Autonomy is a core principle of the cryptocurrency space: Investors need to rely on a reliable, distributed network instead of a central entity that has been known to devalue the assets of others. One flaw associated with autonomy, however, is heredity.
It is estimated that 4 million Bitcoin (BTC) has been lost over time and now sits in an inaccessible wallet. How many of these coins belong to HODLers who died without sharing access to their wallets with others is unknown? Some believe that Satoshi Nakamoto’s estimated 1 million BTC fortune was not touched for this reason: No one else had access to it.
In particular, a 2020 study by the Creenation Institute found that nearly 90% of cryptocurrency holders are worried about their assets and what will happen to them when they drop out. Despite the concerns, cryptocurrencies proved to be four times less likely to use inheritance codes than non-cryptocurrency investors.
However, the lack of solutions seems to be much debated. Johnny Lyu, CEO of KuCoin’s cryptocurrency exchange, told the Cointelegraph that cryptocurrency is still “misunderstood” because most cryptocurrency owners are young and as such do not care about their deaths or legacies.
In addition, Lyu says that we have not yet “come across a legislative precedent in this matter”. As such, there is not enough experience “in resolving a genetic dispute, such as in cases of theft and return of cryptocurrencies. For Lyu, a cryptic legacy comes down to providing relatives with private keys. He added that it could be controlled via private keys in a cold wallet, which is then stored in a safe and stored by a notary:
“If the owner does not want to transfer the cryptocurrency before the time of death, then they need to think about compiling a will and a record of the contents that their heirs need to open the wallet.
The CEO added that investors who want to give up their assets must “solve the problem of maintaining anonymity until the heirs can be considered. At the same time, he acknowledged, the transfer of credentials could “endanger the security or anonymity” of the holder.
For Lyu, the best cryptographic inheritance option was developed by Germain notaries and consists of a flash drive with a “master password, which already contains the account password. That flash drive is stored by the property owner while the notary has the master password, he said.
Lyu’s proposal, however, has a caveat: Lack of autonomy. Trust is sacred if someone else has access to our money.
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Keys and trust
Should crypto holders share keys with trusted third parties? The question is difficult to answer.
For some cryptocurrency enthusiasts, if someone else controls the keys to a wallet with cryptocurrencies, they are actually co-owners. If no one else knows how to access funds, the assets can be lost if the holder dies prematurely.
In an interview with the Cointelegraph, Mitch Mitchell, Assistant Consultant at Estate Planning at Trust and Will – a firm specializing in real estate planning – said that investors in cryptocurrency should share their private keys with trusted family members “for the simple reason that if they do not, private key knowledge dies with them. “
Mitchell added that when or how they should share their private keys was controversial. Max Sapelov, co-founder and chief technology officer at startup CoinLoan, told Cointepegrah that sharing private keys was a “divisible issue” as it depended on “the depth of the relationship” and investor confidence in third parties.
Sapelov said there are two main threats to consider before sharing private keys:
“First of all, in unusual situations, even close family members can turn their backs on money and wealth. Secondly, it is a challenging task to manage private keys (or recovery seeds).
Without proper knowledge, he said it was “easy to lose access” to private keys due to improper backup processes or attacks by hackers who want to steal cryptocurrencies.
Interestingly, prominent members of the cryptocurrency community have publicly acknowledged simply sharing their private keys with family members to ensure they have access to their funds. Hal Finney, the recipient of all of Bitcoin’s first transactions, wrote in 2013 that Bitcoin genetic talks were “of more than academic interest” and that his BTC had been kept in a safe that his son and daughter had access to.
For some people, however, sharing private keys is not a solution. If not because of a lack of trust, because of a possible lack of security. Self-defense is not for everyone, so much so that many cryptocurrencies do not even transfer funds from stock exchanges.
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Keep cryptocurrencies in stock exchanges
Another solution that is often considered when it comes to cryptocurrency heritage is simply to own assets on a leading cryptocurrency exchange. The policy may seem risky at first, given the number of trading systems that have been breached over the years, but as the market matures, some have managed to stay afloat even after security breaches.
For Mitchell, users can store their wallets on a portable hard drive instead of storing money in a cryptocurrency exchange and treating it as a bearer bond, which means it belongs to the holder of the drive. However, it might be wise to keep an encrypted backup on the cloud to provide a double layer of protection, he added.
The advantage of storing on exchanges like Coinbase or Binance, Mitchell said, is that they are more user-friendly for family members who want to recover money. Sapelov pointed out that the main stock exchanges “have one of the highest levels of security” in the space and are required by law to “have the legacy of accounts in place.
Coinbase, for example, allows family members to access the account of a deceased relative after submitting a number of documents, including a death certificate and last will and testament.
In order for rightholders to have access to funds locked in cryptocurrency exchanges, they will certainly have to jump through circles, but having direct access to a drive with the keys would allow them to access the funds immediately.
Another option would be a cryptocurrency exchange service. To Sapelov, whether anyone decides to pay for such services “depends on their preferences,” as this is a new industry that is “definitely gaining popularity” but has not “confirmed a track record yet.” Instead, he suggests that users contact the exchange’s service departments they use to explore genetic potential before it’s too late.
On the other hand, cryptocurrency exchanges or legacy services may close down over time or lose access to the funds themselves. Although the possibility is remote, it is still worth considering when considering how to mediate investments in cryptocurrency.
Nevertheless, there is one more solution that needs to be considered: special cryptography.
Speaking to Cointelegraph Jagdeep Sidhu, chief designer and president of the blockchain platform Syscoin, said it was possible to set up a solution where users’ assets are automatically transferred to another wallet, which can be used for genetics:
“What is possible is to do ‘timed’ encryption. Special encryption where you can encrypt messages that contain a private key that can only be decrypted after a while.
Holders of cryptocurrencies can also identify themselves as the right holders of such transactions, or set up a larger number of beneficiaries, as “there is no limit to how often you can encrypt your key. Sidhu said it was possible to sort out cryptocurrencies while maintaining autonomy with this method.
He further said that it was possible to set up a service that requires the user to be interactive to prove that he still exists. If the user does not respond after a certain time, then “timed encryption messages are created for all your beneficiaries.”
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The solution is nevertheless quite technical and would require users of cryptocurrency to remain interactive or risk accidentally sending their assets to beneficiaries. The confusion that would arise with such an installation could be difficult.
Overall, it must vary from person to person how HODLers’ cryptocurrencies go about their business. Some may prefer to go the scattered route and store their own funds while creating their own genetic solutions, while others prefer to trust institutions for their own funds and will.
What is important is that, after all, users set up a system that allows their right holders access to their cryptocurrency if something happens to them. After all, money that changes lives is not really life-changing if nothing can be done about it.
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