If you want to invest in cryptocurrency, you need to understand the terminology involved. The first term you need to grasp is fiat currency, or fiat money. Secondly, you need to know what a fiat on-ramp and fiat off-ramp are. We will explore these terms below.
Fiat On-Ramps and Fiat Off-Ramps Made Simple
Another name for fiat on-ramps and fiat off-ramps is fiat gateways. In other words, these are gateways that allow you to enter and exit the world of cryptocurrency. There are various types of processes for investors to make use of, such as credit card payments and bank transfers — basically any method used to purchase crypto using fiat currency. You will have to go through a platform that acts as an entry and exit point and provides other services related to crypto investments.
What is Fiat Currency?
Originally, money was backed by an actual commodity, such as silver or gold. Today, governments issue money that has no such backing. Its value is determined by market forces of demand and supply, which leads to an exchange rate between fiat currencies, e.g., between euros and dollars. A government’s stability can also influence the exchange rate.
What is a Fiat On-Ramp?
There are several ways to get cryptocurrency, like ether and bitcoin. You can mine for crypto if you have the right setup. Someone else can give you some crypto as a gift. But the most common way people acquire crypto is by purchasing it outright.
The way to buy cryptocurrency is to pay for it with fiat currency. This is done via an exchange rate that determines how much fiat money is needed for a certain value of crypto. You can convert US dollars (USD) to bitcoin (BTC), for instance.
This is where a fiat on-ramp comes into play. A fiat on-ramp is the provider of the service that permits the exchange of fiat money to buy crypto. This is the simplest way to get crypto. A fiat on-ramp gives you entry to the crypto financial system, which is based on blockchain and decentralized. This is a vastly different world to the fiat monetary system.
What is a Fiat Off-Ramp?
A fiat off-ramp is the direct opposite of a fiat on-ramp. A fiat off-ramp service allows you to swap out your cryptocurrency and exchange it for fiat currency, such as dollars, yen, euro, or pounds. Having a fiat off-ramp is reassuring for buyers of crypto. They want to know that they can sell their cryptocurrency and get fiat money in return. This gives newer crypto investors more confidence and makes them more likely to buy cryptocurrency, knowing that they can backtrack fairly easily. With a fiat off-ramp, you can leave the blockchain monetary system and return to the world of fiat money.
Thus, both fiat on-ramps and fiat off-ramps are crucial to crypto investors and allows them to operate either with fiat currency or cryptocurrency, as and when they choose.
Armed with this new knowledge, you can start exploring the world of cryptocurrency for yourself.
