Creating assets that are favorable for consumer protection rights

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PROBLEM: Consumer Protection

Before this gets out of control
$60M or so from this wallet drainer scam - probably more at this writing

Federal Law provides consumers with protections from fraud or
unauthorized electronic payments

I’m very aware of the whole “code is law” crypto psychology but some hard core cypher punks even reversed their stance when the 1st DAO hack happened on Ethereum. These issues only seem to matter when it’s the individuals funds effected by a breach - and yes, phishing attacks are a breach.

SOLUTION:

Stellar has a feature called clawback that allows an asset issuer to burn a specific amount of a clawback-enabled asset from a trustline or claimable balance, effectively destroying it and removing it from a recipient’s balance. (Clawbacks | Stellar Documentation) This feature was introduced in Protocol 17 and is designed to allow asset issuers to meet securities regulations, recover assets that have been fraudulently obtained, or respond to regulatory actions. (Stellar | Using Protocol 17’s Asset Clawback) Clawback is an opt-in feature that requires the issuer to set the AUTH_CLAWBACK_ENABLED flag on their account and the holder to create a trustline with the TRUSTLINE_CLAWBACK_ENABLED flag.(Clawbacks | Stellar Documentation). There are two operations for clawing back an asset: Clawback and Clawback Claimable Balance(Clawbacks | Stellar Documentation). Clawback is useful for issuing regulated assets such as money market funds, bonds, and equities on Stellar,

Here’s Steller’s logic to achieve this. I think this is a pattern worth mimicking.

Modifying existing modules should give Cosmos a similar utility for issuing assets. Off the top of my head three modules I would scrutinize to assess and define a comparable utility would be:

  1. the staking module
  2. the liquid staked token module
  3. the token factory module

I could spend some time on this and come up with a solution for implementation. Not a whole lot different than the code walk through in this github discussion . CancelUndelegate in staking module · cosmos/cosmos-sdk · Discussion #11022 · GitHub Is this something ecosystem participants demand or oppose and why?

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This is actually a good idea for certain tokens and users that would like to use blockchain in a more secure and protected way. I don’t believe all tokens need to have this functionality but this is a use case that would definitely be of value on the long run to bring more retail risk-averse users to the scene and the Cosmos.

We have also seen that without this functionality that funds can as well be clawed back through hard forks and proposals in controversial ways suck as Prop #16 on Juno (which I heavily disagree with) so it would definitely be better to have two types of tokens, one of them where code is law and definite, and the other where such functionalities can be introduced, both have their pros and cons and their user base.

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My whole thinking was LSD’s - Liquid Stake Derivatives, could be issued that provide higher degrees of protection against fraud.

I agree with this, but to be in compliance with some regulatory policies - I also think it will be required to be a serious consideration for this market segments growth.

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