Luno recently added support for the Ethereum blockchain, allowing South Africans to buy and sell in rand.
The company also added an Ethereum wallet to its cryptocurrency storage portal, meaning users can send and receive Ethereum to and from other Ethereum addresses.
MyBroadband spoke to Luno about the features and limitations of its Ethereum service, and whether it will expand its Ethereum support in the future.
Luno is primarily a cryptocurrency-to-fiat exchange, and like most exchanges, its Ethereum wallet does not support ERC20 tokens.
Many cryptocurrencies which are built on Ethereum, such as OMG and Augur, can be sent to an Ethereum address and accessed from supported wallet software.
As Luno users do not hold their own private keys, they will not be able to recover ERC20 tokens – even if they download a standalone wallet client.
“If someone wants to participate in a token sale, they should send their ETH from Luno to an ERC20 compatible wallet,” said Luno’s Werner van Rooyen.
“Customers should also not send any unsupported currencies or ICO tokens to their Luno account.”
Users who want to add an Ethereum wallet to their Luno account must:
- Access their Luno menu, and select Wallets.
- Select the add wallet (+) icon.
- Select Add ETH wallet.
Security and adoption
Luno’s Ethereum wallet service functions on the same architecture as its Bitcoin wallets.
This means that user private keys and funds are stored in cold wallets, with a certain amount of funds circulated in exchange-operated hot wallets.
While this is a secure way to prevent customers’ private keys from being compromised, it also means users do not officially own their cryptocurrency.
Instead, Luno owns the private keys and holds the cryptocurrency on the user’s behalf.
Van Rooyen told MyBroadband that the Luno exchange has become increasingly popular throughout the year, with around 738 Bitcoin currently being traded on the platform each day.
He said the launch of Ethereum support has seen a great response from the South African cryptocurrency community.
“Ethereum has been a huge success already and the feedback from our customers on social media and in private messages has been very positive,” said van Rooyen.
“We saw nearly 40% of our active users in South Africa enable Ethereum wallets in their Luno accounts during the first day of the announcement.”