Cryptocurrencies are rapidly engulfing a whole new world. They are a virtual form of money protected by unbreakable cryptography. This attribute makes it a secure and private way to store wealth. Each cryptocurrency transaction is initiated through a ‘Private Key.’
A private key is a sophisticated form of cryptography that allows a user to access his or her cryptocurrency.
“The private key must remain secret at all times because revealing it to third parties is equivalent to giving them control over the bitcoins secured by that key. The private key must also be backed up and protected from accidental loss, because if it’s lost it cannot be recovered and the funds secured by it are forever lost, too.”
― Andreas M. Antonopoulos, Mastering Bitcoin: Unlocking Digital Cryptocurrencies
Therefore, holding a private key should be a secret affair. You should not share your private key with outsiders. Doing so would mean giving authority to others to access your cryptocurrency account, transactions, and its affiliates.
Keeping the private key completely secret also comes with a disadvantage. There have been recent cases where crypto-millionaires passed away without giving a hint about their digital assets to their families. All of their crypto assets were eventually lost as their family did not have the required credentials to access them.
In one of the most widely publicized recent examples, U.S. investor Matthew Mellon died in April this year leaving behind him a huge crypto fortune. In February, Forbes magazine had reported that Mellon’s $2-million investment in the cryptocurrency XRP had turned into a $1-billion fortune! Mellon did not name any heirs to his wealth and never shared any information on how to access his crypto wallets; therefore, everything was lost.
According to Chainalysis, about 25% of all bitcoins now in circulation (valued at roughly $23.5 billion) have already been lost forever due to deaths.
Digital inheritance has been a prevailing problem for people worldwide, even before the inception of bitcoin. If an individual dies and his family does not have the specific passwords and other personal information which are necessary to gain access to the person’s online existence like online bank accounts, insurance accounts, distribution to beneficiaries, tax implications, email, social media, etc., then everything will sink into oblivion.
Similarly, to avoid posthumous losses of cryptocurrency, you should update someone with your private key, other passwords, PINs, and 12-24 word mnemonic phrases, then your stored cryptocurrencies would not be lost forever.
Therefore, to ensure that your money falls into the right hands after your death, it is very important to prepare at least one trusted member of your family to inherit your digital assets. Investors should formulate their wills and name their heirs therein.
The ways and means of taking the initial steps vary from person to person. Some have a very old-school approach and prefer to maintain a notebook with all essential information handwritten. While some type in the required data and save it on the cloud. Again, there are some who use online platforms which store account information and passwords. Lifebank is one such platform.
LifeBank – an encrypted data key or downloaded software provides you with the option to store account information and passwords offline. You become the sole guardian and personal custodian of the information on your data key or computer/laptop.
In addition, inheritable digital safe services such as Digipulse help people to keep their bitcoin information safe while allowing it to be utilized for legacy purposes. Simpler methods might include entrusting third parties with copies of private keys, either on paper or in digital format, but such options necessitate a level of trust.
It is now time that we embrace a more responsible attitude towards our cryptocurrency investments. There is a lot to do in terms of our digital inheritance before the inevitable hour strikes.