What is a Bitcoin Replay Attack?

As the chance a bitcoin hard fork only increases as time progresses, there are some concerns to take into account. A replay attack is certainly possible when a hard fork occurs, although there is some confusion as to what such an event entails exactly. Protecting against such an attack is of the utmost importance, as it could have catastrophic consequences.

What Does A Replay Attack Mean For Bitcoin?

It has to be said, using the term “replay attack” is technically not correct when discussing bitcoin and the challenges that await us. A replay attack refers to reusing temporary credentials in an online environment. While a bitcoin hard fork can cause such an attack to occur, it wouldn’t take place in the traditional sense as explained by Wikipedia.

To be more specific, the bitcoin “replay attack” issue would allow an attacker to steal users coins. While the coins wouldn’t necessarily go to the attacker’s wallet address, this vulnerability could empty users’ wallets on the alternate chain.

To explain how the attack works exactly, we will play out a scenario. Let’s say you have 1 BTC prior to the fork. Once the “hypothetical” fork arrives, you would now have 1 BTC and 1 BTU (we labeled the crypto on the alternate chain BTU for simplicity purposes). You go to spend 1 BTC and buy 100 pairs of classic bitcoin socks from TheMerkle. Next, you check your balance on the alternate chain, and are surprised to see that the coins are gone from that wallet as well and went to TheMerkle’s bitcoin wallet. How did that happen? Why did the coins on the alternate chain disappear even though you only spent the original Bitcoins?

The reason is due to the replay attack. An attacker, or anybody in general, could pick up your broadcasted transaction on one chain, and relay it to a node on another chain. Since the transaction is valid on both chains, both nodes would accept it. Even though you didn’t mean to spend your other coins, a malicious attacker or even the receiver trying to sneak himself extra coins could make you spend them. However, that can happen only if you decide to spend your coins in the first place. If you never send a transaction nobody can magically remove coins from your wallet. This attack works both ways too, you could spend BTU coins, and if a BTC node picks up the transaction those coins could be gone as well.

Protecting against this type of “replay attack” will be quite a challenge, to say the least. Both individual blockchains would have to ensure funds cannot be moved twice, although that is much easier said than done. One way that the replay attack could be avoided is if each respective fork added a “salt” to their transaction, making a transaction on one chain only valid on that specific chain. This would prevent attackers from broadcasting transactions on alternate chains, as they would be deemed invalid.

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