First off, I am not a blockchain developer and my grasp of the technology is still relatively new (few months). So what I am proposing below could either be a fresh new idea for battling cryptocurrency fraud, or an amateurish pipe dream. Either way, it is a simple idea so it should be easy to poke holes in it, where they exist.
What Lead Up to the Idea
I started thinking about ideas on how to prevent cryptocurrency fraud after falling for a fake Twitter account scam that targeted individuals who missed out on the Bancor ICO. You can read all about that humbling ordeal in my previous post.
tl;dr: I expressed my frustration with missing out on the Bancor ICO on Twitter and reached out to the official Bancor Twitter account. Shortly after, a fraudulent Bancor Twitter account reached out to me apologizing and offering assistance in processing the transaction, convincing me to send them 1 ETH in exchange for 120 Bancor tokens.
The Goal
Reduce the rate of fraud by rewarding individuals for helping to identify and fight fraud, and decrease the incentive for defrauding others.
The Idea
A blockchain that allows for the flagging of fraudulent transactions and then goes a step further. I will use a simple example to better explain.
Individual A is convinced to send funds to Individual B, through a fake Twitter account imitating a legit company. Upon realizing they had been scammed, Individual A visits the transaction ledger and flags it as fraud. Meanwhile Individual B is continuing the scam, and has convinced Individuals C and D to also send them funds. Thanks to Individual A's initial report, Individuals C and D are presented with an alert, upon submitting their transaction, warning them that Individual B's account has been flagged for fraudulent transactions.
The address you are attempting to send funds to has been reported for fraudulent transactions. Please take a closer look and ensure that you do in fact want to send this person funds, and then click to either continue processing the transaction, or you may cancel the transaction for a minimal fee.
Individuals C and D take a closer look at their correspondence with Individual B, and are able to determine that they were also about to fall victim to the same scam. Both opt to cancel the transaction, pay a minimal fee (for the sake of this example, let's say 2%), and receive 98% of their money back. While this cost them 2%, it did save them from losing 100%, and that 2% is used as a reward for the original reporter of the fraudulent account (Individual A).
The Reward
The 2% fee for preventing the fraudulent transaction is then given to Individual A as a bounty for being the first to report the fraudulent account. While their initial transaction could not be reversed, they were able to warn the rest of the network and as a thank you they then receive a bounty for each subsequent fraudulent transaction they prevented.
Discouraging Abuse of the System
An important note is that one could not just randomly report an address as being a fraud actor. The only time you could report fraud would be after you initiated a transaction where you sent funds to the address you are reporting. Thank you for pointing out that I didn't properly explain this important point 
So what are your thoughts? Would this help prevent any fraudulent transactions from happening?
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