Death, Divorce And Lost Keys

Opinion by: Venket Naga, co-founder and CEO of Serenity

The synergies between cryptocurrencies and the real estate market have shifted substantially in the last few years. Purchasing properties with crypto-backed loans evolved from groundbreaking news to the baseline. 

There is a growing intersection between crypto and real-world assets (RWAs), and the possibilities are abundant. 

Whether it’s Dubai’s first tokenized real estate project in MENA, the world’s largest $3-billion RWA tokenization deal or first-time investments, tokenization efforts are too high-profile to disregard the trajectory of this sector. 

This trajectory is set for further growth, with the forecast that $4 trillion of the real estate market will have been tokenized by 2035. With real estate tokenization progressing at bullet-train speeds, the market is shifting to a democratized dynamic accessible to all types of investors, no matter how large or small their capital is. 

A subtle, unanswered question could critically halt this trajectory: Who inherits these assets when the owner dies? 

As a bedrock of traditional property law, inheritance could prove to be a point of failure for real-world assets if its logic is not scaled to blockchain technology.

Possible solutions for the inheritance dilemma

The absence of a standardized, legally recognized succession mechanism is becoming a risk vector growing as rapidly as blockchain-based ownership in real estate.

While much attention has been paid to regulatory compliance, with frameworks like Markets in Crypto-Assets (MiCA) Regulation being created, inheritance, one of the fundamental pillars of property rights, remains strangely omitted from the regulatory conversation. 

Granted, the traditional court-recognized inheritance mechanism may not be suitable for the tokenized real estate industry, but without a digitized version, heirs face black-box custodianship, ambiguous jurisdictional claims or permanent loss of high-value assets. 

As an afterthought, the question of inheritance could be answered with cold keys, given that it’s one of the most recommended ways to store private keys. While that may work, the answer doesn’t quite tackle worst-case scenarios. 

If the key is lost, then so is the inheritance. One could explore other options, such as multisigs or custodial trust arrangements, but a fundamental gap remains where a native, secure and automated inheritance layer must be. 

Related: Dubai regulator clarifies real-world asset tokenization rules: Lawyer

As it stands, inheritance in Web3 is either insecure or manual, defeating the principles of decentralization and automation.

The answer to the question of inheritance in blockchain technology can be found in the technology itself and its overlap with the real world. This entails creatively exploring the elements in present innovations and bringing them together to create something new. This sweet spot of familiarity and novelty can make what one may call a decentralized data survivability protocol (DeDasP). 

Such a protocol could establish conditions of inheritance through the capabilities of smart contracts, creating an automated transfer of keys to assets upon fulfilling said conditions. 

One avenue for this transfer can be through sharding keys into NFTs among successors, using the logic of a multisig threshold for decryption. This would build an automated infrastructure of inheritance with clarity established between the owner and heirs. 

“Not your keys, not your inheritance,” some might say in a justified concern over the keys of successors being lost, taking away access to the hypothesized NFT shards of inheritance. This is precisely where the overlap with the real world occurs if access to wallets is established strictly through biometric authentication.

Strategically blending technologies such as sharding, NFTs, biometric authentication and smart contract execution to automate survivability can be a potential turning point for blockchain’s ability to handle generational wealth transfer at scale. This creates a pathway to define digital property rights and brings the natural next step in the evolution of tokenized real estate: passing the tokenized assets to the next generation. 

Moving forward

Integrating inheritance directly into blockchain protocols isn’t just a tech challenge; it’s also about the survival of the real-world asset industry. 

People shouldn’t lose their tokenized property because of poor planning, legal gray areas or forgotten passwords. Instead, it should be safely maintained to pass down wealth through generations.

Equally robust solutions for asset succession must accompany the evolution of real estate tokenization. Without them, the promise of democratized access and seamless ownership could fall apart, tripped up by the same problems blockchain is supposed to fix. 

The good news is that emerging technologies are opening the door to a better path, where ownership doesn’t stop with one person but continues through built-in, trust-free inheritance systems that match Web3’s core values of permanence and independence.

Opinion by: Venket Naga, co-founder and CEO of Serenity.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.