The issue of replay attacks typically increase in importance when a hard fork is imminent. This is because in the event of a hard fork, if you own a certain amount of a cryptocurrency e.g. Bitcoin, you will also own the same amount of the new cryptocurrency that is formed from the hard fork. If replay protection has not been implemented on the forking chain, then there is a possibility for both cryptocurrencies to be lost.
For example, if Alice owned 5 Bitcoins and there was a fork of Bitcoin (BTC) to produce another cryptocurrency known as Bitcoin Fork (BTF), Alice would also own an equal amount of Bitcoin Fork, i.e. 5 BTF. If Alice were to conduct transactions such as, sending some Bitcoins to a friend, or even buying a cup of coffee using her Bitcoins, then each one of those transactions can be repeated, or replayed, on the Bitcoin Fork (BTF) blockchain. Those transactions carried out on the Bitcoin blockchain are being broadcasted and picked up by an attacker who can then replay that same transaction to a node on the Bitcoin Fork blockchain, resulting in the loss of BTF.
To be clear, the replayed transaction on the Bitcoin Fork blockchain will always go to the same recipient that was used to send the transaction on the Bitcoin blockchain. The recipient may get greedy and decide to replay your transaction on the other blockchain in-order to get more out of the transaction.
Possible methods to combat replay attacks include:
- Replay protection
- Mixing coins
- Not conducting transactions
Replay protection: A possible way of combating replay attacks is for the developers of the forking chain to implement replay protection. Therefore, transactions made on one chain would only be valid on that chain. However, the issue with this is, it relies on the willingness of the developers to implement it.
Mixing coins: This method involves finding a transaction that will only be valid on one chain and cannot be replayed on the alternate chain. An example of transactions that cannot be replayed would be Coinbase transactions. Transactions made on one chain after a fork using Coinbase, cannot be replayed on the alternate chain.
Not conducting transactions: If no transaction is made on either chain, then there can be no transaction to replay. This method is especially effective if you are a hodler. However, if you are a trader, then this particular method is not very realistic.
To conclude, it’s incredibly important to understand exactly what replay attacks are as they can be used to maliciously to steal user’s funds. These are just some of the precautions that can be used to protect yourself from replay attacks.