As October comes to an end, so does a month of Halloween festivities and scary stories. It is only fitting to dwell on a topic that frightens many within the crypto space: What will happen to our crypto assets when we pass away? This is something most cryptocurrency holders fail to give much thought to, and yet it continues to pose a significant problem as digital assets become more mainstream. So, what can be done? And how can you manage your crypto assets from beyond the grave?
Studies by crypto analytics company IntoTheBlock earlier this year reported that the number of Bitcoin holders alone has now passed 40 million worldwide. What will become of these 40 million separate accounts in the next 50-plus years? In a normal setting, when someone passes away, a will sets out who is to inherit which assets after death. In other cases, assets are passed down to the next of kin. However, in the crypto space, there is no way of knowing if someone owns cryptocurrency — and you will never find out unless the crypto holder tells you. As a result, rightful heirs may never inherit assets that they are entitled to, and this could be a significant amount of crypto wealth that the deceased has built up over a lifetime.
Over the years, we have seen many real-life horror stories about people who have lost millions in crypto due to losing their keys, or forgetting the passwords to crypto wallets. In 2018, QuadrigaCX founder Gerald Cotten died without sharing vital crypto passcodes, which resulted in locking up — forevermore — about US$250 million in assets belonging to other people in the now-defunct exchange. To prevent this from happening today, crypto owners must ensure that someone knows about their digital wealth and how to access it.
The market already offers multiple offline crypto storage solutions, but not so many that account for when you pass away. Many of those solutions force the user to trust a third party, and those who opt for self-custody face the challenge of securing their crypto assets while they are alive.
Protecting private keys is the cornerstone of online security in the crypto world, and this often results in people’s hesitation to share such information when alive, which poses a problem when you die. By allowing a third party to handle your inheritance, you are left to their capriciousness on whether or not they will pass it on to your heirs, keep it to themselves, or even lose it in the case of bankruptcy. Because of the decentralized nature of crypto and the responsibility that lies in the hands of the holder, there is no straightforward way to handle this succession when it comes to self-custody. The dilemma will almost always result in a tradeoff between security and ownership.
This issue is a tough nut to crack. However, many companies have started to implement strategies to tackle crypto inheritance. Some may prefer to go down the decentralized route and self-store their funds while creating their own inheritance solutions. Whereas others may prefer to trust institutions with their assets. More and more crypto inheritance firms are also starting to pop up, while other businesses have begun to offer crypto inheritance options that offer flash drives for the crypto owner while beneficiaries hold a master password.
However, people also should not be so quick to dismiss the various hardware solutions on the market. With these, asset holders have the option to pass on 24-word seed phrases to their heirs in advance. The option even exists to make a 2×12 split, sharing your assets among two children. But beware of the risks: If something happens to one of these children, all of your “social backup” may be lost.
The next generation of backup solutions tackling the issue of crypto inheritance are end-to-end and achieve this by adding an encryption layer and recoverability to the backup. Such backups are also recoverable without any third-party risk. Encrypted backup solutions on the market allow users to recover their seed while never revealing it, meaning when they pass away, their crypto can be recovered by their inheritors. The actual code is revealed only when a top plate, with its uniquely arranged characters, is paired with the indents of a second bottom plate.
Hardware wallet providers offer a solution that benefits both the living and the dead. Not only are you ensuring maximum security for your crypto assets during your life, but can safely pass over these assets in death.
The topic of managing crypto assets beyond the grave should no longer be dreadful and mysterious. But it does start with putting a plan in motion as soon as possible. After all, you can’t take your crypto with you — but you can pass it down, beyond the grave, if you are well prepared.