Just about everyone and their dog has heard about Bitcoin. And no doubt you have also heard a wide range of stories, good and bad. There are the guys who bought a few Bitcoins a few years ago when it was only a couple of hundred bucks a coin and then became ridiculously wealthy overnight. Then there are those who bought right before Bitcoin had it's major crash in January and lost more than half of the value of their hard earned Rands. There's also those who decided to gear up and mine their own Bitcoin, also with varying degrees of luck. And those who got scammed. Abd also those who invested in mining contracts. (To this day I'm still not sure if there is a legitimate mining contract option out there.)
Despite all the stories, Bitcoin has certainly matured in the last year. Prices have also become a little more stable compared to last year and there is a lot of progress on the technical side. For example, adding Bitcoin Payments to your website is extremely simple with Bitpay.com. But there are also the many nay-sayers, many of who lost money and might have very good reason to be negative about it.
This article will discuss everything about Bitcoin in South Africa. What it is, where to get it, what to do with it, how people are making money with Bitcoin and just about anything else about it. If anything is unclear, please leave a comment at the bottom and I will certainly get back to you with an answer!
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What is Bitcoin?
Bitcoin is a virtual currency called a "Crypto Currency". While Bitcoin is amongst the most famous, there are thousands of different types of cryptocurrencies. I will mostly talk about Bitcoin as a cryptocurrency and perhaps a little bit of Ethereum, as these are the only two currencies supported by Luno, South Africa's most popular exchange.
Bitcoin is powered by a technology called "Blockchain". The Blockchain is simply a ledger of all transactions that has ever occurred for a specific cryptocurrency. So each time I send you some of my Bitcoin, that transaction is stored in this global ledger.
For something to have value, there needs to be a finite number of it and not easy to obtain. Bitcoin is limited in the number of total Bitcoins that can be mined. To mine Bitcoin requires massive processing power.
Bitcoin is a difficult concept to grasp, which I believe is also a big factor in why it has such a bad name or it's uptake has taken so long. If you want to know more about Bitcoin, I highly recommend starting here.
Is it a good idea to buy Bitcoin?
It really depends what your goals are. Bitcoin should be treated like any other high risk investment. Do not use money you are not willing to lose and do not spend large amounts of money until you have a complete understanding of how the trading platform works and you have done several buy/sell orders.
When it comes to investment, there are primarily two reasons you would want to buy Bitcoin:
- Long term investment: Buy now, and wait a year, or two, maybe even three or more, before selling it and taking your profit
- Short term trading: Buy when the price seems low, and sell when it is high.
Both of these strategies could work for you, as long as you are aware of the risk. No one knows what is going to happen with Bitcoin in the years to come. There are avid supporters of Bitcoin, like myself, who believe that Bitcoin has a really good chance of becoming a world currency, or at least that it will spark the creation of another currency that will become a global currency. But there's also a chance that Bitcoin might fizzle away completely. Government interference is a real concern, as well as various practicalities and shortcomings of the underlying technology.
If you strongly believe that Bitcoin is the future, then it might be worthwhile spending a small percentage of your monthly investment budget on cryptocurrency. But I wouldn't stray too far away from Bitcoin. Ethereum has taken a very hard knock as of late and its future doesn't look bright. For some, that might be a good reason to buy this coin, but make sure you understand why the price is so low.
Where can I buy Bitcoin in South Africa?
Bitcoin can be purchased from an Exchange. Currently South Africa has 3 reputable exchanges:
Luno is the exchange with the most users and for that reason it is the only exchange that I use. Exciting things are happening at CoinDirect, so there is a good chance I will make use of them in the future.
What is bitcoin mining?
Bitcoin mining is the use of computer processing power to process transactions. By processing these transactions, the "miner" is rewarded with Bitcoin. While Bitcoin Mining has nothing to do with physical mining, the principle follows the concept of mining for gold.
For a more detailed explanation on mining, I highly recommend reading this.
Is mining bitcoin profitable?
I wrote a detailed answer to this question here.
In short, it is unlikely that you would make a profit in South Africa. Here's why:
- With a 12 Card GPU rig valued at R90 000.00, you can currently make R1800 per month and electricity will cost about R1400. So you will make R400 per month. It will take you 19 years to pay off the rig.
- With 2 x Avalon 821 miners, which should be significantly more effective than a GPU rig, you are looking at spending R20 000.00 for the miner and your estimated income is R2200 per month, and electricity is estimated at R1866. So you'll only be making R333. It will take you 5 years to pay off the miners.
The only other times I would recommend mining is if you
- have access to free electricity
- get the gear for free somehow
- have major belief that crypto will grow in future (but even then, it would make more sense to just buy Bitcoin)
Where can I buy things with Bitcoin in South Africa?
There's a surprisingly large number of places where you can spend your Bitcoin in South Africa. 220 places to be exact! Check out the full list here.
Are there any bitcoin scams to watch out for?
So so so many!
"Mining Contracts" is a popular one. Many of these eventually collapse because they often don't even mine crypto. The profits you see is often just your own money being paid back to you. Until, of course, the day comes when it stops paying and the company you bought the contract from is gone.
While scams are indeed a real threat, phishing is also a huge problem. I've had friends sign up at exchanges and within a day or two, they get either an e-mail or a text message asking them to "Update their password". Which of course takes you to a fake site where the perpetrators obtain your login details.
Bitcoin is a new technology and with any new technology it is going to take time for people to understand it and be less prone to being scammed. For now, be vigilant. If something sounds too good to be true, make sure you investigate it thoroughly before you throw your hard-earned Rands at it. Also be sure to make use of the internet. If you Company X has a fantastic deal, do a search for "Company X scam" and read about the experiences others have had.
Still not sure if something is a scam or not? Leave a comment below and I'll check it out and let you know if I think it's a scam or not!
How do I buy bitcoin on an exchange?
If you have never worked on any type of exchange, it might be confusing at first to buy Bitcoin. This is also why people might prefer to use the "Easy Buy" and "Easy Sell" options on Luno. I don't recommend using these, as you will not get as good a deal as you would get if you buy on the exchange itself.
To use the exchange, simply log into Luno and then click on "Exchange". You should see a screen similar to the one above.
An exchange is simply a place where people can buy and sell Bitcoins. The exchange acts as a mediator to match buyers and sellers. If you are selling 1 Bitcoin at R100 000.00, then someone who is trying to buy Bitcoin can buy that Bitcoin (or a part of it) from you on the exchange.