zlacker

>>mikeyo+(OP)
I ask this every so often during threads regarding stolen cryptocurrency:

Is there any solution yet to preventing stolen cryptocurrency funds from being spent? Isn't the only solution to have a central database and require laws to require every transaction to be pre-checked to see if it's stolen funds or not?

And not only that, the centralized system will have to be constantly keeping track of wallet mixing to see where funds are being redirected to, attempted to being washed to?

>>loceng+E6
Most cryptocurrencies are designed such that the concept of "returning" stolen funds is not really meaningful.

The best analogue is cash. If you want to return the cash you need to physically find it and move it back.

>>throwa+U7
So we pretend to treat it like cash and ignore that we can track and know exactly what digital currency is stolen? That's your proposed solution?

>>loceng+OK
No, you're using words that I don't think are meaningful in the context of what a cryptocurrency is.

Assuming you can't physically track down a thief and seize control, the technical best case you can achieve with Bitcoin is to blacklist specific transaction outputs e.g. you can choose not to accept them. You can't prevent others from accepting them, but you could for example as a governmental body add them to a global blacklist of sorts and legally forbid exchanges from accepting transactions which have at some historical point interacted with those blacklisted transaction outputs.

With the use of Lightning or coinjoin or various other privacy preserving protocols you're going to end up in a situation in which you have to taint the entire coinbase (e.g. all coins) eventually; the ultimate endgame of doing that would be to "ban Bitcoin" on exchanges.

With something like Monero or ZCash there's no serial number to track in the first place so you have no ability to blacklist anything; your only option is to refuse to accept those currencies at all.

These are possible legal avenues you can go down. But _returning_ the funds is mathematically impossible without somehow gaining access to the private keys that control them.

The fact that there is no "solution" here is an explicit goal of most of the cryptocurrencies that I'm aware of. It's certainly the reason that I'm interested in the space; it's non-custodial, as cash is.

If someone steals your car, takes it abroad and you don't know where it is, it's gone. There is no solution. Goodbye car. So it goes. If I could add a mechanism that drove it back to me, I wouldn't want it for a host of reasons.