What happens to my Bitcoin when I die – Bitcoin Magazine
This is an opinion editorial by Prasad Prabhakaran, COO and co-founder of HexaWallet.
Over time, an estimated 4 million bitcoins have been lost and are now in inaccessible wallets. It is unknown how many of these coins belonged to HODLers who died without sharing access to the wallet with anyone else.
If you manage your Bitcoin keys, you must devise a strategy to transfer your wealth or your bitcoin will be lost forever.
Bitcoin inheritance is still poorly understood because most Bitcoin holders are young and, as a result, do not often think about death or inheritance.
As this Cointelegraph article states: “According to a 2020 study by the Cremation Institute, nearly 90% of crypto holders are concerned about what will happen to their crypto after they pass away. Furthermore, despite a high level of concern, crypto holders are reportedly .four times less likely to use wills for inheritance than non-crypto investors.”
If bitcoin is a new investment for you, it is crucial to plan for the long term, which includes considering what will happen to your bitcoin after your death.
“If you don’t make a copy of that key and put the key in a safe place where people you trust can find it and know what to do with it, then the wealth you’ve accumulated in crypto is going to sit there.“- Matthew McClintock, an attorney focused on bitcoin estate planning.
What are the current options for Bitcoin inheritance?
- Do nothing.
- DIY.
- Custody Exchanges.
- Expensive closed solutions.
- Poorly constructed cryptocurrency solutions with token incentives.
Do nothing
Due to its decentralized nature, bitcoin has some special security concerns that do not apply to assets under the control of a centralized authority. Bitcoin should be seen as a physical item of value, like diamonds, precious metals or cash, even though it is digital money. Anyone who gets access to your bitcoin can use it, for better or worse. In contrast, if you walk away without giving anyone access to your keys, your bitcoin will likely be lost forever.
DIY
An alternative is DIY storage systems such as the Glacier protocol. These non-commercial options have the distinct advantage of being completely private. There is no need for anyone to know that the user owns bitcoin or has set up a storage system.
The disadvantage lies in ease of use and guidance. Glacier, for example, took eight hours to set up and four hours to withdraw bitcoin during initial testing according to the official website. Although practice can cut this time in half, each transaction still takes several hours. Glacier requires the purchase of about $600 in equipment and a painstaking process that includes modifying laptop hardware, using the command line interface, installing operating systems, etc.
We are forced to only marry other tech geeks because it is so technical.
Custody Exchanges
People’s money is in their own hands thanks to Bitcoin! You don’t need to trust any financial institution to get your money because you control your private key and your bitcoin is stored on the public blockchain. Bitcoiners claim to be their own bank or even “self-sovereigns” because they have full control over their currency.
Because of this, a controlled legacy like that of a custodial exchange undermines the libertarian foundation of Bitcoin. You need to trust someone with your financial information if you want to transfer your bitcoin to someone after your death. If you access bitcoin through an online exchange like Coinbase, you have given that company your key and are relying on its employees to give your heir bitcoin when they ask for it.
Expensive solutions
Some organizations allow customers to lock their bitcoin keys inside multiple layers of other private keys, which can then be distributed among other signatories. Although this technology is meant to make it easier to inherit bitcoin, it can also lead to more involved processes such as beneficiary KYC, etc. Some of these inheritance programs are only available to certain customers who are willing to pay exorbitant prices and are only available in specific geographical areas. places.
Crypto solution with symbolic incentives
“Use DeFi apps to securely manage, store and transfer your bitcoin…even after you pass away.”
Doesn’t this sound like a scam to you? We’re not that bad, are we?
Summary
Overall, there can be individual variations in how bitcoin HODLers carry out their intentions after their death. While some may choose to entrust institutions with their money and wills, others may prefer to follow the decentralized route and store their money themselves while developing their own succession strategies.
Bitcoin HODLers deserve a better solution to secure bitcoin for their loved ones, and security should not come at the expense of privacy. They deserve a solution that is easy to set up and maintain and that supports multiple trusted hardware signers in an airgap and/or multisig fashion.
Ultimately, it is critical that users set up a structure that allows their beneficiaries to access their bitcoin assets in the event of their death.
Money that can change your life isn’t truly life-changing if it can’t be spent.
This is a guest post by Prasad Prabhakaran. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
