Moving from the old world of physical currencies into the new realm of crypto is a daunting barrier for many users. Itās often the first big transaction a user makes, so itās natural that many people have concerns and questions.
In this edition of RhinoLearn weāre going to take you through the process of moving from traditional, or fiat money into crypto, so you can approach the ābig leapā with confidence.
There are four key ways of turning fiat into crypto. They are:
- Peer-to-peer lending exchanges
These provided pretty much the sole outlet for crypto purchases when digital currencies began to go mainstream back in the mid-noughties.Ā
Back then, buyers and sellers would enter the exchange and be matched with one another. So if you wanted to sell one bitcoin, you would be matched with a person willing to buy that one bitcoin.Ā
The system was protected by escrow accounts ā third-party vaults which allow two transacting parties to deposit the money or assets they wish to exchange, before releasing them once both sides are happy.Ā
Hereās how an escrow works when you move from fiat to crypto.
- You make your trade request, for example: āI want to buy X amount of bitcoinā.
- When a bitcoin-seller is matched to your request, the bitcoin is automatically deducted from their wallet and goes into an escrow account.
- You send them the money via bank transfer.
- Once they acknowledge that theyāve received the money, they tell the escrow account to release the bitcoin to you.
Peer-to-peer exchanges are still around today, and they have been reinforced with Know-Your-Customer (KYC) checks, which require both buyers and sellers to submit their identity documents, their mobile number and email address. This means you can be sure your trading partner is legitimate and isnāt going to scam you.
Over-the-counter exchanges
In this scenario, you reach out to a trading partner (or they reach out to you) directly and you conduct a private transaction.
- You contact your partner and make a request (for example āI want to buy X amount of bitcoin for cashā).
- The pair of you meet up to carry out the exchange. You hand over the money, and your trading partner shows you theyāve sent you the funds on their phone or laptop.
This is great if you know the person youāre dealing with – perhaps youāve traded with them before or theyāre a personal friend. However, if you donāt know the person, itās probably the most dangerous of all four methods: thereās the chance you could be robbed when you go to carry out the exchange.Ā
So weād definitely advise caution before going down this route.
- Centralised exchanges
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Centralised exchanges (or CEXs) such as Coinbase, Binance and FTX have made it easy for loads of different users to enter the crypto scene. These centralised parties haveĀ integrated with banks to provide easy access to crypto assets.
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In this case, instead of trading peer to peer, you trade peer to exchange. It works like a traditional currency exchange, only youāre getting digital assets at the end.
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- You deposit the fiat money into the exchangeās bank account with a specific reference number.
- Once the exchange has received the funds, theyāll automatically credit your account, so youāre ready to go.
- Now you can carry out swaps and trades into your desired cryptocurrency.
- Once youāve received your crypto, you can withdraw it into your own wallet or make further trades and swaps.
- On-ramp services
As its name may suggest, this type of service provides a ārampā into the crypto world (there are also ramps that go the other way, from crypto to fiat, and theyāre known as āoff-rampsā).
This method is extremely simple.
- You link your card to a particular on-ramp service.
- You send them funds.
- The money is deducted from your bank.
- You receive a set amount of crypto in exchange (youāll see the exchange rate before you make the transaction, donāt worry!)
In fact rhino.fi has integrated with Moonpay, one of the biggest on-ramp service providers.
With this integration, users can go straight from the fiat world onto our exchange, which is hosted off the main Ethereum blockchain (and thus avoids the high fees).
To find out more about our integration with Moonpay, click here (LINK TO MOONPAY BLOG).
So, in summary:
- There are loads of different ways you can transfer fiat to crypto.
- Each of these methods has different pros and cons, so you can choose the one thatās right for you
- Some methods are riskier than others, particularly over-the-counter exchanges. If you go down this route, be sure you know who youāre dealing with.
- rhino.fi offers a particularly easy method of moving fiat to crypto, using ramping services.
Ok, now you know all the ways you can go from fiat to crypto, stay tuned to RhinoLearn for more advanced tips and guidance about how crypto trading works. If you want a more advanced introductory guide, check out our explainer on the metrics to look for when evaluating a new crypto project.
