Inheritance: A Serious Subject Not Many Crypto HODLers Are Paying Attention To
Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.
Without a detailed plan to transfer the private keys when the time comes, your crypto assets are pretty much useless to your loved ones
According to a report from Crypto.com, the total number of crypto users could reach one billion worldwide by the end of 2022, up from 295 million in December 2021. Most crypto traders and HODLers are still in their youthful years, and haven’t given much thought to death or inheritance yet. Very few have an inheritance plan in place to ensure that their loved ones can access the assets after they are gone.
Over the years, an estimated 4 million Bitcoin has been lost, lying idle in inaccessible wallets. It’s believed that a large portion of that Bitcoin belongs to HODLers who passed away without sharing access to their wallets with anyone. Some even believe that Satoshi Nakamoto’s 1 million Bitcoin hasn’t been touched in years because no one has access to it.
The downside of self-sovereignty?
Cryptocurrencies like Bitcoin are designed for self-sovereignty, giving owners full control over their assets. “Not your keys, not your coins,” goes the not-so-old saying. Crypto puts your wealth directly in your hands, without involving an intermediary. The assets are stored on the blockchain, visible to anyone who has your public key.
Your private keys, which are a long string of characters, act like passwords. The individual or entity that controls your private keys controls your crypto. Once lost or forgotten, the private keys can’t be recovered.
To make it easier for users, most wallets have a 12- or 24-word recovery phrase that acts as a human-readable representation of your private key. If your loved ones don’t find the private keys to your crypto after your death, they won’t be able to access it. And if you share your credentials with them while you’re still alive, there is a real possibility that they could steal all your crypto even before your death. That’s the dilemma.
Putting a plan in place
Most HODLers come up with their own ways to ensure that their heirs get to own their assets when the time comes. Some write down their wallet addresses, private keys and/or seed phrases on a piece of paper and lock it in secret lockboxes. The paper wallets, though widely used, might be discarded mistakenly as trash if discovered after years.
Others turn to blockchain solutions like Serenity Shield for the sake of security and mental peace. Serenity Shield allows users to create an inheritance StrongBox – a virtual safe – through its encrypted and fully decentralized solution. The StrongBox serves the dual purpose of crypto inheritance and insuring against the loss of your private keys.
Serenity Shield users configure their StrongBox with all the sensitive information before it’s encrypted and split into three unique NFTs, which are stored securely on the Secret Network blockchain.
- 1st NFT remains with the account user
- 2nd NFT is sent to the designated heir(s)
- 3rd NFT is kept secured in Serenity Shield’s smart contract vault
You or your heirs need at least two NFTs to crack the StrongBox. Serenity Shield smart contract sends the third NFT to your heir only when the StrongBox activation policy defined by you is fulfilled. You can claim the third NFT to modify or cancel the conditions of the StrongBox, or simply to recover the information. It utilizes Decentralized Identity (DID) technology for secure user login. Serenity Shield recently secured €1.55 million in funding despite the current market turmoil.
Centralized exchanges like Coinbase and Binance have also grown in popularity due to their ease of use. Coinbase, for instance, allows a family member to access the account of a deceased relative after submitting relevant documents like the last will and a death certificate.
However, centralized exchanges leave you without direct ownership of your coins. You don’t have access to your private keys. This becomes a risky affair considering dozens of centralized exchanges have gone out of business or been hacked. Some notable centralized exchange hacking events include the infamous MtGox (2014), Bitfinex (2016), Binance (2019), and KuCoin (2020).
We also have software and hardware wallets to secure our digital assets. Software wallets are free and easy to use, and offer users a 12- or 24-word seed phrase for remote access and wallet recovery. But many users store these seed phrases in emails or IoT devices, increasing the exposure to hacks. Hardware wallets have the same risk – the seed phase being lost.
Conclusion
With the growing crypto adoption and users’ desire for self-custody, it has become increasingly important for HODLers to ensure that their loved ones have access to their private keys – and thus crypto assets – after their death. The approach you take depends on a number of factors including the strength of your relationship with your loved ones. What truly matters is to have an inheritance plan in place.
