How onRamp and offRamp work

Tram Ho

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Introduction

Crypto On-Ramp and Off-Ramp services are solutions that make it easy for users to convert between traditional currencies and cryptocurrencies. It is an important bridge between the traditional financial markets and the crypto-asset world.

Crypto On-Ramp and Off-Ramp services increase convenience and access to crypto assets, while reducing barriers for new entrants to the crypto asset market. These services play an important role in making crypto-assets part of the global financial system and diversifying user portfolios.

Challenge from web2 to web3

Because the blockchain network is independent of other technology networks such as banks and traditional finance, in order for digital assets to be accessible to ordinary users, many gateways are needed. bank’s customer office. However, with the development of digital banking, we have the opportunity to access crypto assets through deposits in banks. To access digital assets today we have some simple ways like using in-app-purchase of Apple or Google Play, using Visa Card, Exchange with other crypto users. However, to do that, users will encounter some difficulties as follows:

  • Technical understanding: Users need to understand the basics of Web 3.0, including technologies such as blockchain, cryptocurrencies, digital wallets, and smart contracts
  • Security and Privacy: Users must ensure their own safety when transferring money from Web 2.0 to Web 3.0. This includes storing and protecting private keys, ensuring that no one has access to their digital assets.
  • Transaction Fees and Processing Time: When transferring money from Web 2.0 to Web 3.0, users may face transaction fees and slower transaction processing times than traditional services
  • Legal and Regulatory: Regulations related to cryptocurrencies and Web 3.0 are still evolving and may vary from country to country.

On-Ramp & Off-Ramp

On-Ramp is a form of conversion from fiat money to digital assets offered by several parties with digital assets. The exchange of assets depends on the market rate or by agreement between the parties. The simplest is a form of peer-to-peer exchange between people with assets

Technical challenges

  • Off-chain transaction verification: It is the transaction verification at the user’s bank.
  • System security: Because the system stores users’ assets, it is necessary to ensure security requirements and industry standards in storing digital assets.

Legal challenges

  • Currently, the trading of crypto assets with other goods is prohibited in many countries, if using crypto assets as a unit of currency is against the law. Meanwhile, many countries do not have clear regulations on crypto assets, leading to legal risks when disputes arise.
  • Crime Risks: Using cryptocurrencies can create a favorable environment for criminal activities such as money laundering and terrorist financing.
  • Security Risks: Due to its digital nature, cryptocurrency is vulnerable to hacks and hackers. The loss of cryptocurrency due to attacks and secret key loss is also a big challenge.
  • Locked or Restricted Accounts: Due to the unclear legality of cryptocurrencies, cryptocurrency exchanges and e-wallet services may block user activity.

Build a On-Ramp & Off-Ramp platform

First of all, we determine the development direction is to build a platform that allows users to directly exchange assets with each other on the digital space, it is similar to you exchanging two items in the game. For this, however, there is an additional interoperable system that connects to banks or financial institutions where users store their money.

We divide the system into 2 parts, 1 will directly support users in countries that allow cryptocurrency trading, 2 will use the APIs of companies that have been licensed to trade in countries that require trading. license request. The identification will be based on the user’s account registration information and identity verification (KYC).

KYC system integration

To integrate the KYC system into your system, several steps need to be taken as follows:

  • Information collection: Start by collecting information from customers, including basic information such as name, address, date of birth, country, phone number, and email address.
  • Verify information: Verify customer information by asking them to provide visual or text proof of identification, such as a driver’s license or identity card. The KYC system will use authentication technologies to ensure the authenticity of these documents.
  • Information check: The KYC system will check the information provided by the customer with different sources to ensure the accuracy and completeness of the information.
  • Information processing: The KYC system will automatically process information and provide results to the system manager or administrator for approval.
  • Information storage: Information collected and verified by the KYC system will be stored safely and securely to ensure confidentiality and comply with regulations on personal information protection.

Build a p2p order book

The architecture of the P2P order book consists of two main components: a buy order and a sell order. Each order includes a price and an amount of the asset the user wants to buy or sell. When the buy and sell orders match, a transaction is executed and the assets are exchanged between the parties.

Orders are entered into the P2P order book in order of price from high to low or vice versa depending on the type of arrangement used. If an order is not matched by any other order, it is stored in the order book and waits until another matching order is entered into the system.

Once the two buy and sell orders match the price, the system will create a transaction processing order for those two orders, this request will be put into a queue to process the transaction asynchronously, if in During the processing process, if one party cannot complete the transaction, the system will cancel and return the assets to the participating parties.

The processing steps can be summarized as follows:

  • Asset pairing
  • Liquidity and reserves management
  • Counterparty matching (when applicable)
  • Payment processing
  • Delivery of funds

Building bridges with 3rd services

Depending on the location and the number of transactions of the user, the system needs to find or use the services of many providers at the same time, Some services only allow transactions not more than $ 5,000 a day or $ 50,000 a day. month, so you will have to save the transaction history of each user to choose the right service.

The processing steps will be similar to the following figure:

  • Convert from crypto assets to currency

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In this processing flow, it should be noted that the user needs to transfer the token to the system before making the request. In the event that the user will not transfer assets to the system, an additional step of transferring the user’s assets to the system will be required before performing the transaction.

Since the transaction is asynchronous and the time of each step will take some processing time, the transaction rate will not be the same as when the request started. Therefore, for users who need to display warning information as well as the execution time may change. For matched transactions, it is possible to lock the corresponding amount of assets to perform the transaction.

  • Convert currency to crypto assets

Conclusion

Currently, On-Ramp and Off-Ramp services play an important role in facilitating users to convert between traditional currencies and cryptocurrencies. With the rapid development of the cryptocurrency market, On-Ramp and Off-Ramp services are becoming more and more popular and competitive. This gives users more choices with flexible payment methods, attractive transaction fees, and support for multiple cryptocurrencies.

However, users need to consider carefully when choosing the On-Ramp and Off-Ramp service that suits their needs. This includes examining factors such as transaction fees, cryptocurrency support, payment methods, and safety and security of the service. In addition, users also need to understand the legal regulations and comply with them when using these services.

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Source : Viblo