If you’re new to the crypto world, it won’t be long until you come across the phrases, “fiat on-ramps” and “fiat off-ramps”.
In this lesson, you’ll learn what these phrases mean. 👍
The process of transferring money between fiat and crypto is known as “on-ramping” and “off-ramping”.
If you’ve ever bought crypto with fiat money, you’d have used a “fiat on-ramp” (also known as a “fiat gateway“).
Fiat on-ramps and off-ramps act like “roads”, connecting the fiat and crypto worlds.
Crypto Road to Fiat
Where on-ramps are a way to enable users to convert their fiat currency for cryptocurrencies, off-ramps are the opposite.
Off-ramps allow you to “cash out” your crypto by enabling you to exchange your crypto for fiat currency.
Fiat Off-Ramp
A simple way to think of fiat on-ramps and off-ramps is to imagine two roads. One road is part of the “fiat world” and the other road is part of the “crypto world”.
If you’re in the “fiat world” and wish to access the “crypto world“, you use an entrance ramp or “on-ramp”
And if you’re in the “crypto world” and wish to return to the “fiat world“, you use an exit ramp or “off-ramp”
Fiat on-ramps and off-ramps allow you to move your money back and forth between the fiat and crypto worlds.
These “ramps” need to bring in new users and new money into the crypto market.
What is “Fiat”?
The term “fiat” is a Latin word that is often translated as “it shall be” or “let it be done.”
In plain English, fiat is defined as “the giving of orders by someone who has complete authority.”
In the context of money, modern governments issue “fiat currency” to bused as the primary money in their economy.
Fiat currency refers to a government-issued currency that has no intrinsic value because it’s not backed by anything (such as commodities like gold or silver).
For example, U.S. dollars is a fiat currency.
Fiat Money
So are the Japanese yen, Chinese yuan, British pound, Philippine peso, Swiss franc, Thai bath, Brazilian real, and South African rand.
The only reason fiat currency is used as money is due to the fact that the government, using its authority, “orders it so” by authorizing the fiat currency to be established as legal tender.
Fiat Currency as Legal Tender
Legal tender is anything recognized by law as a means to settle a public or private debt or meet a financial obligation, such as tax payments, contracts, and legal fines
While governments may be in control of their fiat currency and maintain its supply, its value is entirely dependent on how holders perceive its value and utility.
Basically, for fiat currency to function as money, holders must have faith it has value and will maintain this value.
What are fiat “on-ramps” and “off-ramps”?
Fiat on-ramp and off-ramps, also known as fiat gateways, are gateways into and out of the crypto world.
Fiate Gateway
While there are different types of fiat gateways such as bank transfers or credit card payments, generally speaking, any form of fiat deposit into the crypto market is a fiat gateway.
What is a Fiat On-Ramp?
If you want to get involved in bitcoin or other cryptocurrencies, unless it’s gifted to you, you have to buy some.
And in order to buy some, this requires you to exchange the fiat currency you own for cryptocurrency.
And in order to exchange fiat currency for cryptocurrency, you need to use an “on-ramp“.
Fiat On-Ramp
A fiat “on-ramp” is a service that allows for the exchange of fiat currencies for cryptocurrencies.
For example, you exchange USD (fiat currency) for BTC (cryptocurrency).
Since most people hold fiat currency, exchanging fiat is the most accessible method of access to cryptocurrencies.
On-ramps allow you to leave the fiat-based monetary system and enter into the decentralized, blockchain-based monetary system instead.
In other words, it’s an “on-ramp” to the world of cryptocurrencies.
What is a Fiat Off-Ramp?
The opposite of an on-ramp is an off-ramp.
An “off-ramp” is a service that allows for the exchange of cryptocurrencies for fiat.
Fiat Off-Ramp
The availability of an off-ramp assures users that they’re not locked into a cryptocurrency and can “exit” (sell crypto for fiat) at any time.
Off-ramps are complementary to on-ramps and serve a critical role in providing a way for you to bring your money back into the traditional world of fiat.
Being able to fairly easily turn cryptocurrency back into fiat helps to increase new user adoption for crypto since they can “get out” if needed.
On-ramps allow you to leave the traditional fiat monetary system and enter into the decentralized, blockchain-based monetary system instead.
Off-ramps allow you to leave the decentralized, blockchain-monetary system and enter into the fiat-based monetary system instead.
In other words, it’s an “off-ramp” to the world of fiat currencies.
