these platforms typically charge a small fee for their services. This is usually either baked into the spread — the difference between the price they pay and the price they offer to you — or it’s charged as an additional commission. This can range considerably between platforms, and often depends on the payment method and region, but typically tops out at around 5%.
In general, brokers primarily cater to less experienced or time-strapped investors looking to gain exposure to cryptocurrencies with as few obstacles as possible using payment methods they are familiar with. In light of this, they typically accept a wide range of payment methods, support a large array of cryptocurrencies, and feature strong customer support.
But perhaps the main feature that separates cryptocurrency brokers from other on/off ramps is that they generally feature a price lock-in option. This essentially guarantees a cryptocurrency exchange rate for a fixed period (usually up to 15 minutes) to eliminate any volatility risks.
Some of the more popular examples of cryptocurrency brokers include Changelly, Coinmama, CEX.io, and Coinbase. Each of these has its benefits, and can vary considerably in the commission and spread; available features; supported payment methods; and cryptocurrencies offered. Cryptocurrency ATMs also fall under the category of a cryptocurrency broker, but generally have much higher fees due to their convenience and accessibility.
Thanks to platforms like PlasmaPay, even DeFi applications are beginning to see the integration of intuitive cryptocurrency on/off ramps, helping to tackle one of the biggest obstacles to their adoption — accessibility.
For recurring cryptocurrency traders and frequent users, cryptocurrency exchanges are generally the preferred port of call for any cryptocurrency on/off ramp needs.
Unlike cryptocurrency brokers, full-fledged cryptocurrency exchanges generally feature much more complex order types, interactive charts, and dozens of trading pairs — including crypto/crypto, crypto/fiat, and sometimes fiat/fiat pairs.
Thanks to the powerful trading features these platforms support and the huge number of asset types on offer, cryptocurrency exchanges are frequently used by professional traders looking to deploy both simple and advanced trading strategies. They also generally support high-frequency trading over API, making them attractive platforms for institutional traders such as crypto funds.
Cryptocurrency exchanges often support credit and debit card purchases, as well as international bank transfers. Many will offer a simplified cryptocurrency purchase/sell feature, similar to that provided by most cryptocurrency brokers.
Binance, Kraken, Gemini, and Coinbase Pro count among the most reputable cryptocurrency exchanges, and the vast majority of cryptocurrency users now hold an account on at least one of these platforms — many of which also use their fiat payment/withdrawal options.
As of writing, almost all cryptocurrency exchanges with on/off ramp capabilities are centralized platforms — this means they are centrally controlled by a business entity and usually require custody over user funds. PlasmaPay’s PlasmaSwap is notably one of the few exceptions, given that it’s a decentralized platform with fiat support.
Likewise, they generally need to comply with strict KYC and AML regulations — meaning users will need to complete some basic checks before engaging with any fiat features.
OTC desks are the third main type of cryptocurrency on/off ramp. These can be online or offline platforms that allow users to directly trade cryptocurrencies for fiat (or vice-versa) with one or more counterparties without relying on a centralized exchange or broker.
These OTC desks provide a matching service and the facilities necessary to ensure the trade is conducted between the buyer and seller safely. They may be subscription-based and/or take a commission for each trade completed through its service.
For the most part, OTC desks are used by high net worth individuals and institutional clients looking to exchange a large amount of fiat for cryptocurrency, or vice-versa. Most popular cryptocurrency exchanges now have their own OTC desk — e.g. Kraken OTC (which recently acquired Circle), Binance, and Coinbase Prime.
The minimum order size for OTC desks can vary from platform to platform, but tends to be upwards of $100,000. This makes it suitable for major retailers that accept Bitcoin, e.g. Overstock and Expedia, which may need to exchange large volumes without losing money due to slippage.
OTC desks offer a number of primary advantages over brokers and standard cryptocurrency exchanges. For one, they allow traders to liquidate large orders without suffering from slippage, and these orders also take place separately from online orderbooks — ensuring they do not directly affect market dynamics.
Moreover, they’re generally private, since users cannot see the trades being executed by others, though KYC is likely to be required to vet counterparties.
About Master Ventures
Master Ventures is a blockchain-focused venture studio helping to build the next generation of blockchain-based Web 3.0 system innovations within the crypto industry. Launched in 2018 by Founder and CEO Kyle Chassé, the company’s ethos can best be summarized in the acronym #BeBOLD: Benevolent, Open, Love, Decentralized.
Master Ventures co-creates with entrepreneurs and businesses worldwide to turn the best ideas into innovative and disruptive products. They do this by investing as strategic partners through offering advisory services to the projects they believe in. To date, Master Ventures has invested in over 40 crypto projects, including the likes of Kraken, Coinbase, Bitfinex, Reef, DAO Maker, Mantra DAO, Thorchain, and Elrond.
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