MakerDao, Seedcamp, Fabric Ventures, and Firstminute are pouring over a million dollars into a startup looking to rival centralized crypto exchanges with a model that shakes up the process of purchasing crypto with fiat currencies.
Counting crypto exchanges like Coinbase as its major competitors, Ramp brands itself as more “decentralized” due to its peer-to-peer trading structure that removes the need for a centralized custodial wallet, which exposes users to the risk of hacks.
Instead, in Ramp’s trading model, a seller will first lock a certain amount of cryptocurrencies in a smart contract. A buyer then directly wire transfers fiat money to the seller’s bank account, which in turn triggers the smart contract to release the escrowed cryptocurrencies to the buyer.
“It works very similar to some OTC trades that are being done on telegram daily,” Ramp CEO Szymon Sypniewicz explained to The Block. “What we are doing now is more of a Coinbase built on smart contracts.”
The company is also looking to partner with dApps and wallet providers to make users’ cryptocurrency purchasing experience simpler. Specifically, such partnerships would allow users of services like Dharma, Argent and Fortmatic to purchase cryptocurrencies with their bank account while using their respective apps.
However, as the company rolls out its product, it also faces restrictions and competitions ahead. For now, Ramp’s service is only offered in Europe where banks are required to disclose their APIs to licensed third-parties, which enables Ramp to verify the completion of wire transfer payments without forming partnerships with individual banks. To expand Ramp globally requires similar laws in place in other countries or partnerships with local banks, which may hinder Ramp’s growth.
Elsewhere across the Atlantic Ocean, Digital Currency Group backed startup Wyre is offering a similar fiat onramp product that is available to U.S. users and has raised a $5.8 million Series A. Like Ramp, Wyre also seeks to integrate with wallet providers and exchanges to scale its products.
“We are working on a solution for the US market…” said Sypniewicz. “We’re taking steps to pilot first experiments in the US in the next couple of months.”
Sypniewicz said that they plan to use the newly raised capital to develop the product and seek wider integration with more platforms. The company is also working on devising a protocol that allows institutions around the world to use Ramp as a plug-in to offer onramp service to its customers.
“The long term goal is to make this pattern of interacting between blockchains and open-banking infrastructure, commoditized, financial primitive,” said Sypniewicz.