How to set up a trust fund on Bitcointhat’s trustless – Decrypt

Today, open-source software developer Luke Childs, published a concept of a trustless trust fund that can be established using only Bitcoins code.

Since Bitcoin is decentralized, it can be used to create financial transactions between people that dont rely on any third party. But in this case, its used to replicate a financial tool, known as a trust fund.

The idea is to allow an abstract grantor (in this case Mum and Dad) to set aside and lock up part of their funds for a beneficiary (child), which will unlock only when some specified conditions are met (when the child reaches the age of 18)using just Bitcoins code. Theres no need for assistance from any third parties.

The idea is that Mum and Dad lock up some funds in an address with the above spending condition. Mum, Dad and Child each have their own key. Once Mum and Dad have committed to the fund, they cannot withdraw. However they can make additional contributions in the future, Childs explained.

Within this framework, if the child wants to withdraw some funds before they are 18, they will be able to do this with the approval of one of the parents. Later on, once the child is 18, they will gain full control over the funds without needing a signature from the grantors.

The framework also allows the parents to set multiple dates for the trust fund to be unlocked instead of just one. They just need to repeat the steps and send different amounts to each address, effectively setting up a few funds instead of just one.

It's pretty cool that contracts like this can be implemented natively in Bitcoin! Childs added.

Bitcoins code even allows it to future-proof situations such as grantors dying or losing their keys, additionally acting as an inheritance mechanism (although funds still could be forfeit if both parties lose their private keys).

While traditional trust funds are an established and useful form of asset management, they usually also involve a lot of hurdles and disadvantages. One of the main drawbacks of using a trust is the cost of establishing it since the procedure often requires quite expensive legal assistance.

Additionally, managing the trust could also prove costly since many trusts are administered by banks and other financial institutions. And even if the trustee is some private party, they can still require reasonable compensation for their efforts.

Trusts are also often much more complex to draft since they may involve disbursements at certain intervals or give the trustee the ability to decide when funds could be taken by the beneficiary. The trustee may also have to register a trust checking account.

Moreover, despite a popular belief, trusts dont provide any particular tax advantages and can become a source of many inconveniences. For example, banks and financial institutions can create additional hurdles and require various administrative procedures if trust assets are used as collateral for a loan or other funding.

Not to mention the human factor that may lead to a lot of conflictslegal or personalbetween beneficiaries and trustees if they just dont like each other very much, for example.

And just think that all of these problems could be avoided with a few lines of Bitcoin codewith basically the same results.

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How to set up a trust fund on Bitcointhat's trustless - Decrypt