The unexpected death of a young man in Colorado USA, left behind grief and a puzzling question on how to gain access to his bitcoin investments given the security involved.
This young man’s story leads to the question — How should investors reconcile the security and privacy associated with digital currencies, with the possibility that its private controls might make it inaccessible if the investor dies unexpectedly?
Are cryptocurrencies too secure?
A main advantage of cryptocurrencies such as bitcoin is that they are protected by powerful cryptography. This though could also be a drawback when considering unexpected scenarios such as the sudden passing of a bitcoin owner. Bitcoin is remarkably secure as transactions are carried out and recorded anonymously with multiple layers of privacy and protection for digital currency wallets. But while this feature helps investors secure their assets, it can be challenging for estate planners or families who try to access them.
Most bitcoin wallets use a set of random characters or “public keys” to send and receive payments. A “private key” is a user’s access point, which serves as a password for the wallet and its contents.
Why bitcoin needs private keys
If a bitcoin owner dies without sharing a private key, that person’s heirs may find a wallet that they do not have access to. Investors can share their private keys with others by writing them down in a secure location or saving the key with a service that manages access codes. However, if estate executors can’t recognize bitcoin wallet private keys, they could be discarded accidently, so the commercial service is likely the best option.
A commercial service will not only guard access codes, but will be in charge of sharing the information with executors or others who need the information if the investor dies.
In the case of the Colorado man, the family worked with Coinbase, a popular wallet service, to confirm their relationships, and access his wallet.
Like investors who may have in the past stashed paper stock certificates or cash in unknown places, it’s likely that some cryptocurrency assets will be hard to track down after a person dies.