Cryptocurrency: The South African Guide to Bitcoin
- Author: Sean van der Merwe
The word ‘Bitcoin’ (BTC) may strike an uncertain note in the minds of people in this great country of ours. While we can be admired for many great things, like our culture, diversity, and beauty, the ‘South African way’ in the tech industry is a little behind the front running nations like the USA, Europe, and Japan.
The world has been soldiering on in the cryptocurrency scene, but many Saffas are still trying to figure out if it is a scam or not. We can thank social media for the spread of disdain in this regard!
Well, hopefully, this guide will settle your mind on the matter once and for all and have you embracing a technology that is truly starting to change the way in which investment and financial transactions will be done in the future.
A Little History
Bitcoin is the mother of all cryptocurrency, having been the first of its kind to meet the world. A Pseudonymous person/group, called Satoshi Nakamoto developed Bitcoin and launched the first block in 2009. The primary purpose of the currency was to provide an alternate economy to centralised fiat currency, which had been travailing through a great recession at the time.
The concept of cryptocurrency is the direct opposite to that of fiat money when it comes to funds management. Where the Rand is centralised by the Reserve bank, Bitcoin is decentralised and under the control of no entity. Rather than centralised parties controlling an economy, Nakamoto envisaged a decentralised system that was controlled by the people, gaining its value in its popularity alone.
While Bitcoin grew in value in short bursts, 2017 saw a massive rise in the price of the currency to just under a staggering $20,000 per coin (around R280,000 at the time). 2018 saw the currency lose over 80% of its value, while 2019 has seen a strengthening in its value again, currently sitting at over R117,000 for a single coin.
In this guide, we’ll answer questions you may have regarding this popular cryptocurrency and take a closer look at what makes Bitcoin a good idea.
‘Is Bitcoin a Scam?’
Let’s skip right to the punchline. Bitcoin is not a scam! Having said this, it is not uncommon for opportunists to take advantage of the ignorant to run scams in the name of Bitcoin.
Pure education on the subject would prevent any further frustration in this matter, teaching you to accurately discern the true from the false in the crypto scene.
‘What Is Bitcoin Anyway?’
Bitcoin is a digital money form called cryptocurrency. It is not a physical coinage, but rather a series of codes and hashes kept in a crypto wallet. Most cryptocurrencies carry a monetary value and can be bought and sold for fiat currencies, such as Rands, Dollars, Euros, Pounds, and the like.
What makes cryptocurrency unique, is that it is stored and managed on a special registry, called a blockchain. This register is decentralised so that no single trusted party can control any part of it.
The Bitcoin blockchain is hosted on many server nodes around the world, each verifying transactions as they are made. Each node must verify a single block’s transactions before it is approved on the network. For this reason, it makes the platform extremely secure.
Because verification is manifold, the blockchain ensures that all transactions are immutable, so when a payment has been verified and plainly reflects on the registry, it is guaranteed that the transfer has taken place and it cannot be reversed.
‘Can Bitcoin Be Accessed and Invested in South Africa?’
Bitcoin is completely legal in South Africa and can be easily bought and traded from within the borders of the country at South African cryptocurrency exchanges.
While most online Bitcoin news promotes big international exchanges, such as Coinbase and Kraken, let us endeavour to support our locals and trade (buy or sell) Bitcoin at domestic exchanges, such as Luno or ice3X (iceCubed). These are two of South Africa’s oldest and most trusted exchanges.
While Bitcoin is an international e-currency and really does not recognise borders, buying it in Rands at a SA exchange will save you forex costs when selling your coins at a later stage. Many larger international exchanges may not deal in the Rand at all.
Both Luno and ice3X can be accessed easily via downloadable apps for both your Android or Apple phone or tablet, turning your mobile device into the perfect digital wallet and trade platform to manage your currency.
The easiest and most convenient way to set up a wallet would be to open an online exchange version. Of course, the safest way is to store all the information on a cold wallet (offline USB hard drive). Fortunately, the funds can be moved from one wallet to another very easily.
As for investment, holding onto the coin is all that you need to do to invest it. Try and buy low and then sell it when the value climbs. For more advanced investment, one can dabble in Futures Trading, but we advise that you research the ins and outs of doing this thoroughly before undertaking trades of this sort.
‘But I Don’t Have Over R100k To Invest in a Single Coin!’
Bitcoin was designed for the man in the street and there may be very few people that you know that could afford a full Bitcoin. Fortunately for all of us, we are not required to purchase a full coin.
Instead, you can purchase a decimal fraction of that amount. One of the more common fractions is an mBTC (milli Bitcoin), which is a 1,000th of a Bitcoin. There is also a Bit (0.000001) or a Satoshi (0.00000001). In ZAR Rands, you can use as little as 2-10 units of the local currency at Luno to buy e-currency.
Understanding this side of cryptocurrency really makes Bitcoin trading accessible to all South Africans!
‘Can I Sell and Trade BTC in South Africa?’
Buying and selling of BTC can be conducted on recommended exchanges in a very straight forward way. People are always looking to both buy and sell Bitcoin. The exchange will broker the deal for you for a minimal fee.
Of course, you can also go the Peer to Peer (P2P) route, where you physically meet up with either a Bitcoin buyer or seller and carry out business at your local coffee shop. While the buyer transfers Rands via EFT, the other party can get online and transfer the e-currency via their wallet, painlessly and instantly.
‘Now That I Have Bitcoin, Can I Spend It?’
While it is common that people purchase Bitcoin to hold it rather than spend it, the currency was developed to be usable. More and more companies around the world are starting to accept this e-currency as a form of trade on their platforms.
In South Africa, we are a little behind in the evolution of things, but there is still no shortage of businesses accepting BTC.
‘Is Mining for Me?’
Some people live under the misconception that mining hashes and codes off the internet is the cheaper way of getting Bitcoin in hand. Initially, it is actually the more expensive route to take, as the hardware and software involved, along with the electricity costs, could set you back a small fortune. Then, you will have to take the gamble that Eskom leave the lights on long enough for you to conduct your business.
For a small amount of money, you can rather purchase your BTC and watch it grow as you hold onto it.
In the long run, however, mining may be something you might want to look into. You will only start making a profit once your expensive data miners have been paid for and you can reap the rewards of the excess. Even then, it is not advisable to go it alone.
Competition to add the next hash to the blockchain is excessively fierce. The computing power of a single network will leave you with very little chance to show anything after months of mining. Should you want to run a household rig, we advise that you join an international mining pool. You add your processing power to their network, and they pay you dividends for the maths and processing that your computer provides them.
Be assured that Bitcoin and cryptocurrency is the way of the future. Massive tech companies around the world are beginning to jump on the cryptocurrency bandwagon.
Our suggestion to you is that you get on board now in order to ride the wave that is coming. It doesn’t matter how much you invest, just give it a go!