Opinion: Venket Naga, Co-founder and CEO of Serenity
In recent years, the synergy between the cryptocurrency and real estate markets has undergone significant changes. The use of cryptocurrency-backed loans to purchase properties has evolved from groundbreaking news to the norm.
The intersection between cryptocurrency and real-world assets (RWA) is growing, with abundant possibilities.
Whether it’s Dubai’s first tokenized real estate project in the MENA region, the world’s largest $3 billion RWA tokenized transaction, or initial investments, tokenization efforts have become an industry trend that cannot be ignored.
This trend is expected to grow further, with predictions that by 2035, $40 trillion of the real estate market will be tokenized. As real estate tokenization develops rapidly, the market is shifting towards a democratized dynamic, allowing all types of investors, regardless of capital size, to participate.
A subtle yet unanswered question could severely hinder this trend: who will inherit these assets when the asset owner passes away?
As a cornerstone of traditional property law, inheritance could become a failure point for real-world assets if its logic fails to extend to blockchain technology.
The lack of standardized, legally recognized inheritance mechanisms is becoming a risk factor as blockchain-based real estate ownership rapidly grows.
Despite significant attention to compliance and the establishment of frameworks such as the Markets in Crypto-Assets (MiCA) regulation, the fundamental pillar of inheriting this property right has strangely been excluded from regulatory discussions.
Indeed, traditional court-recognized inheritance mechanisms may not apply to the tokenized real estate industry, but without a digital version, heirs will face black-box custody, ambiguous claims of jurisdiction, or permanent loss of high-value assets.
As an afterthought, the inheritance issue could be addressed through cold storage, as it is one of the most recommended methods for storing private keys. While this may be effective, the answer does not fully resolve the worst-case scenario.
If the keys are lost, the inheritance will also be lost. Other options, such as multi-signature or custodial trust arrangements, can be explored, but there remains a fundamental gap that requires a local, secure, and automated inheritance layer.
Currently, inheritance in Web3 is either insecure or manual, contradicting the principles of decentralization and automation.
The answer to the inheritance issue in blockchain technology can be found in the technology itself and its overlap with the real world. This requires creatively exploring elements in current innovations and combining them to create something new. This blend of the familiar and the novel can form what is known as a Decentralized Data Survival Protocol (DeDasP).
Such a protocol could establish inheritance conditions through the capabilities of smart contracts, automatically transferring the keys to assets when these conditions are met.
One way to facilitate this transfer could be by fragmenting the keys into NFTs assigned to heirs, using multi-signature threshold logic for decryption. This would establish an automated inheritance infrastructure, creating a clear relationship between the owner and the heir.
“Without your keys, there is no inheritance,” one might reasonably worry about the heir losing their keys, thus losing access to the hypothetical NFT inheritance fragments. This is precisely where the overlap with the real world comes in, if wallet access is strictly established through biometric authentication.
Strategically integrating technologies such as fragmentation, NFTs, biometric authentication, and smart contract execution to automate survivability could become a potential turning point for blockchain in handling intergenerational wealth transfer on a large scale. This creates a pathway for defining digital property rights and brings about the natural next step in the evolution of tokenized real estate: passing tokenized assets to the next generation.
Integrating inheritance directly into blockchain protocols is not only a technical challenge but also a matter of survival for the real-world asset industry.
People should not lose tokenized property due to poor planning, legal gray areas, or forgotten passwords. Instead, it should be securely maintained to pass wealth through generations.
Equally powerful solutions for asset inheritance must accompany the development of real estate tokenization. Without them, the promise of democratized access and seamless ownership could collapse, tripped up by the very issues blockchain was meant to solve.
The good news is that emerging technologies are opening a better path, where ownership does not end with one person but continues through an embedded, trustless inheritance system, aligning with the core values of Web3: persistence and independence.
Opinion: Venket Naga, Co-founder and CEO of Serenity.
Related: Coinbase crypto lobbying group urges Congress to support key crypto legislation
Original article: “Death, Divorce, and Lost Keys: The Inheritance Issue in Tokenized Real Estate”
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