Decentralizing on-ramp and off-ramp?

Kotani Pay
6 min readJan 9, 2023

One of the biggest challenges facing on and off-ramping aside from regulation is liquidity. To do real-time settlement in a seamless way, you need both fiat and crypto which can be problematic in large volumes. As an on-ramp and off-ramp solution provider, one is dealing with various floats, stablecoins, and currencies at various times which can be quite a big challenge for treasury management. Liquidity providers are much needed especially when scaling up in the industry. An alternative solution is to decentralize the on and off-ramp process.

Johannes Erbert the co-founder of inside coffee discussed on and off-ramping at length with Felix Macharia, CEO of Kotani Pay, together with Eric Apollo, co-founder of Bitlipa at the ETHSafari in Kilifi.

But first, why do we need on/off ramping?

On ramping/off-ramping which simply means moving from local currency to digital currency and vice versa creates a way for money to talk to each other. Why is it important with all the money eco-system around us?

For Felix, to understand the importance of on and off-ramping, first, you need to understand the money eco-system and how the use of money is part of the culture. In Sweden, NFC cards and Visa MasterCard are prominently used and in Kenya, M-Pesa is used for everyday transactions. In some eco-systems, it’s only cash that is being used.

“We look at the different use cases that blockchain can offer such as cross-border remittances, savings, and Global economic use cases such as digital microwork that can only be enabled by technology that is truly global and in this case blockchain technology. I don’t see us competing it’s more like how do we connect blockchain protocols Dapps, wallets, and DeFi to current money eco-systems and that’s what how you grow over time,’ He adds.

Eric takes a different approach and looks at it as two worlds, a bank, mobile money, the fintech world, and the blockchain world. These two worlds have different dynamics, rules of engagement, and technology stacks. On and off ramping sits in the middle.

“We are 7 billion people in the world and 300 million people in the world are using crypto wallets, a number that keeps growing. We need a bridge for these two worlds and every time these two worlds connect fireworks happen and the kind of volumes there are off the charts,” he adds

What is the cost of off-ramping to other means?

Eric argues that so far, on/off ramping is fairly scalable compared to other non-blockchain means of transactions that are relatively high. On/off ramping solutions can go as low as 1% but there is also the issue of scaling and growing the solution hence the need to know how much of a bigger margin they are working with.

“I think it’s the first stage to bringing people into Web3. The next focus is on what you build on top of that. So far as it's payment embedded and then we also have the DeFi rails. Once we are there, there will be competitive because the focus will be on what are the added value people getting on this platform that targets different needs of different people. It’s important to note that the Visas of the world are also joining, they are investing and they already have skin in the game.” he adds.

Felix agrees that blockchain solution has low fees compared to the current solutions being provided. He adds that scaling up of on/off ramp service has a lot to do with user experience and the cost for the end user.

“We focus very much on the user experience as we want to make it as flawless for the client to onboard on mobile money to their Kotani Pay wallet or Bitlipa wallet as possible and not feel like it’s a hassle that takes too many steps. So anytime a client is creating a Kotani Pay wallet, they are actually creating their blockchain wallet and anytime they are depositing cash, it’s actually exchanged in the background as a blockchain asset.”

What are some of the challenges of on/off ramp?

Regulation has been a constant problem on/off the ramp. Felix and Eric share the same sentiments where regulations are not clear and the landscape is different across Africa. Felix notes that regulators have different approaches and they are keen to see if you are growing the local economy or gambling with other people’s money using tokens.

“If you’re able to communicate your use cases you have a greater chance of getting to work with some of these payment trails,” Felix says

Another shared problem is liquidity. To have a real-time settlement, one needs to have cash on one side and crypto on the other hand.

“In such a case, you find we have a float that costs money, bringing in another layer of cost in your operation, expenses, and transactional fees. We need more liquidity providers and market makers to come in and smoothen this process for us, ” Eric adds.

The two Co-founders also share the same problem of fragmented payment systems in Africa. Felix, explains that, unlike in Europe or US where they connect to Visa and Mastercard, In Africa, you have to deal with different mobile money channels. An M-Pesa in Kenya, Airtel in Uganda, and MTN in Ghana are different from MTN in South Africa and they all have different regulations.

“ There is a lot of friction because of the fragmentation in the payment systems if you want to create one single API that serves DeFi wallets and the marketplace is crypto exchanges for Africa you’re dealing with a lot of parties and they are all demanding you to Know their Business perspective,” he adds.

The two also agree on the challenge of the skill gap. Felix notes that it is important to have the right people with the right skills in Web3 to integrate faster in order to avoid situations such as an integration with a DeFi wallet, which taking 6 months rather than 4 to 6 weeks. Eric adds that the challenge of this for startups is that the available skill faces the competition of bigger companies paying way better than what they can offer in their capacity.

Eric also notes with concern the lack of education as most people consider DeFi and Web3 as complex things. He adds that it's the responsibility of people in the ecosystem to keep it easy and simple for the rest to understand and make the user experience smooth.

“It is important to communicate the advantages of Web2 and 3 to people as they are the ones who will benefit the most from it. They are also the same people who will help you generate volumes and traction.” Eric adds.

Decentralizing on and off ramps.

On and off-ramp brings massive value when it comes to onboarding users to Web3 but challenges crop up as it continues to become bigger. This can range from the handling of a lot of fiats, and crypto which can be an overwhelming experience for the finance team to the security challenges that are alarming. In a way, you can’t have enough liquidity to provide for both fiat and crypto. Felix Macharia believes that the solution is decentralizing the liquidity pools where people can contribute on the fiat side and crypto side.

“This can be seen in a paper done by Steffen Krogmann who proposes something called Wakala that is a decentralized on-and-ramp system where you can incentivize crypto agents to contribute to the crypto pool and fiat agents to contribute to the fiat pool,” he adds.

Felix further states that another emerging challenge when you are too successful is that you become a risk to the ecosystem by being regulated. One has to find a way to do KYC/AML and decentralized identity solutions for this decentralized on/off ramp.

“ We have talked about Web3 being this new world where people earn from the value they create. You can have a Decentralized Autonomous Organization (DAO) that controls this open-source on/off ramp solutions and let members of the DAO earn from that. I think that’s where we need to be five or six years’ time.” He concludes.

At Kotani Pay, we are committed to ensuring financial inclusion for all by linking your clients to accessible DeFi services. Let’s talk more.



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