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25 July 2021

Protecting Your HODL Legacy: Shamir Backups And Inheritance Planning

Protecting Your HODL Legacy: Shamir Backups And Inheritance Planning

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The author of this particular post was a friend of the man’s family and wanted to find out if there was any way to access the bitcoin.

Bitcoin is a bearer instrument, meaning that it’s not sufficient for your survivors to be aware of your stack - they have to be able to access the keys.

On the other hand, you don’t necessarily want your family having access to your bitcoin while you’re still alive.

But before we get to the details of how Shamir backup works, let’s have a brief recap of what seed backups are.

So nowadays you don’t actually back up your private key as such, but rather the recovery seed — usually in the form of 12 or 24 words in particular order.

You may lose your phone or break your hardware wallet, but you will still be able to access your bitcoin if you have the recovery seed safely stored away.

Having just one copy of your recovery seed is literally playing with fire.

For example, a “3 out of 5 Shamir backup” means that the user created five shares when setting up the scheme and the threshold requirement to access the original secret is three shares.

This means that Alice can back up her seed for example in the following way (assuming the 3 out of 5 Shamir backup):.

With this arrangement in place, Alice doesn’t have to worry about losing access to her bitcoin even if her house burns down, because she can regain access to it by collecting the remaining shares from her friend, her mother and the safe deposit box.

The original Shamir scheme has been around since 1979, but was only properly standardized for use in seed backups in late 2017.

And of course, if you have some bitcoin on hot wallets, exchange accounts or other services, you should inform your survivors about these too.

And even if your friend won’t prove himself as trustworthy as you thought, your family will have legal recourse against a known person, which wouldn’t be the case if they were scammed by a stranger.

Shamir backups solve the problem of protecting the recovery seed.

The two can actually be combined: you can have a multisig scheme, where the recovery seed of each individual wallet is protected via Shamir backups.

Both multisig and Shamir backups rely on the physical remoteness of the elements (signing parties or Shamir shares) for their security.

For Shamir, this isn’t such a problem, as you usually need to deal with your seed only when setting up your wallet and later on when performing a recovery (which can be years down the road).

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