With Bitcoin first emerging in 2008, the world of cryptocurrency is still very much in its infancy.
Due to the fast paced nature of the sector, the majority of people in the space tend not to look too far into the future, preferring to concentrate on present day issues.
However, there is one thing in life that we can’t escape, and no matter how far away it may be, it’s always best to prepare for life’s main inevitability.
Storage Problems
Bitcoin and cryptocurrencies in general, utilize storage methods that vary greatly from the traditional methods of storing money and assets that we are generally used to. Crypto assets are stored on the blockchain and users are able to access their funds by using various wallets.
Users also determine ownership of these assets via the use of unique private keys. The general mechanics of blockchain technology and cryptographic distributed ledgers has resulted in a secure and extremely private way for individuals to store value.
However, this privacy has its drawbacks when it comes to passing on digital possessions.
Bitcoin wallets do not require personal information such as names, addresses, or date of birth and users generally interact with wallets by using PIN codes or uniquely generated seed phrases.
These are designed to be kept secret, which enhance privacy while making it difficult for another person to know a wallet’s contents, or to be able to access the wallet.
As a result, there is a real possibility that any funds held in popular wallets provided by the Exodus crypto wallet, Jaxx, Ledger, and Trezor will be lost forever in the event of the sudden passing of the wallet owner.
As a result, the UK’s Law Society has stressed the importance of creating “digital wills” which entail leaving behind clear instructions regarding intellectual property and any digital assets in the event of death.
In today’s world, an individual’s digital legacy is increasingly made up of pictures, emails, social network accounts, online bank accounts, and digital currencies. The vast array of information that makes up an individual’s digital presence can be almost impossible for family members to track and Gary Rycroft, a member of the Law Society Wills and Equity Committee, has warned that family members may not know where to look online and as a result, everyone needs to make various details of their digital life absolutely clear.
The Law Society has announced that:
Having a list of all your online accounts, such as email, banking, investments and social networking sites will make it easier for family members to piece together your digital legacy, adhere to your wishes and could save time and money
Some of the instructions we are advised to leave should include a list of all the frequently used online accounts that contain important personal information, as well as valuable assets.
In the event of death, this list will allow family members to track down any funds held online that may still be accessible.
Exchanges Hold the Key
Coinbase may Help? – Image via PR Coinbase
As we’ve seen, obtaining a family member’s Bitcoin holdings can be extremely complicated, Bitcoin is pseudo-anonymous by nature, and incorporates multiple layers of encryption and authentication.
Wallet providers often pride themselves on providing anonymous services and sometimes hold little to no user data.
On top of this, many Bitcoin operators cannot be accessed in the same way as a local bank branch can, it’s also entirely possible for Bitcoin exchanges and wallet providers to be on completely different continents.
However, the recent passing of a man in Colorado highlights the role major exchanges can play in ensuring that digital funds can be safely passed on to family members.
The Colorado native had been investing in Bitcoin for a number of years and left his Bitcoin holdings behind in a virtual wallet. His family members were aware that he had been using Coinbase and this allowed them to locate where his funds were held.
His family were then able to approach the exchange and present the relevant documents, which led to the confirmation of a wallet and the eventual transfer of its contents.
Without leaving any information regarding services used and the appropriate ways to access accounts, it’s fair to say that most user’s funds will be lost forever with any untimely death. Despite having only been around since 2008, some crypto analysts are already speculating on the amount of Bitcoin already lost in wallets forever.
Plan for Contingencies
While the community waits for a software solution to solve this specific problem, it may be necessary to do away with a certain amount of privacy in order to ensure that loved ones get access to cryptocurrency holdings in the future.
People who privately store their cryptocurrencies can leave hardware wallets in addition to seed phrases in bank safety deposit boxes alongside the relevant instructions.
Users can also make arrangements to notify family members of any hot wallets they may have in order to ensure that their funds can be accessed in the future.
