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Blockchain

Definition

Blockchain is a secure digital ledger system that records transactions in connected blocks across multiple computers, enabling cryptocurrency and other digital assets to exist without central control.

Understanding blockchain matters for estate planning because blockchain-based assets like cryptocurrency and NFTs form part of your taxable estate but require different access and transfer processes than traditional assets.

What Does Blockchain Mean?

Blockchain is the underlying technology that enables cryptocurrency and other digital assets to function. Think of it as a shared digital ledger distributed across thousands of computers. The name comes from how information is organised: data is stored in "blocks" that are linked together in a chronological "chain." Each block contains transaction records and a cryptographic link to the previous block. No single person, company, or government controls the blockchain—it's decentralised, meaning the network operates through consensus among all participants.

When a transaction occurs, such as Emma sending 0.5 Bitcoin to her brother David, that transaction is recorded in a new block. Thousands of computers across the network verify the transaction is valid—confirming Emma actually owns the Bitcoin she's sending. Once verified, the block is added to the chain and cannot be altered without everyone noticing. Every computer on the network maintains an identical copy of the entire blockchain, making it extremely secure. Changing historical records would require controlling most computers simultaneously, which is practically impossible on large networks like Bitcoin or Ethereum.

Blockchain technology is increasingly relevant to UK estate planning. The Property (Digital Assets etc) Bill, introduced in September 2024, formally recognises blockchain-based assets as personal property in England and Wales, meaning they can be inherited like physical property. HMRC treats blockchain assets as taxable property subject to inheritance tax. Unlike traditional bank accounts, blockchain assets aren't held by financial institutions—you must pass cryptographic keys to your executors for them to access these assets. Without proper planning, an estimated 20% of blockchain assets become permanently inaccessible when owners die without leaving access information. Around 2.3 million UK adults hold cryptocurrency, making blockchain literacy essential for modern will-making.

Common Questions

"Is blockchain the same as cryptocurrency?"

No, blockchain is the underlying technology that enables cryptocurrency to exist. Blockchain is a digital ledger system that records and verifies transactions, while cryptocurrency like Bitcoin is a digital currency that uses blockchain technology. Think of blockchain as the infrastructure (like roads) and cryptocurrency as what travels on it (like cars).

"Do I need to understand blockchain technology to include cryptocurrency in my will?"

You don't need deep technical knowledge of blockchain, but understanding the basics helps you plan properly. The key is knowing that blockchain-based assets require special access information (private keys) to be passed to your executors securely, and that these assets form part of your taxable estate.

"Can I store my will on a blockchain?"

While blockchain-based wills exist experimentally, they are not currently recognised as valid under UK law. Section 9 of the Wills Act 1837 requires wills to be in writing and signed with witnesses present. Your will should be a traditional paper document, but it can include provisions for blockchain-based assets like cryptocurrency.

Common Misconceptions

Myth: "Blockchain and cryptocurrency are the same thing."

Reality: Blockchain is the technology; cryptocurrency is one application of that technology. You might encounter blockchain through NFTs, smart contracts, or digital identity systems—none of which are cryptocurrency. Understanding blockchain helps you recognise all blockchain-based assets that may need estate planning coverage, not just digital currencies.

Myth: "Blockchain transactions are completely anonymous and untraceable."

Reality: Blockchain transactions use pseudonymity (cryptographic addresses) rather than true anonymity. While your name isn't directly attached to transactions, blockchain records are permanent and public. Digital forensics specialists can often trace ownership, especially when cryptocurrency is exchanged at regulated exchanges. More importantly, hiding assets from your executors means they may be permanently lost, not kept secret.

  • Cryptocurrency: Digital currencies like Bitcoin and Ethereum that use blockchain technology to enable secure transactions without central banks or payment processors.
  • Digital Assets: The broader category of online property that includes blockchain-based items like cryptocurrency and NFTs alongside other digital holdings.
  • Bitcoin: The first and most well-known cryptocurrency that runs on blockchain technology, demonstrating how distributed ledgers enable decentralised digital currency.
  • Private Key: The cryptographic password that controls access to blockchain-based assets—the only way to transfer or recover these assets after death.
  • NFT: Non-Fungible Tokens are unique digital items recorded on a blockchain, proving ownership and authenticity of digital art, collectibles, and virtual property.

Need Help with Your Will?

If you hold cryptocurrency, NFTs, or other blockchain-based assets, they form part of your estate and need proper coverage in your will. Understanding blockchain helps you ensure executors can access these assets when needed.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.