Reviving Dead NFT Wallets: One Method to Try
The Perils of a Dead Wallet: What Happens to NFTs?
The reality for NFT collectors is one that can easily turn into a nightmare – losing the seed phrase. Though the idea of a hacker stealing your NFTs is terrifying, a dead wallet is a whole other ordeal. This is a problem for Brian Frye, a professor at the College of Law at the University of Kentucky, as well as an NFT artist and filmmaker.
The Worth of an NFT in a Dead Wallet
Frye delves into the conundrum of the value of an NFT in a dead wallet. Essentially, the NFT still represents ownership of the same artwork, and therefore its value should not have changed. However, a dead wallet means that the NFTs are rendered functionally worthless, as you are unable to sell or transfer them to another wallet.
The Nightmare Continues
More than being a heartbreak for collectors, a dead wallet could also be a major headache for the collector’s heirs. There is no sure way to abandon ownership of a dead wallet, so it becomes a part of the estate, which may potentially incur taxes on the value of the NFTs.
The Unresolvable Issue
Trying to find a solution to this entirely theoretical yet amusing problem poses quite a challenge. To comprehend the possible solution, understanding property law’s perception of NFTs is crucial. Ordinarily, property owners can transfer their property rights, but with NFTs, the only right they possess is the ability to transfer ownership of NFTs to someone else.
The Tax Dilemma
Taxation can prove to be particularly thorny for owners of dead wallets. Those who can’t sell their NFTs for a profit are spared from taxation, but when they pass away, the estate and NFTs still become subject to estate tax, despite their inability to be sold.
A Real-Life Example
The story of Robert Rauschenberg’s “Canyon,” illustrates how absurding this situation can get. Sonnabend’s heirs were faced with a $29.2 million estate tax assessment on “Canyon,” even though it was illegal to sell it due to its incorporation of a stuffed golden eagle.
In conclusion, the dead wallet problem could become a nightmare for NFT collectors and their heirs. It remains to be seen how the law will eventually evolve to address this perplexing issue.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.
