Author: Venket Naga, Co-founder and CEO of Serenity

The synergy between cryptocurrency and the real estate market has undergone substantial changes in recent years. The use of cryptocurrency-backed loans to purchase properties has evolved from groundbreaking news to a fundamental operation within the industry.

The intersection between cryptocurrency and real-world assets (RWAs) is continuously expanding, with diverse developmental possibilities.

Whether it’s the first tokenized real estate project launched in Dubai in the MENA region, the world’s largest $3 billion RWA tokenization deal, or investors' initial attempts, the high-profile developments in the tokenization field have sufficiently highlighted the growth trajectory of the industry.

Venket Naga points out that this growth trajectory is expected to further increase, with an estimated $4 trillion in the real estate market to be tokenized by 2035. As real estate tokenization develops at a high-speed pace, the market is shifting towards a democratized dynamic, allowing various investors, regardless of capital size, to participate.

However, a subtle yet unanswered question could severely hinder this growth trajectory: Who will inherit these digital assets when the asset owners pass away?

As a cornerstone of traditional property law, if the inheritance mechanism cannot effectively extend to the realm of blockchain technology, it may become a critical failure point in the tokenization process of real-world assets.

With the rapid development of blockchain-based real estate ownership, the lack of standardized, legally recognized inheritance mechanisms is becoming an increasingly risky factor.

While the industry is highly focused on regulatory compliance and has created frameworks such as the Markets in Crypto-Assets Regulation (MiCA), the issue of inheritance, which is a fundamental pillar of property rights, has strangely been excluded from regulatory discussions.

Indeed, traditional court-recognized inheritance mechanisms may not be suitable for the tokenized real estate industry, but without a digital version, heirs will face dilemmas such as black-box custody, jurisdictional ambiguity, or the permanent loss of high-value assets.

From a retrospective perspective, inheritance issues can be addressed through cold wallet keys, as this is one of the most recommended ways to store private keys. Although this method is feasible, it does not truly resolve the worst-case scenario.

Once the keys are lost, the inheritance rights will also disappear. People can explore other options such as multi-signature or custodial trusts, but there remains a fundamental gap at the level of native, secure, and automated inheritance.

Currently, inheritance in the Web3 space is either not secure enough or requires manual operation, which contradicts the core principles of decentralization and automation.

The answer to the inheritance issue in blockchain technology can be found in the technology itself and its intersection with the real world. This requires creatively integrating existing innovative elements to create new solutions. This perfect combination of familiarity and innovation may form what is known as a Decentralized Data Persistence Protocol (DeDasP).

Such protocols can establish inheritance conditions through smart contract functionalities, automatically transferring asset keys when specific conditions are met.

One method of transfer could be to shard the keys into NFTs allocated to heirs, utilizing multi-signature threshold logic for decryption. This would build an automated inheritance infrastructure, clarifying the relationship between owners and heirs.

"Not your keys, not your inheritance," some experts may express reasonable concerns about heirs losing keys and being unable to access NFT inheritance shards. This is precisely the critical point of integration with the real world, especially when wallet access is entirely established through biometric authentication.

Strategically integrating fragmentation, NFTs, biometric authentication, and smart contract execution to achieve automated persistence may become a turning point for blockchain in handling large-scale intergenerational wealth transfers. This not only creates a pathway for defining digital property rights but also brings about the natural evolution of tokenized real estate development: passing tokenized assets to the next generation.

Integrating inheritance directly into blockchain protocols is not only a technical challenge but also concerns the long-term sustainability of the real asset industry.

People should not lose tokenized property due to poor planning, legal gray areas, or forgotten passwords. Instead, these assets should be securely maintained to achieve intergenerational wealth transfer.

The development of real estate tokenization must be equipped with equally robust asset inheritance solutions. Without such solutions, the promise of democratized access and seamless ownership may collapse due to issues that blockchain was supposed to resolve.

Fortunately, emerging technologies are paving better paths, allowing ownership to extend beyond individuals through built-in, trustless inheritance systems, perfectly aligning with the core values of permanence and independence in Web3.

Views expressed by: Venket Naga, Co-founder and CEO of Serenity.

Related: Blockdaemon launches institutional-grade non-custodial staking and DeFi solutions.

This article is for general reference only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in the article are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Original article: “Death, Divorce, and Lost Keys: Inheritance Issues in Tokenized Property”

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