No More Bits Of Paper: Innovation Is Solving Crypto’s Inheritance Issues At Last

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One of the most overlooked aspects of cryptocurrency is the question of what happens to it if you die? Crypto inheritance is something that should be planned in advance, but sadly it is often ignored. 

There’s a lot of evidence to back this up. It’s believed that around four million Bitcoin has been lost forever in wallets that can no longer be accessed, and in many cases that’s because the owner passed away without passing on their seed phrase. Some speculate that this is what happened to Bitcoin’s creator Satoshi Nakamoto, who vanished with billions of dollars worth of BTC left untouched in idle wallets. 

If you happen to have any worthwhile amount of cryptocurrency savings, it’s important to consider what will happen to those assets in the event you pass on. Thankfully, decentralized solutions from startups such as Serenity Shield have emerged to simplify how investors can pass on their digital assets.

The Risky Business Of Crypto Inheritance

Many people will simply jot down their seed phrase on a piece of paper somewhere and inform their loved one where it is, in case the inevitable happens sooner than they plan. But doing so is risky, as that piece of paper can easily be misplaced, or worse, be found by someone else. If that happens, your entire digital assets could be lost forever, with no recourse available. 

So a better solution is needed for crypto inheritance. You could, of course, simply write a will and leave it with your lawyer or solicitor to deal with. Unfortunately, this still means having to write down the key, and placing a lot of trust in your legal representative. The only advantage of creating a will is preventing squabbles among your family and friends over who is entitled to what, but it doesn’t eliminate the risk of that seed phrase being lost or stolen. 

The whole point of crypto is that it’s meant to be trustless, so you don’t really want to go and place your trust in someone, even if that person is your better half. 

Some cryptocurrency exchanges promote their crypto inheritance services as an alternative. For instance, Binance offers a way for next of kin to recover the assets of their loved ones: 

In the case of Binance, it needs to see documents including a death certificate, and a legal document such as a will that bequeaths those assets to the beneficiary. Of course, they’ll also need to see proof of identity. Once these documents have been supplied, Binance will wait for a specified period to check that the deceased user doesn’t suddenly rise from the dead and log in to their account.  

The problems here are obvious, though. It still relies on trust, and that is far from ideal. While some people may be happy to leave small amounts of crypto on an exchange, most prefer not to do so. Exchanges can be vulnerable to hacks and other security incidents, and they can also mismanage user’s funds, as we saw last year with FTX. 

Safer And Smarter Solutions

The great thing about the blockchain business is that it’s an incredibly resourceful place, and a number of projects have set out to address the issue of crypto inheritance with decentralized solutions. 

For instance, TrustVerse has created an asset management service that integrates an inheritance solution called Pluto. It uses a combination of private smart contracts and a data oracle that makes contact with the user’s next of kin in the event that they fail to check in on time. 

TrustVerse’s solution is based on a “Proof-of-Death” consensus mechanism that aims to prevent fraud. The user can set up an inheritance plan that specifies the conditions through which their digital assets can be bequeathed, with smart contracts automatically executing that process. Once it has been set up, the designated heir will be required to submit a death certificate to unlock the assets guarded by the smart contract. Pluto is flexible too, with provisions to cover numerous beneficiaries who must all reach consensus for the assets to be unlocked.

Offering an even more innovative solution that does away with the need for a death certificate is Serenity Shield, creator of an extremely secure, multi-chain data storage protocol that’s entirely decentralized. To use Serenity Shield, the user simply connects their Web3 wallet to the dApp and registers an account, selecting their preferred plan and paying a small fee. Once done, the user can create a “StrongBox” where they can store sensitive data such as their seed phrase, logins, passwords and other files. 

The data submitted to the StrongBox is encrypted via an API with the AES256 format, before being sent to a smart contract on the Secret Network, ensuring full privacy. The StrongBox is then created, and the user is provided with a viewing key which is also encrypted through the API. This key then undergoes the Shamir Secret Sharing method, where it is encrypted a third time and split into shards represented by three unique NFTs. One of these NFTs is sent to the smart contract, while the other goes to the user and the third to their designated heir. The user then sets up the conditions under which their heir can access that NFT. Serenity Shield also uses the FINDORA system, Prism++, to conceal the wallet addresses that received the three NFTs. 

To unlock the StrongBox, two of the three NFTs must be used to reconstruct the original viewing key. It’s a fully trustless solution that allows the user to remain in complete control of all three NFTs. The user always has access, and by making regular contact with the smart contract, they can prevent their heir from accessing the third NFT to ensure their assets remain secure. Only if they fail to check in will the heir be granted access.

An alternative to these solutions is Safe Haven, which provides a way for investors to transparently facilitate access to their digital assets after they pass away. The ingredients here include a TFC Share Distribution Key, a Trust Alliance Network and an Escrow protocol. 

Safe Haven’s protocol works like this: The investor, or “initiator” distributes a seed phrase or private key with any number of stakeholders that they define. This is done in collaboration with a member of the Trust Alliance Network, which is a group of legal entities that has an established relationship with Safe Haven. 

The selected legal entity from the Trust Alliance Network, known as the “validator”, handles the process of distributing the seed phase as shares through a smart contract, as defined by the initiator. Each share is encrypted, and represents a portion of the digital assets the initiator desires to be distributed if the conditions specified within the smart contract are met. These shares are then managed as a legal certificate by notaries within the Trust Alliance Network. Should the smart contract’s conditions be met, a specified number of the designated shareholders must present their shares for the assets to be unlocked. In this way, the initiator maintains full control of their assets so long as the smart contract conditions are unmet.  

Peace Of Mind At Last

These innovations can be viewed as a sign of the growing maturity of the digital asset industry, which requires reliable solutions to the challenge of inheritance that don’t sacrifice its decentralized principles. Without a robust and foolproof way to ensure that crypto assets can be accessed in the event of the owner’s untimely demise, the industry cannot hope to achieve widespread adoption. Thankfully, these questions are being addressed in a satisfactory way, enabling crypto investors to relax, safe in the knowledge that their funds will be passed onto their loved ones in a timely manner. Let’s hope more people will start using them.