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What happens to your cryptocurrency when you die?

What happens to your cryptocurrency when you die? image

Are you investing in cryptocurrency? 

Have you built up a few crypto assets in the digital world?

What would happen to all your crypto treasures if you suddenly disappear?


 

Leaving the land of the living and moving on to the afterlife would mean having to leave one's material and financial assets behind, usually transferring possession of these assets to your closest family members or even friends. Almost everyone over their 50s has set up a Will noting down the people they are most fond of as the lucky successors of their worldly treasures. For those who haven't prepared this handy little document, there are still a number of set policies on how these will be relayed onto their living descendants. However, cryptocurrency, being a relatively new asset, has no rules, no policies, and no governing body to transfer its ownership to the next in line when the current user passes on. The security and near anonymity that bitcoin and other cryptocurrencies provide may be considered a general benefit to its users while they are alive but it also presents a problem to how it would be inherited when they are gone.


Problem 1: Ownership

Sharing your private key is sharing ownership of your digital wallet and your bitcoins

The main problem to cryptocurrency inheritance would be its concept of ownership. It is unlike real-world assets, either material or financial, that are easily identified as belonging to a specific individual through a heavy trail of paperwork. Simply put, you just need to prove your identity to claim what is yours. Cryptocurrency ownership, however, is not linked to a person's identity but is dependent on the private key of each wallet. Knowing the private key would mean having access to the wallet and all bitcoins or other altcoins inside, meaning that an individual can conduct any transaction with this vital information alone. Basically, sharing your private key is sharing ownership of your digital wallet and your bitcoins.

 

Problem 2: Security

Access to the private key is the lone barrier protecting your bitcoins from falling into the wrong hands

This concept of ownership leads to another problem with cryptocurrency: Security. Since the cryptographic private key to a wallet is the only singular way to access a wallet, it acts as a double-edged sword. It benefits users by providing a narrow gateway of access but is also unable to provide them with a fail-safe or safety measure to protect their assets. Many applications containing valuable information provide their users with a 2-step verification process that might seem like an unnecessary hassle for others but is still a good method of protecting the owner's information from online hackers. With this vital piece of information acting as the lone barrier protecting your bitcoins from falling into the wrong hands, it is difficult to find a secure way of relaying this key to your benefactors.


Solution: Planning

Simply saying it is difficult does not rule out the possibility of a successful bitcoin inheritance, or any cryptocurrency inheritance. A lot of people have begun to set and plan where their cryptocurrency will go when they are gone and some of these plans have been successful. Generally, the most important thing for this to be a success is for the owner to be prepared with a plan. How do I plan where my cryptocurrency goes? The first thing to get started on these plans would be to:

  • Identify Benefactor

    1. Unlike other assets which the government may distribute to your nearest blood relations even without a will, cryptocurrency is not a centralized currency or a commodity which they can easily access and give away. Due to the steps that need to be taken in order to access your wallets, it is important to have a person or people in mind because the other steps would rely on a few things about these people as well. Mainly, on how much they know about cryptocurrency because the next step involves having to:

  • Inform them

    1. Depending on how well they know and understand the concept, there is a need to inform and get your benefactors up to date on cryptocurrency. Whether they may not be familiar with the specific cryptocurrency you possess, or they just don't know what cryptocurrency is at all, it would be helpful to give them a heads up. This would help them gain a better idea on what they may be getting.

  • Prepare Instructions

    1. You may have a single digital wallet or multiple wallets, be investing in bitcoin alone or in various types of cryptocurrencies. Whatever the case, it is important to layout detailed instructions to help them get what you left for them. It is more likely that the transfer won't be as easy as a bank transferring financial assets into another account after they simply get a signature and this would mean that they have to work for it. Having a set of detailed instructions, guiding them through the process would certainly help and ensure that your digital treasures don't just become lost.

  • Find a Secure Medium

    1. Remember how knowing the private key equates to ownership of the bitcoins in a wallet? Ensuring that your private key is not in a legal document that would be openly accessible is one of your first priorities, like a will for example. If not stored properly, there would be no point for you to try to hand down your assets when other people can just easily transfer your bitcoins to their own wallets. Safety deposit boxes may be a good place to store paper wallets or cold storage devices. Your instructions could then provide access to the safety deposit box where the new owner would be able to securely find your keys. Another option would be to keep this with a trusted third party who will be tasked with relaying it to the necessary individuals when the time is right. There are now companies that have started to fill in the gap created by the need for this service. Generally, you only need to find a place to store your private keys where no one but your benefactors will be able to access.

  • Find a Lawyer

    1. All the things that you have planned for would not be put into motion after your death if there is no responsible party to carry it out. Just like the regular Will, lawyers can help relay your plans or instructions to your family. This may not always be necessary if you have opted to place your trust in a third party to help conduct the transfer. However, anyone interested in securing their cryptocurrency may most likely also want to, or already have secured their assets in the form of a Will. Adding your set of instructions to your will as being a document to be passed on would likely ensure that it gets where it is supposed to.


 

In conclusion, because owning bitcoins does not require a user to provide any personal information, a wallet's existence and access to it become solely dependent on the individual's discretion of use. People who have these digital assets but keep it a secret, might very well literally take these secrets to their graves, and their bitcoins with them unless they plan and prepare the necessary measures.

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