With cryptocurrency increasing in both circulation and value, many users are underestimating the procedures that ensure the security and longevity of their digital assets.
Even many online services still do not take serious action against the potential digital asset loss of their users.
Often, basic security protocols are followed, but long-term good practice is neglected. Only a few digital asset owners consider what will happen with their online property in case of death or loss of access key.
In this article, we’ll look at the nature of digital assets and the tactics to keep them safe – for yourself and your family.
What are digital assets?
Traditional examples of assets are cash, real estate, and different valuable objects. Digital assets are electronically stored content, files, accounts or digital currencies owned by an individual.
As most cryptocurrency owners are still in their mid-20s to mid-30s, they are naturally less concerned about their digital heritage. However, inconsiderate storing, managing and transferring of digital assets not only affects the virtual currency holders themselves, but also their families and the entire cryptocurrency ecosystem.
If a digital currency owner dies without sharing their account information, their coins simply go to waste, which in turn, decreases the overall amount of the remaining assets.
Studies show that 3.79 million Bitcoins are already lost forever, amounting to 23% of all the Bitcoins currently in circulation and worth more than 40 billion USD.
However, cryptocurrencies are not the only digital assets. Other valuables may include:
The dark side of unhackable security
Cryptocurrencies are virtual assets protected by unbreakable cryptography. But even these ‘coins’ have two sides:
- Crypto presents a secure way of storing wealth because it’s currently impossible to hack your account or steal your assets;
- If you lose access to your cryptocurrency wallet (your private key), you lose your assets forever.
This process is irreversible – there is naturally no centralized authority that could fix the loss of blockchain-based data. But losing your access key doesn’t always mean you’ve acted irresponsibly. Other potential situations include fire, robbery, death or loss of memory.
Short-sighted thinking can create major losses for the relatives of crypto users or companies that deal with cryptocurrencies. There have been cases of relatives still struggling to resolve the complicated issue of digital inheritance.
However, the cumbersome inheritance procedure can be bypassed when it comes to cryptocurrencies – if the owner has been managing his or her digital assets wisely.
Digital asset management: how to protect your virtual property?
We’ve established that retrieving or inheriting lost virtual assets is extremely difficult if not impossible. So your only way to go is to avoid losing access to your digital valuables for one reason or another.
These are possible solutions for safeguarding your digital valuables:
Store your assets offline
Some cryptocurrency owners believe that storing their private keys in offline hardware wallets is the safest option. They work similarly to a flash drive that you can unplug from your internet connected PC.
If you choose this solution, mind that you are the only one who can guarantee your assets aren’t lost forever. You have to take important steps to safeguard your password, like keeping your device up to date and choosing a suitable physical location for storage.
Downside: Your data carrier could be lost, damaged or exposed to a third party who can easily withdraw or transfer all the digital assets from your crypto wallet.
Include your crypto wallet information in your will
One way to go is to document your digital property in an estate plan or a net-worth statement mentioning where you purchased it and how your heirs can access it. You can also add your security keys to your last will and testament form together with your bank account details and other digital or traditional assets.
An alternative option would be to use a “legal trust” – a type of holding company that can keep some assets separate from the rest of your estate.
Downside: Anyone who can physically access the will, such as company staff, partners or even maintenance, is also able to empty the cryptocurrency wallet before your intended recipient would be able to view it.
Prepare a guide on how to access your digital assets
It’s a good idea to make at least two backups of your data and store them in different locations.
You can also prepare a handwritten guide on how to access your online accounts and cryptocurrencies and hide it in a secure location that only specific people know about.
Make it as detailed as possible, including instructions for downloading and restoring a crypto wallet, sending it to another address, and then further securing that address.
Downside: Someone can access the storage while the asset owner is still alive. Also, the only person aware of the secret location can unexpectedly pass away.
Distribute shares of a private key
Splitting up portions of a key among recipients and stakeholders is a transparent way to ensure your cryptocurrency savings remain protected.
There are services designed to encrypt the owner’s assets on the blockchain, dividing the keys or “shares” among those mentioned in the will and letting the initiator stay in control over his assets for as long as necessary.
Downside: A validator (legal entity) needs to be involved to reconstruct the key; therefore this solution is not suitable for those who seek an anonymous transfer of assets. It’s also not the best option if you want to name only one recipient.
Use a decentralized cloud storage
Possibly the most innovative solution is to ensure that all your digital assets and crypto wallets are encrypted and stored in a decentralized vault, and can automatically be transferred to the recipients of your choice.
Digipulse functions as an autonomous digital safe giving you ultimate control over who receives your digital and crypto assets. The automated transfer of ownership is based on the activity signals received from connected API integrations. If the owner remains inactive on all integrated platforms for a predefined amount of time, the ownership transfer process is triggered.
What sets Digipulse apart from other services, is the option to use the service completely anonymously. Also, the heir is not necessarily notified of the existence of any assets, so there’s no risk that they would try to access them sooner.
There’s also no need to involve banks or legal bureaucracy – the choice and means of bequeathing your assets is solely yours. A further benefit of this system is the possibility to choose a different recipient for your digital assets – somebody who might not be the legal successor.
Downside: Even though Digipulse is one best solutions available, early adopters might face minor development bugs in the early stages.
What will be your digital heritage?
Few of us tend to plan ahead when it comes to passing on our digital assets, but bear in mind – unlike the prevailing banking system where legal and insurance policies protect your assets, everything you accumulate and store online is at risk of irreversible loss.
So how can we make sure that the digital assets we have accumulated over time are passed on to our family, just like any tangible properties we have?
Easy! Choose one or several methods for keeping your digital assets safe and make sure your mind is set to the future.