Host: Rani Molla
Guest: Rebecca Heilweil | Reporter | Recode
Category: ₿ Crypto
Podcast’s Essential Bites:
[1:02] “People are realizing that should something bad happen to them, they don't necessarily have in place a plan for their crypto to make sure that it goes to their loved one. Turns out actually estate planning for your cryptocurrency or what happens to your Bitcoin after you die is a bit more complicated than just writing in your will, […] give my crypto to my next of kin. […] About 16% of people in the United States have used crypto.”
[1:50] “Technically, nothing actually happens to [your crypto if you die]. It just kind of continues to exist on the blockchain. […] There are now thousands of cryptocurrencies and some of them work a little bit differently, but technically, nothing happens to it. […] Blockchain […] is the basis of a lot of cryptocurrencies. This is a digital ledger that's basically created by a bunch of different computers that are spread throughout the world. And they record every single cryptocurrency transaction using these public and private keys. So public keys are like bank account numbers and allow you to send crypto to other people. And then there are the private keys, which are basically your password. And these are usually unique, extremely large numbers and letters that unlock the crypto that you own on the blockchain. But the problem is that these passwords don't work like other online passwords, you can't just say I forgot my password and reset it and hope everything will be alright. There are workarounds and things like that, but basically, if you lose access to this private key, but haven't created some other way to get it, your loved one will never be able to access that crypto. That cryptocurrency is tied to that private key and there won't be any way to get it back.”
[3:42] “There's the analog solution, which is writing down the information that you need to access your crypto on a piece of paper and storing it somewhere safe where family members can get it. A lot of other people use services like Binance or Coinbase, which basically allow people to trade and sell crypto on the internet. So these companies will hand over someone's crypto assets if you can prove that you're the legal heir, you're legally entitled to them in the same way a bank would. But even though these are very, very popular platforms, and they do provide that kind of backup, a lot of crypto users don't like them because they're a target for hackers. And they also do rely on another company which some people think kind of undermines the whole point of crypto being this alternative to a centralized financial institution in the first place.”
[4:31] “There are a crop of startups that are now showing up that build tech specifically for cryptocurrency inheritance. Two of them are called Safe Haven and Casa. These two companies maybe use different technology but basically the idea is that you can lock your crypto within several other layers of private keys, or passwords which you can then disperse across several different people, may be multiple children or your loved one. And then you need multiple of these people to come together. To actually unlock that asset. […] It's really very, very complicated, but it's supposed to solve this problem.”
[5:21] “[An example for the so-called deadman switch is if] you own a bunch of crypto and you give your husband a special harddrive with a special type of key that's supposed to unlock that crypto. That key won't work immediately to unlock the crypto. What will happen is that that key sends a notification to you first. […] So then you have a certain amount of time to respond to that message and basically, let the tech know that you're still alive. If you don't respond within that amount of time, the system will automatically assume you're incapacitated or dead. And your husband in this scenario will automatically gain access to your crypto assets. So that's one version of the deadman switch, you can set it up in different ways. But someone I spoke to who's using this approach said they're also keeping a backup special key that's stored outside of their home just in case their partner can't access that key because there's been a fire or flood. So this gets very complicated very, very quickly.”
[6:20] “Really wealthy people can afford an approach that isn't as jerry rigged, they're turning to one of their favorite ways to store their money with crypto, [which is] trust funds, family offices, wealth managers that are now taking charge of their crypto to and making sure that their loved ones will be able to get that crypto. So these are people who either got rich by investing in crypto early or have bought crypto because they're trying to also get in on this big investment opportunity. So they are storing their keys with specialized financial institutions that are focusing almost entirely on managing crypto assets of the financial elite.”
[8:56] “Basically, you have to weigh how much you care about the cybersecurity of your crypto while you're still alive and how much you want to ensure that your loved one will be able to access that crypto once you're dead. There is no perfect solution here it seems. It's a problem for anyone who owns crypto and as crypto's value continues to grow this means the stakes are only getting higher.”
Rating: 🚀🚀🚀
🎙️ Full Episode: Apple | Spotify | Google
🕰️ 10 min | 🗓️ 03/02/2022
✅ Time saved: 8 min
