Earlier this year, Ryan Klein had a near-death experience.
While cleaning out a gutter at his California home, the 32-year-old IT professional took a misstep and tumbled 10 feet off a ladder into a fortuitously placed wintergreen shrub.
Sprawled out on the ground, gazing up at the cerulean sky, a terrifying thought crossed his mind.
“I realized that my wife didn’t have access to my cryptocurrency,” he told The Hustle. “If I’d died that day, that money would’ve just disappeared.”
The following weekend, Klein took action: He wrote down his private keys and account passwords, typed up detailed instructions on how to access his holdings (~$77k worth of various coins), and entombed the information in a small safe in his closet.
Klein is one of a growing number of crypto investors who are beginning to give serious thought to the afterlife of their bitcoin.
And a burgeoning digital asset inheritance industry is taking note.
The dead man’s crypto dilemma
If Klein had died that day, it’s likely that one of two things would’ve happened to his assets:
- If he had a will, they’d be distributed to whomever he legally designated to be his successor(s).
- If he didn’t have a will, a decedent (typically a spouse) would apply for probate, and then his state would’ve designated an administrator to dole them out according to a formula.
A will stipulates who gets what, but it generally doesn’t include a comprehensive list of a deceased person’s assets. It’s the job of an executor — someone designated in a will, or appointed by a court — to track everything down.
Traditional investments (say, a savings account at a bank) are relatively easy to find, access, and delegate with a death certificate and other legal documentation.
But crypto poses some unique challenges.
Zachary Crockett / The Hustle (GIF via Skeleton Party)
Crypto investors maintain their own assets using digital wallets that are only accessible via a password or a private key — a 256-bit long string of alphanumeric characters that is only known to the account holder.
Without these private keys, there is little hope of heirs ever accessing a dead loved one’s crypto holdings.
Had Klein died without sharing his private key with his wife, it’s likely his crypto holdings would’ve been stuck in permanent purgatory on the blockchain.
By one estimate, ~20% of all bitcoins are “lost,” meaning the wallets containing them haven’t been accessed in 5+ years. This works out to ~3.7m bitcoin, or ~$140B in capital (as of publication) — and that doesn’t include the 10k+ other cryptocurrencies on the market.
A significant percentage of this lost crypto is thought to be the result of investors dying without leaving behind a pathway of access to heirs.
There have been a few high-profile cases of this nightmare situation:
- In 2018, Gerald Cotten, the CEO of the crypto exchange Quadriga, unexpectedly died at age 30, allegedly taking with him the private keys to $250m worth of his clients’ cryptocurrency.
- Also in 2018, Mathew Mellon, a businessman who’d turned a $2m investment in the cryptocurrency Ripple into a reported $500m+, died without telling anyone where his private keys were stored. His wallets have yet to be located.
- In 2013, a 26-year-old Bitcoin miner named Matthew Moody died in a plane crash, leaving behind no way to access thousands of dollars’ worth of crypto. Years later, his father is still trying to recover the funds.
Despite these tales, many crypto investors haven’t given much thought to the afterlife of their bitcoin.
In a survey of cryptocurrency investors conducted by The Hustle, nearly 40% of respondents reported having no plan in place to pass on their cryptocurrency to an heir.
Zachary Crockett / The Hustle
Crypto investors skew on…