A Stanford University proposal to make encrypted transactions reversible adds a wrinkle to the crime and fraud prevention debate. The researchers suggested that mutability – the ability to reverse blockchain transactions – would help prevent crime.

One of the advantages of cryptocurrency is that it is possible for the market – individuals, traders and banks – to decide whether a trend reversal is needed. The new (reversible) cryptocurrency will not only be able to test the acceptance or willingness of reversible transactions, but will also help test the idea that reversibility reduces crime.

Although cryptocurrency is not a tool of the dark web, it is sometimes portrayed as such. Fraud, fraud and other forms of crime occur and increase in proportion to the amount of money invested and the number of coins in circulation.

One of the main ways law enforcement deals with crime in the cryptocurrency markets is through forensic analysis using blockchain technology. Blockchain forensics is a growing area of ​​law enforcement where transactions are analyzed to pursue and recover stolen or fraudulently obtained crypto assets. It first came to prominence a few years ago when the US Internal Revenue Service used it to recover the ransom paid by Colonial Pipeline to hackers who had taken control of it. However, in the highly decentralized and risky world of cryptocurrencies and imperishable tokens, blockchain investigation has become an important tool for compliance as well as regulation, creating potential impacts on legitimate traders.

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Investigators are closely scrutinizing transactions recorded on the blockchain, looking for signs that people are trying to hide or conceal tokens. Some of them include quickly switching between ledgers, using tools that hide fake IP addresses, multiple microtransactions, and using Acrobat or a shuffling service, where cryptocurrencies from many sources are pooled to hide their provenance.

The ability to roll back will make it easier for law enforcement to recover stolen and fraudulently obtained funds, and reduce potential rewards from crime. This could reduce the risk of banks and other well-established financial institutions providing cryptocurrency services to the general public rather than as private investments. It will also reduce any problems associated with human error, such as “fat finger” errors. This will help make the cryptocurrency more useful for exchange, investment and other normal uses.

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On the other hand, reversibility – or mutability – can also conflict with the idea of ​​the blockchain itself. Its scalability could make the blockchain as vulnerable to tampering as any other repository of information, which could steal one of its key security features. And the attempt to impose a standard to determine when a blockchain can be liberalized apparently violates another important benefit: the benefit of decentralization.

The decentralized, anonymous nature of crypto finance makes the tension between regulators and cryptocurrencies somewhat inevitable. For ideological or privacy reasons, many people are attracted to the promise of anonymity that blockchain provides, but these features are attracting more scrutiny from regulators because the anonymity itself can enable transactions ranging from tax-free to the sale of products Illegal drugs or weapons enable. countries such as North Korea to avoid international sanctions.

As cryptocurrencies become more widespread, financial institutions and investors will also pressure regulators and exchanges to adopt protections or weaken anonymity to comply with securities and money laundering laws.

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The scalability will make blockchain investigation even more important to regulators and investors. By analogy, various government agencies and financial institutions require businesses and individuals to keep accurate financial records. Many fraud schemes require manipulation of these records – the hackers have to cover their tracks, try to water down the stock and try to convince people that the company is doing better than it actually is in order to constantly inflate the stock price. When discovered, forensic accountants are called in to prepare accurate accounts.

Blockchain forensic companies will end up with a responsibility to protect the integrity of the blockchain, effectively becoming the de facto central authority – leading to the inevitable differences in whether we can trust them?

But the final word in making the blockchain reversible or changeable must be the decentralizing power of the market itself.

Source: CoinTelegraph