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(In reality, this may not do much to discourage theft, but may assist in recovery)
Steganographically embed an ID unique to the camera in every digital image. The fact that the ID exists can be public knowledge, but how the data is distributed can be kept secret and vary by manufacturer and model.
The manufacturer would offer a web site or service where uploaded photos could be checked, in conjunction with a password or somesuch, for embedded IDs and the owner verified.
When you purchase the camera, you register it in your name and password with the camera's serial number. This ties you to the ID. You don't need to know ID, just that every picture taken with the camera is traceable back to you. Selling the camera would require some sort of transfer of registration. The password inhibits this from happening casually.
A knowledgable thief will probably save the image a few times in a lossy format to eliminate or obfuscate the ID - but a thief is only going to hold on to so many cameras. Cameras sold to the unsuspecting won't come with a valid transfer of registration and the original owner can be identified by the embedded ID. If you think you know who the thief is, or the police catch someone with a camera you believe is yours, you could obtain a copy of a photo taken with the suspect camera and bounce it against the manufacturers identification site. If it comes back as a match between your password and your ID, the photo must have been taken with your camera.
The inspiration for this idea. [phoenix, Oct 01 2008]
Secret Code in Color Printers Lets Government Track You
From EFF.org [phoenix, Oct 01 2008]
||It is called "water-marking". Same principle as actual water-marking, different technology. In fact there was an idea (i think by she, to whom a name cannot be assigned) posted and deleted here within minutes of each other. Turns out it was not plausible.
||If you intend to watermark, and communicate each picture, the key (or hash) may become apparent. Regardless of the specific protocol, this becomes cryptographically weak. A) a water-mark will be apparent (not steganography anymore); and B) you provide information with which to decode and possibly replicate the water-mark.
||Besides, most digital cameras encode tags onto the image. Of these are the device description and unique serial number. These are generally hardcoded, and not possible to remove from the device.
||[4whom] You're right, of course. Even if the steganographic information were switched around a bit, the overhead required to own and use the camera would make it a poor seller. It was just something that popped into my head when I was thinking about the "Photo Safe" idea.