Handling inheritance a quandary for bitcoin
Five years ago, Matthew Moody was killed during an observational flight when the two-seater plane he was in crashed flying over a canyon in Chico.
Michael Moody knew his 26-yearold son had been mining bitcoins — today worth thousands of dollars each — but had no idea how many he had or how to find them. Michael Moody has spent the past three years seeking the answers.
“My son was actually one of the earliest people to mine it,” said Moody, a retired software engineer. “He used his computer at home to mine bitcoins when you actually could do it that way, and he had a few, we think.”
The decentralized and unregulated nature of bitcoin means that without the keys to access his son’s digital wallet, hosted by Blockchain.info, Moody has no way of accessing any funds.
And it’s almost impossible to find out whether a person is sitting on peanuts or a fortune, as wallets can contain an unlimited number of unique addresses, or identifiers, with bitcoins assigned to each.
Without knowing every address, it’s not possible to locate every piece of currency.
Blockchain.info did not respond to requests for comment on this story.
“There is no authority that could be appealed to fix this,” Nolan Bauerle, director of research at cryptocurrency analysis website CoinDesk, said of an individual’s bitcoin stash becoming inaccessible after dying. “Those coins would be abandoned.”
Moody says entrepreneurial young people, unfamiliar with emerging
digital currencies, need to be better educated about the steps needed to be taken to ensure their investments are properly secured, both for themselves and for heirs.
In the 1990s, your digital legacy might have just meant email accounts, but today extends to passwords, encrypted device backups, photo archives, personal data held by search engines, advertisers and social networks — and now cryptocurrencies.
Issues around inheritance include initial coin offerings, the process of raising money from investors by offering them virtual “tokens” instead of shares. In 2017, about $3.5 billion was raised worldwide from initial coin offerings, according to CoinDesk.
The relatively nascent practice of holding an initial coin offering means legislation is yet to catch up, and questions about what happens to people’s tokens when they die are numerous.
But following a number of lawsuits, lawmakers will soon decide whether a token acquired from an offering will be considered no different to a share bought through an IPO.
“My bet is that (initial coin offerings), when issued by a company, they’re going to be considered securities,” said Peter Henning, a professor at Wayne State University Law School and veteran SEC and Justice Department lawyer. “If they are securities, then just like stock or bonds you can put them in your will and pass them down.”
European Central Bank President Mario Draghi said that blockchain technology is “quite promising” but that “the value of bitcoin oscillates wildly. Of all things, I would not call bitcoin a currency for this reason.” He said the central bank remains “very interested” in the blockchain, which underpins cryptocurrencies. Some firms are beginning to make provisions. CoinBase is a custodial service, which holds a customer’s private keys — the kind that if lost would otherwise render any bitcoins permanently inaccessible — and as such is able to provide some level of security in the event of a person’s death. The company asks for documents such as a death certificate and will in order to transfer the assets.
It’s not a solution that some enthusiasts will be keen to use, as the idea of someone else being in custody of bitcoins is antithetical to decentralized, user-controlled ethos that sparked an interest in the anonymous currency in the first place.
CoinBase declined to comment for this story.
The safekeeping of a private key remains the bottleneck regarding the inheritance of bitcoins. French startup Ledger, which in January raised $75 million from investors, makes electronic bitcoin wallets.
These use USB dongles to store passwords for accessing and spending cryptocurrency. Of course, if your heirs can’t find the dongle or don’t recognize it for what it is, the problem remains.
Ian Purton, CEO of the StrongCoin digital wallet service, said it’s an issue that has arisen as the industry matures, “and people start to consider family and what would happen to their digital assets.”
“When we first started out it was all about how we can best secure bitcoin from hackers,” he said. “Now, our focus is also on protecting users who may be unfamiliar with cryptography.”