Disclaimer: This article is written as a conversation starter, rather then a guide or a solution to a problem.
While cryptocurrencies have become more popular and easier to access in recent years, there is one aspect that is often overlooked. What happens to your crypto assets when you die?
Cryptocurrencies are secure by design because there is no central authority that can manipulate the system. As in, peer-to-peer blockchains are designed to stop others who do not have access to a person’s private keys from accessing their digital wealth. Unfortunately, it is this very design choice that prevents your loved ones from retrieving your cryptocurrencies without you being there yourself.
Typically, with physically assets a person has a will that designates who their assets go to, or they don’t have a will, and a relative (typically a spouse) would apply for probate. It’s then simple enough to show a bank the legal documentation and they will transfer the funds to the now rightful owners. Cryptocurrencies however are like buried treasure; no one will find it unless they know how to find it.
Unfortunately, there are many examples already of unexpected deaths and the loss of funds, with some being in the hundreds of millions of dollars’ worth of client’s funds. *https://thehustle.co/what-happens-to-your-bitcoin-when-you-die/
The question remains, how do I keep my crypto secure, but also accessible to those who would inherit it when I die?
A simple old school method would be to write everything down, all assets and instructions on how to access it, everything. Then put it in a safe. This is by far the easiest way and if you don’t own too much crypto (under $5,000 worth), then this method would suite most situations.
What if I own more, say, $10,000 to $100,000 worth? Some people might be a bit paranoid about revealing access to their cryptocurrencies on an easy-to-read piece of paper. What if someone breaks in and steals the safe? It’s easy enough to adapt the above situation. Instead of writing Your Wallet Recovery Phrase on a piece of paper, use an air-gapped computer to write the Recovery Key on an encrypted USB flash drive. This solution then relies on whoever needs access to drive knowing the password to the flash drive. Alternatively, the Recovery Key Phrase could be written in reverse, or written in some other “encrypted” way that only you and your loved ones would know. That way, if the keys are stolen, it makes it very difficult for the funds to be broken into.
Once you start getting above the $100,000 mark, not only do you need to start thinking a bit clever to keep your funds safe, but you are also now in the position where you really should have a “digital will”. The biggest issue that you will face is, do you trust the person who handling your digital will. What if you have $1,000,000 worth of crypto that needs to be split up between 4 family members, and the person handling the will walks off with all of it? There’s no central authority to prevent this.
Some people might consider the worth of cryptocurrencies inside the wallet is not worth the risk in revealing how to access it. While this is their choice, it is not everyone’s choice.
The best solution however would be blockchain technology itself. Creating a Digital Will with smart contracts isn’t a new concept and is probably overused as an example. While this solution only works on platforms that support smart contracts, it in theory is not complicated. For example, Cardano with its upcoming smart contracts will support Oracles, which will allow the contract to reach out and retrieve information from the internet. A Digital Will smart contract could reach out to a “death registry” and if it finds a match, trigger the start of the contract. As a safeguard, there could be a time limit of 6 months of which the owner of the contract has time to cancel if it’s being exploited (such as the death registry is hacked).
There are many solutions to this problem and services out there that can handle it for you. While this article is as informative as it can be, it’s meant as a guide or a conversation starter, not a conclusion with a solution.