I've never been a fan of crypto (despite holding some for diversification), but I think some tweaks could be made to make it safer and more reasonable without comprising what its proponents like about the system.
Crypto prtocols need a way to reverse transactions if the original address as well as some quorum of elected "supervisory overseers" agree [1] to it within a week or so. There should also be a mechanism to move the balance to another address with the original owner and these parties.
This wouldn't allow the "regulators" to themselves steal or coerce, but they could provide assistance in large thefts like this.
[1] Obviously the attacker would vote no, but a single yes from the true account owner would override.
Since nobody has offered a response, I'll offer my 2c. Your suggestion flies in the face of what Bitcoin and other cryptocurrencies that operate according to the same principles were designed to be (trustless, some degree of anonymous) and it would make the system ripe for abuse (more than it already is). What if Luke Jr is lying and he spent those bitcoins in return for goods and services?
Suddenly you have to establish a department that would hear from both parties which introduces the problem of identifying the other party and getting in contact with them, then they would have to evaluate the evidence and make some kind of judgement. Paypal attempts to do what you're describing and it's constantly abused by both buyers and sellers alike.
Bitcoin might not be perfect, it might not even be fit for most purposes (highly subjective), but scrapping the idea outright would be a much better outcome than bastardizing it with "trusted" middlemen to the point where it's not fit for any purpose at all.
I think progress could be made in UX design, by pushing users towards using hardware wallets and other areas, but changing the protocol such that trustless transactions now require trust is not an appropriate solution. It's the core of what cryptocurrency is as a concept.
Thanks for the response! I appreciate it much more than the downvotes, and it gives me a position to consider.
I still find myself in disagreement - there need to be safeguards at the protocol level, and not just for ordinary people.
Escrow and restitution could be built as a feature where trustless and anonymous transactions can still take place. Taking into account my previous post, imagine this setup:
There are now two types of wallets/addresses. One type functions exactly as Bitcoin does today. The other type, however, automatically subjects transactions to temporally-gated restitution systems and allows you to recover funds if a side channel refund request is made.
Funds in the original Bitcoin wallet type experience transactions that are instant and non-refundable, and you can keep "hot" funds here. The "cold" wallet type requires more time to pass before the funds "settle". It can function as your bank and offer lots of additional security.
It'd be easy to make the wallet type an identifiable part of the address so that all parties know what types of transactions they're involved in.
This extension to the protocol could be 100% opt-in.
It's already part of Bitcoin: You'd simply assign your coins to a 2 of 2 multisignature with your escrow service. It's implemented in practice too, in varrious forms including ones with timeouts in case the escrow service goes down or tries to extort you itself.
Crypto prtocols need a way to reverse transactions if the original address as well as some quorum of elected "supervisory overseers" agree [1] to it within a week or so. There should also be a mechanism to move the balance to another address with the original owner and these parties.
This wouldn't allow the "regulators" to themselves steal or coerce, but they could provide assistance in large thefts like this.
[1] Obviously the attacker would vote no, but a single yes from the true account owner would override.