Complex Made Simple

Who will inherit your Bitcoins should you bite the dust?

The short answer is no one. They will be lost in the ether forever.

Unless you will them to your next of kin or cat ( a bit more difficult) or whomever you wish, and today those options are limited.

Here’s what we know   

No question. Will Bitcoins 

When access to a bitcoin wallet is gone, the bitcoin is gone forever. It’s a task that calls for a private key – a 256-bit number that enables your coins to be spent. Without it, no bitcoins. Around 4 million bitcoins (worth some $30 billion) has been lost as a result of people dying without providing proper access to them.

“As bitcoin becomes more mainstream and its value continues to increase, considering how to manage it as part of an estate planning exercise is becoming increasingly difficult,” said David Janczewski, Coincover’s cofounder and chief executive, adding that, with bitcoin, “there’s no bank manager to ask, and no one can break (the safe or security box) in for you.”

Earlier this year, in perhaps the worst case of posthumously lost bitcoin, the chief executive of Canadian bitcoin and crypto exchange Quadriga, Gerald Cotten, died suddenly while on vacation in India from a disease in early 2019, leaving hundreds of millions of dollars in bitcoin and other cryptocurrencies apparently unrecoverable. Cotten died with the private keys to his exchange’s funds on his laptop, which only he has access to. Oops. 

Resurrecting dead Bitcoins

U.K.-based Coincover, founded just last year, has teamed up with Palo Alto-headquartered bitcoin storage company BitGo to offer bitcoin and cryptocurrency wills. 

The service hands out pseudo-wallet keys to people’s next of kin. But imagine if that next of kin is a child, or a spouse that was previously preoccupied with raising a family or whose business had nothing to do with digital assets. They would be clueless and would need assistance from other people and the mere thought of that happening puts those cryptos at risk. 

A prominent Bitcoin startup is also looking to aid in this dilemma.

Meet Casa Covenant.

The thing is that most cryptocurrency security systems today disallow or disincentivize inheritance solutions, as they pose extra risks to the safety of your coin.

The “Casa Covenant” tackles that.

This system, put simply, “allows you to securely pass on your bitcoin to whomever you designate, while minimizing the risk that someone can steal these funds in advance of your death.  

According to a blog post outlining this solution, Covenant will use multi-signature technology, which will add a key to Casa’s existing 3-of-5 Key Shield product to make it a 3-of-6 setup. “This [additional] key is activated after clients start the inheritance planning process with Casa, and it’s held by a client’s estate lawyer,” the post explained.

When proof of a client passing away is presented, the Estate lawyer Key, Casa’s Recovery Key, and a Safety Deposit Box Key can be accessed (after the proper legal steps), thus allowing for transactions to be sent.

Yet another digital inheritance solution exists.

TrustVerse is a protocol for handling digital assets, including the management and ownership of digital identities. Pluto is its legacy planning service for cryptocurrency owners. After selecting an inheritance design that dictates the conditions under which the assets can be bequeathed, a smart contract is set up to administer the process.

A certificate of death gains access to the assets locked into Pluto’s smart contract. There are also provisions to cover multiple beneficiaries, who must reach consensus before funds can be unlocked.

Similar technology is utilized in Last Will, a BCH inheritance solution.