Crypto Real Estate Tokenization Faces Inheritance Challenges

The intersection of cryptocurrencies and the real estate market has evolved significantly in recent years, with the purchase of properties using crypto-backed loans becoming increasingly common. This trend highlights the growing integration between crypto and real-world assets (RWAs), with notable projects such as Dubai’s first tokenized real estate initiative in the Middle East and North Africa (MENA) region, and the world’s largest $3-billion RWA tokenization deal. These developments indicate a trajectory of growth, with forecasts suggesting that $4 trillion of the real estate market will be tokenized by 2035. This shift is democratizing the real estate market, making it accessible to investors of all capital sizes.

However, a critical question remains unanswered: Who inherits these assets when the owner dies? Inheritance, a fundamental aspect of traditional property law, could become a point of failure for real-world assets if its principles are not adapted to blockchain technology. The absence of a standardized, legally recognized succession mechanism poses a growing risk as blockchain-based ownership in real estate expands. While regulatory frameworks like the Markets in Crypto-Assets (MiCA) Regulation focus on compliance, inheritance remains overlooked. Traditional court-recognized inheritance mechanisms may not be suitable for the tokenized real estate industry, leaving heirs vulnerable to black-box custodianship, ambiguous jurisdictional claims, or permanent loss of high-value assets.

One proposed solution is the use of cold keys, a recommended method for storing private keys. However, this approach does not address worst-case scenarios where the key is lost, resulting in the loss of inheritance. Other options, such as multisigs or custodial trust arrangements, also fall short of providing a native, secure, and automated inheritance layer. The current state of inheritance in Web3 is either insecure or manual, contradicting the principles of decentralization and automation. The solution lies in leveraging blockchain technology and its real-world applications to create a decentralized data survivability protocol (DeDasP). This protocol could use smart contracts to automate the transfer of keys to assets upon fulfilling specified conditions, such as sharding keys into NFTs among successors and using biometric authentication for wallet access. This approach ensures clarity between the owner and heirs, creating an automated infrastructure for inheritance.

Integrating inheritance directly into blockchain protocols is not just a technical challenge but also crucial for the survival of the real-world asset industry. People should not lose their tokenized property due to poor planning, legal gray areas, or forgotten passwords. Instead, these assets should be safely maintained to pass down wealth through generations. Robust solutions for asset succession must accompany the evolution of real estate tokenization. Without them, the promise of democratized access and seamless ownership could be undermined by the same problems blockchain aims to solve. Fortunately, emerging technologies are paving the way for a better path, where ownership continues through built-in, trust-free inheritance systems that align with Web3’s core values of permanence and independence.