It is a thin line between the adequate security of personal wealth within the crypto world and an eventual inability to transfer such wealth to heirs or other beneficiaries when the need arises.
The transfer of ownership of Bitcoins or other cryptocurrencies from its original owner to heirs in the case of eventuality is a matter that hasn't been properly defined within the crypto environment.
Who really owns the Bitcoins?
For security reasons, access to individual wallets have been designed in such a way that only one individual is legally allowed access to specific wallets. Any person who shares the details of their login, or details of how to access their wallet does so at their own risk.
“You can only possess Bitcoins if you possess the corresponding private keys.” Says Michael Vogel, CEO at Netcoins.
As the security design within the crypto ecosystem has focused on the protection of the wealth of crypto users, there lies the risk of losing one’s valuables in the case of eventualities such as death and incapacitation.
Online wallets are hosted on decentralized platforms. In other words, these platforms are not owned or controlled by any specific individuals or group per se. Therefore, when there are eventual, cases where the keys to an individual’s account becomes unreachable, including their email login, such a person’s possessions will continue to exist in thin air and becomes lost forever.
A puzzle of many pieces
Pamela Morgan of Empowered Law PLLC in her article highlights the complications involved in the process. She however notes that there is already work in progress to enhance the security of an individual’s crypto asset even in death or any other eventualities.
“We are designing systems that provide complete control to the individual while they are alive and well but divided control and access in case of emergency – like death, coma, or traumatic brain injury. By combining hardware, software, process-controls, and contracts, we implement user-friendly, tested plans to be executed by either the executor, trustee, or attorney when the time comes. The plans can be modified at any time and can be incorporated into a larger will or trust document, or operate on a stand-alone basis.”
Other possible solutions
Michael Vogel of Netcoins notes that the loss of Bitcoins is currently an everyday scenario within the ecosystem. Vogel explains that lost Bitcoins eventually gets distributed into the Bitcoin society, therefore making every other existing Bitcoin a little more valuable.
Vogel also identifies how difficult it is to retrieve Bitcoins from a deceased relative, noting the possible scenarios that may play out.
“Trying to retrieve Bitcoins from a deceased relative may be challenging or even impossible. If the Bitcoins are deposited at a mainstream exchange or hosted via a third-party, then you may be able to use an estate lawyer to prove that you are the new account owner.
You can only possess Bitcoins if you possess the corresponding private keys, thus, the most practical way would be to write down the keys in a will, or give half to your lawyer and half to your executor. This goes for anything digital, including passwords to websites or any data that you might want to pass down.”
However, he concludes by noting the possibility of creating an automated system where a smart contract could be created that uses a literal ‘dead man's switch’ to automatically transfer Bitcoins to a family member after the owner fails to check in after a given period of time.