Cryptocurrency is a decentralized form of currency that has fettered its way into popularity in the last several years. It is not regulated by any bank or institution, and the government won’t make more when it runs out. Rather, the number of individual coins that can ever exist is capped at twenty-one million. Unlike physical currency, ownership of bitcoins is not linked to a person, but to a digital entity with a unique public address. Moreover, in a transaction, bitcoins are transferred from one address to another, and all transactions are recorded in a public ledger called a blockchain, which aside from acting as an archive for transactions of digital assets, also prevents the duplication of transactions.
Types of Cryptocurrency
- Bitcoin (BTC)- Currently trading at upwards of $9,000, Bitcoin has dominated the cryptocurrency market. With a market capitalization of over $157,000,000,000, Bitcoin is definitely the most popular and most invested-into form of digital currency.
- Litecoin (LTC)- With the third highest market cap of all cryptocurrencies, Litecoin comes in as the second most popular form of digital currency. While similar to Bitcoin, it allows for faster transaction processing speeds, and, trading at $150, it is significantly more budget friendly than it’s more expensive counterparts.
- Ethereum (ETH)- While it does share with Bitcoin the quality of acting as a digital currency, the additional applications of Ethereum are what sets it apart from the crowd (of other digital currencies). Whereas Bitcoin and Litecoin act as mere digital currencies, Ethereum functions as a platform through which people can use Ether tokens to create and run applications, and more importantly, make smart contracts. Additionally, funds held by these tokens can only become accessible once the conditions of the contract have been met.
- Ripple (XRP)- Originally released in 2012, Ripple is a real-time gross settlement payment system as well as a currency exchange and remittance network. Using a common ledger managed by an entire network of independently validating servers, Ripple is based on a shared public database that makes use of a consensus process between these validating servers to ensure integrity of transactions.
- Darkcoin (Dash)- Similar to Bitcoin, Darkcoin, or Dash, is a digital, decentralized, and secure payment method that is designed to keep its users’ identity secret. Unlike Bitcoin, however, Darkcoin’s blockchain operates in a way that allows for combinations of transactions to be recorded anonymously, increasing the level of security surrounding the coin.
Like other forms of asset protection, making sure your assets are secure requires strategic planning to protect against future creditor claims. If you leave asset protection until a potential creditor begins to seek compensation, you run the risk of having your assets compromised. Additionally, a key yet overlooked element of asset protection is financial transparency. If you get sued and become subject to a money judgement, you will be required to disclose a comprehensive list of details regarding your financial life, including details about your bank accounts, investments, and real and personal property ownership. Additional risks you run by using digital currencies as asset protection tools include the fact that anyone can get access to the assets if they acquire your digital wallet address and pin code. Also, it’s important to remember that investing in cryptocurrency is a gamble if you aren’t investment-savvy, as the value of any cryptocurrency is never set in stone and certainly not guaranteed to appreciate in the future.
While the risks associated with using cryptocurrencies as asset protection tools are definitely something to consider before investing, it’s important to understand the benefits of keeping assets in cryptocurrency, especially considering their anonymous nature. Possibly the largest benefit of owning cryptocurrency is that since it is centered on the notion of a decentralized asset, a court or any central judicial authority cannot access the assets, nor any information regarding the quantity or value of them without the digital wallet. Absent of the pin code, no legal authority can manipulate ownership of the digital assets.
Protecting Your Digital Assets
Being that the anonymous nature of cryptocurrency does not provide a “forgot your password?” option, it is paramount that owners of digital currency retain the information necessary to protect their assets.
This tried and true method requires simply that the information in your wallet be kept externally from your computer. Whether in a USB or on a sheet of paper, you should always have a record of your address and pin number handy.
Making extra copies of important transactions or data is crucial in case of a glitch or computer failure. Creating a strong and difficult password is a great way to keep your digital wallet safe.
Keeping your wallet software up to date will provide the quickest and most reliable functionality. If it is not updated, it will be easier for hackers and thieves to tap into your wallet and compromise your assets.
Requiring a password to access your wallet can only help to secure your assets. Not only should you use capital letters, symbols, numbers to make your password strong and unique, but it should be fully memorized and/or kept in a safe place, since the password recovery system offered by many cryptocurrency softwares is very weak.
Overall, while cryptocurrency is still relatively new in the world of asset protection, it can potentially be a great asset to you when looking to safely preserve your own. If you are looking to protect your estate, consult with a licensed asset protection attorney to figure out if investing your assets is the right path for you.