JOHANNESBURG — The year 2017 has, so far, become a defining one for cryptocurrencies which are increasingly becoming more mainstream. The subsequent popularity in cryptos such as Bitcoin and Ether (which sits atop the Ethereum network) has sent the prices of these currencies surging through the roof. Bitcoin itself surpassed the $4000 mark this year while Ether has ballooned from around the $8 mark in January to over $300 this month. Then there’s the Bitcoin fork, known as ‘Bitcoin Cash’, which came into existence just this month and which has surprisingly surged to $600 in recent days. There’s a range of other cryptos and the market, generally speaking, is heating up. But caution is required as volatility in these markets is significant — investing in cryptos is not for the faint-hearted. Subsequently, at BizNews, we’ve received a number of questions on the topic from readers and I’ve answered some of those questions here. Of course, there’s a lot of burning curiosity around cryptos. So, if you have a question, please feel free to email me on this link and I’ll try to publish an answer in future posts. – Gareth van Zyl
Hope you do not mind me picking your brain but I am new to Bitcoin and have recently purchased one share [one unit]. I would ultimately like four and will just keep plugging away every month. I think this is the way forward. I also would like to invest in Civic and Ether. How do I go about it? I would like the safest way to invest in these and do you think they are good to get into now? Beverley Vosloo.
Beverly, it sounds like you’ve developed a plan on acquiring Bitcoin and it will be interesting to see how your strategy pans out. At today’s current Bitcoin price, one Bitcoin unit (BTC1) trades for about R56 000 on local exchanges, bringing your total planned Bitcoin investment to around the R224 000 mark. The beauty of a decentralised cryptocurrency such as Bitcoin is that once you own it, you can transfer/exchange it for any other cryptocurrency (anywhere in the world) such as Ether (which forms part of the Ethereum network or blockchain.) If you’ve bought Bitcoin on a local South African Bitcoin exchange such as Luno or ICE3X, you can then transfer your Bitcoin to other global exchanges, like Kraken, which allow you to buy Ethereum and, in fact, a range of other cryptos such as Bitcoin Cash (BTC). Of course, you have to set up your account on Kraken, which can take a few days to verify as they capture data such as your address, name etc. But once you have an account open on one of these global exchanges, it is as simple as transferring your desired amount of Bitcoin to your exchange/wallet of choice (this can take less than an hour). Once you have a Kraken wallet and some Bitcoin in there, you can then purchase Ether. This method, though, does incur costs along the way. Now, you may also want to consider ICE3X, which is is the first exchange in South Africa to sell Ether, and this may be a more desirable route. (But again, you have look at the costs involved and weigh up your decision.) So, one option for you may be to rather just skip buying Bitcoin and go straight to Ether on ICE3X. A key note to remember is that Ethereum is similar to Bitcoin in that it is a cryptocurrency that operates on a blockchain.
However, there are some differences. For example, Ethereum uses a more flexible technology when it comes to the average number of transactions per second. Ethereum is also a smart contract network, which means that ‘if and else’ conditions can be built into transactions themselves, opening up fascinating opportunities for commerce. One result of the smart contract approach in recent months has been the rapid rise of so-called ‘ICOs’ or ‘Initial Coin Offerings’ in the market. ICOs, like IPOs on a stock market, allow you to invest in startups by using cryptocurrencies like Ethereum or Bitcoin to buy ICO “coins”, which are akin to digital coupons or tokens. Buyers of these ‘tokens’ or cryptocoins hope that the startup will perform well, leading to an increase in value. Now, Civic – headed up by South African born Vinny Lingham – launched a “token sale” earlier this year in which it raised $33m. Civic called its move a ‘token sale’ rather than an ICO, because it wanted to create 1 billion tokens to allow for secure and low-cost access to identity verification through the blockchain’s online ledger. The tokens were sold for the equivalent of 10 US cents and they could be purchased using cryptos such as Bitcoin or Ethereum. The value of these tokens now are around 49 US cents each. Now, the token sale is currently over, but if you want to buy Civic Coins (CVC), you can turn to sites such as www.bittrex.com and purchase these using Bitcoin. To then keep your coins safe in future on your own device, you can use an offfering like Trezor.
Sir, I’m an ardent follower of your daily emails and the political instability in our country, South Africa. Please could you assist me on how can I join Bitcoin to earn a few rands? I’m a pensioner and could start with R2000 only. Is this too little? Your valued advice will be needed to assist me. Janitha Singh
Hi Janitha, you can buy Bitcoin with any amount of money thanks to the beauty of Bitcoin’s (and all cryptocurrencies’) deciminal nature. Obviously one Bitcoin currently trades at around R56 000 at the time of writing on Luno. But R2000 worth will get you approximately 0.03521096 BTC (Bitcoin). Ultimately, only you can decide whether this is too little for you. Just bear in mind, that Bitcoin and cryptocurrency markets are volatile in nature with wild swings. If you have the stomach for that, then good luck. Also, although there is no regulation around cryptocurrencies in South Africa, the best advice I can give is to treat Bitcoin as an asset class in South Africa. This means that you must declare any earnings you make to SARS as it could trigger a capital gains tax or personal income tax if you’re a trader. Also, it’s key to note that local Bitcoin exchanges like Luno typically capture your FICA information.
What is the best platform to use, to purchase (or mine ) Ether? Peter Bodill
Hi Peter, in terms of purchasing Ether, you have a range of choices (see my answer in the first question). However, to summarise, ICE3X is the first exchange in South Africa to sell Ether. Alternatively, you can buy Bitcoin through another SA exchange like Luno and then buy Ether from other international exchanges such as Kraken.
Mining crypto is a whole different ball game. If you want to do it yourself, you will need a mining kit at home that, on the basic end, involves a simple laptop and some mining software and on the higher end an actual server. But unless you’re willing to invest the time and effort (and money on the electricity costs, which are constantly rising in South Africa), the incentive to mine crypto yourself is pretty low. You would really, ideally need a server farm in a location such as China (which has low energy costs) to pull this off well. Alternatively, there is something called ‘cloud mining’ whereby you can mine bitcoin via a third party data centre. This topic is another article on its own, but it can involve you investing in a crypto mining outfit and receiving a small return for your investment (in crypto such as Bitcoin). However, the returns are widely reported to be small and you would need to establish if it’s worth your time and money. Also, there are various mining scams out there, so do your homework and be careful. Because of Bitcoin’s decentralised nature, always be wary. No regulator or law authority will step in to save you if you’ve invested in a scam that sounded too good to be true.