Binance founder and Chief Executive Changpeng Zhao says the crypto world has an inheritance problem that’s yet to be solved, and argues that DeFi will not see mass adoption until it comes up with a solution.
Crypto inheritance is certainly a major headache for anyone who possesses significant digital assets, but it’s not the insurmountable problem that CZ seems to think it is.
In a recent interview with Crypto Banter, CZ claimed that wallet accessibility is today one of the hardest problems in the crypto industry, adding that if he was not too busy running Binance, he would eagerly try to come up with a solution himself.
“I wouldn’t go for the most promising, I would actually go chase the hardest problem, which today I think is the wallet,” CZ said. “The wallet is the main blocker for mass DeFi adoption.”
Crypto’s inheritance hassles stem from the fact that digital assets are just too damn secure. With cryptocurrencies, there is no bank or middleman that controls access to a user’s funds. Instead, the onus is entirely on the user to keep their funds safe. Crypto funds are stored on the blockchain and generally accessed via a wallet. And the only way to open that wallet is to enter the so-called “private key”, which is a long, randomly generated string of numbers and letters.
While most crypto holders understand this well and keep a copy (or several copies) of their private key in a secure place, it can create some major headaches if they fail to share this with anyone before their untimely death – as users of the once popular Canadian cryptocurrency exchange QuadrigaX know only too well.
The good news is that crypto inheritance doesn’t have to be a problem. Indeed, CZ would most probably be wasting his time if he did set about trying to come up with a solution, given that plenty already exist.
One of the most compelling offerings is the upcoming Serenity Shield dApp that provides a truly decentralized way to not only enable asset ownership transfer, but also secure wallet access in the event that someone merely forgets their private key.
Serenity’s clever solution is the aptly-named StrongBox Vault, which offers a simple, secure yet completely unhackable way for designated heirs to gain access to someone’s private keys in the event that they pass away. It relies on decentralized identity (DID) and non-fungible token (NFT) technologies that provide access to the StrongBox that holds the private keys, only when certain conditions are met.
The way it works is: The user creates a StrongBox to store their sensitive information. Then, once the StrongBox is created, a smart contract mints three NFTs that each contain a part of the key required to access it. One of these NFTs is sent to the owner, while the second is sent to the user’s designated heir. Finally, the third NFT is stored in a secure smart contract.
To decrypt the StrongBox and see the sensitive information held within, users must have any two of those three NFTs. Now this is the clever part. The account owner will then create what’s called an “activation policy” that only goes into effect after a specified period of inactivity. To register the user’s activity, the StrongBox employs a combination of techniques, such as reading blockchain transactions, requesting a notification response or authentication through the dApp. In this way, should the account owner suddenly pass away, their inactivity will result in the release of the third NFT to their designated heir. They’ll then have two of the three NFTs, enabling them to decrypt the StrongBox and access the private keys.
Italian startup Crypto360 provides an alternative, albeit non-decentralized solution to crypto inheritance with its Crypto Custody service. The basic idea with this is that it securely stores a user’s private key, and will only make it available to a designated heir once specific, pre-defined conditions have met. So, for example, the heir might have to produce a genuine death certificate to gain access, or else medical proof of mental incapacity, or some other condition.
To ensure security, Crypto360 stores the private keys in an encrypted format. The user must then provide a second password to their designated heir, which can be used to decrypt the file stored by Crypto360. In this way, no one at Crypto360 can access the private keys themselves, eliminating the risk of theft.
With the availability of these solutions to crypto inheritance, perhaps Binance’s CZ could make better use of his time by keeping himself up to date with the latest goings on in the world of crypto, for his “hardest problem” is clearly no longer the major headache it once was.