Bitcoin is famous for being a cumbersome system when it comes to managing private keys. There are plenty of ways to secure private keys. The security spectrum covers a myriad of options, depending on the person’s technical skill and preference. What not many Bitcoin holders consider is what happens to all those security mechanisms, and, by extension, to their private keys when they die. Casa Covenant is one of the first solutions to this problem.
The Issue of Bitcoin Inheritance
To appreciate the solution that Casa Covenant offers, it is necessary to understand the problem. The features that make Bitcoin a pure P2P form of electronic cash, create problems when it comes to the inheritance of those coins:
- Whoever owns the private keys owns the coins
- Holders are discouraged from having third party custodians
- No one can guarantee the security of private keys except for the owner of those keys
- Often times only one person knows how to access those keys: the holder
- Telling anyone else about the existence of those keys and how to access them introduces an element of risk for the Bitcoin holder
The Perils of Passing Down your Bitcoin to Family Members
All these issues make securing Bitcoin and having an inheritance plan, mutually exclusive in many cases. Even if you have a plan in place to pass the coins down to your family members, and you have disclosed that plan to one of them, a myriad of things can go wrong:
- That family member is not necessarily as proficient as you are when it comes to handling Bitcoin, resulting in lost coins
- Giving that chosen family member highly sensitive information about your coins can compromise their own safety
- Mistakes can be made when it comes to communicating instructions about how to access your coins which would effectively relegate your stash to the growing pile of lost Bitcoin
Trusting a Third Party
Therefore, the best way to put a Bitcoin inheritance plan together, involves a third party. This would be a capital sin in Satoshi’s book, but it is a necessary evil. It can also be done in a secure manner, which is exactly what Casa Covenant is all about.
How does Casa Covenant Make Third Party Involvement Secure?
The cornerstone of Casa Covenant is a multisig option that allows authorized people to gain access to the coins by putting 3 of 6 signatures in. This essentially adds a key to Casa’s Shield 3 of 5 multisig wallet. The sixth key is activated when Casa’s client initiates the inheritance protocol. The sixth key is given to an estate lawyer whom the Bitcoin holder chooses.
This estate lawyer is trained by Casa on how to handle those keys and what Bitcoin inheritance entails. Casa Covenant protocol also relies on having one of the 6 keys being kept in a safe or deposit box under the name of the Bitcoin holder. This allows the lawyer to gain access to the safe if the Bitcoin holder passes away but doesn’t give him enough keys to access the funds. A third key – the Casa recovery key – is needed to complete the inheritance process.
The Downside of Casa Covenant
This is a reasonably safe way to make sure a Bitcoin holder can pass their keys down to their loved ones after death. Nevertheless, it relies on a few factors that many Bitcoin holders might be uncomfortable with:
- Disclosure of Bitcoin holdings to a lawyer – being identified as a Bitcoin holder
- Trust in the local legal system
- Funds would be subject to inheritance laws – taxation
Bitcoin Inheritance is Still a Difficult Subject
There are no perfect systems. When it comes to Bitcoin inheritance, at some point holders will have to choose the lesser of a few evils. In that case, the Casa Covenant protocol is an option worth exploring. It might not be right for everyone, but even understanding how it works will allow any Bitcoin holder to start thinking about a mechanism that will guarantee that their coins will find their rightful owners in the event of death.