E270 3 Bitcoin Wallets Executors Overlook
When someone passes away, it is the executor’s job to gather the decedent’s assets. What are the Bitcoin wallets executors may overlook? We’ve discussed how to look for common bitcoin key storage (Episode 253 3 Steps When a Bitcoin Owner Dies), such as hardware wallets, software wallets, and seed phrases. But a professional bitcoin executor will also find these others.
Wallets on nodes
Think of a node as your own server on the bitcoin network. Bitcoin is a digital currency, and the way it travels through the world is through nodes. Nodes are intentionally inexpensive and meant for individuals to be able to afford and maintain. Nodes are meant for the individuals to be the backbone of the system, not big companies.
If a professional bitcoin executor sees the decedent was serious about bitcoin, privacy, and decentralization, the executor knows to look for a node. These nodes can even be on a Raspberry Pi or an old laptop, as long as there is sufficient memory space. Why look there? Because these nodes will often have a wallet inside them.
On a high level, the lightning network is a second layer on top of the main bitcoin network. The lightning layer relies on “channels” between lightning nodes.
Say you use Vemno, and you are hanging out with your friend for dinner. Maybe you owe her $5 for the drink and she owes you $10 for dinner. Venmo is not actually transmitting money back and forth each time you do. Venmo keeps a tally of what is moving back and forth between you, and at the end of the day/week/month, it totals a net amount of dollars to be transmitted from your bank to your friend’s bank (or vice versa). Think of it like an abacus where you move the beads back and forth. Here, the main network is the banks and Venmo is the connector/second layer. Venmo has to hold some money to make sure those transactions happen.
Similarly, if you and I transact with bitcoin, we’re not going to send bitcoin to each other every time. We could set up a lightning channel between us. Let’s say we regularly send $100 between ourselves, so we probably have a channel with about $500. That $500 is locked into the lightning channel between us.
Upon my passing, my executor should close the channel and find out what is owed you and to my estate. A professional bitcoin executor will recognize a lightning wallet, and search for node to close channels to release channel funds.
The example of $500 may not seem like a lot of money. But, if the channel was established a while ago, and bitcoin has gone up in value, it might have a significant value.
Hopefully I got this right. If you are more technically savvy in cryptocurrency, please feel free to correct me!
We’ve talked about the main exchanges before. Nowadays, even non-Bitcoin enthusiasts have heard of Binance, Coinbase, Kraken, and other large exchanges.
There are even more alternative exchanges that focus on privacy, international exchange, etc. They may not even be companies, but decentralized software. A professional bitcoin executor will also recognize alternative exchanges and know how to recover funds on alt exchanges such as Bisq or HodlHodl.
This topic is constantly evolving, and we will try our best to keep you up to date. Please send us your questions and we will do our best to respond!
If you want to learn more about professional executors, please check out my book, “How to Hire an Executor.”
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