META: What is Ethereum and is it worth buying in South Africa? This guide explains what Ethereum does, how it differs from Bitcoin, and what to consider before investing.
Bitcoin gets most of the attention. But if you've spent any time researching crypto, you've come across Ethereum. It's the second largest crypto by market cap and it does something fundamentally different to Bitcoin.
Here's an honest breakdown of what Ethereum is, what it's used for, and whether it belongs in your portfolio.
What Is Ethereum?
Ethereum is a decentralised blockchain platform that allows developers to build and run applications on it. These are called decentralised applications (dApps).
Ether (ETH) is the native currency of the Ethereum network. You need ETH to pay for transactions and computations on the network.
If Bitcoin is digital gold (a store of value), Ethereum is closer to a global computer. It's the infrastructure layer that thousands of other projects are built on: DeFi protocols, non-fungible token (NFT) platforms, stablecoins, and more.
How Is Ethereum Different from Bitcoin?
Purpose: Bitcoin was designed primarily as a peer-to-peer currency and store of value. Ethereum was designed as a programmable platform.
Smart contracts: Ethereum introduced 'smart contracts' - self-executing code that automatically carries out the terms of an agreement when conditions are met. Bitcoin doesn't do this natively.
Supply: Bitcoin has a hard cap of 21 million coins. Ethereum doesn't have a fixed supply, though the issuance rate has been significantly reduced since the network's upgrade to Proof of Stake in 2022.
Energy use: After The Merge in 2022, Ethereum moved from Proof of Work (energy-intensive mining) to Proof of Stake. It now uses significantly less energy.
What Drives Ethereum's Value?
Utility: The more applications built on Ethereum, the more demand for ETH to pay for transactions. Usage drives value.
Staking: Since moving to Proof of Stake, ETH can be staked to earn yield. Staking yields are variable, not guaranteed, and depend on network conditions. This is not a recommendation to stake.
Ecosystem size: Ethereum has the largest developer community in crypto. The depth of the ecosystem creates a network effect that's difficult to replicate.
Market sentiment: Like all crypto, ETH's price is also influenced by broader market sentiment, macro conditions, and speculation.
Should South Africans Buy Ethereum?
That's a question only you can answer, and it depends on your financial situation, risk tolerance, and investment goals.
What's worth considering:
Ethereum has demonstrated durability. It's been through multiple market cycles and remains one of the most widely used blockchains. Past performance and historical resilience are not indicative of future results.
It's volatile. Like Bitcoin and all crypto, ETH can drop 50%+ in a bear market. If that would significantly harm your financial position, the allocation should reflect that.
It's taxable in South Africa. Gains from ETH are subject to South African Revenue Service (SARS) tax. Keep records.
Don't buy because of FOMO. Buy because you understand what it is and have made a deliberate decision.
The Bottom Line
Ethereum is a real, widely used blockchain platform with a meaningful ecosystem built on top of it. It's not a speculative meme. It's also not without risk.
Understand what it is, decide how it fits your goals, and invest accordingly.
80Eight SA (Pty) Ltd is an authorised Financial Services Provider. FSP 49010. This content is for informational purposes only and does not constitute financial advice.
