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As you know, segwit2x was officially canceled last week, but some miners decided to still go forward today, and some exchanges like coinbase plan to support the hard fork.

So things will happen like this for double spending one segwit2x exchanges resume deposits and withdrawals (If I understand correctly) :

  • The frauder installs 2 bitcoin wallet software on his computer : one supporting segwit2x and another one which doesn’t (both using the same wallet format).
  • He sends non segwit2x bitcoins to his wallet on his computer.
  • He backup his wallet file.
  • Frauder then perform a segwit2x transaction through his segwit2x software to an exchange accepting segwit2x. The transaction being larger than 1Mb block size, it is rejected on the original blockchain and he keeps his balance on the original blockchain but not on the second.
  • He then replay the same transaction by using his backed up walled through his non segwit2x software to an exchange not supporting segwit2x.
  • Frauder then converts his segwit2x bitcoins to an other cryptocurrency like Doge or Litecoin, and send them to an exchange not supporting segwit2x (which he converts to original bitcoin).
    He does the same operation on the exchange were he sent his replayed transaction (and sends the doge/ethereums to the same exchange he sends his ethereum doge converted from segwit2x).
  • He then repeat the operation by resending his doubled non segwit2x bitcoins to his wallet on his computer.

So, if I understand correctly, the price of the original chain should go down to zero due to the trivial arbitrage operation described above and price of segwit2x chain should explose, correct ? So I suppose this means I should get out of exchanges implementing the update, isn’t it ?

If I misunderstood, please explains what transaction replay means.

  • Considering that no block for Segwit2x has been found yet and the client for it requires special configuration to create such a block, it is unlikely that there will even be a Segwit2x chain for any of this to even happen. Furthermore, that client has an off-by-one error which will likely screw up any other segwit2x clients. – Andrew Chow Nov 17 '17 at 20:35
  • @AndrewChow : Of course, I’m talking about scenario 2 described here : blog.coinbase.com/bitcoin-segwit2x-update-b69a1c1e5ece. Otherwise, if what I’m describing is impossible, then It’s impossible to perfom a replay attack ? or am I misunderstanding what is lack of replay protection ? – user2284570 Nov 17 '17 at 22:48
  • Downvotes ? Why ? – user2284570 Nov 18 '17 at 2:47
  • The title is nonsensical, to begin with. – Anonymous Nov 18 '17 at 3:45
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    "However, despite these developments, a small number of miners may attempt to go forward with a fork.". In practice, no miners did (so far). – Pieter Wuille Nov 18 '17 at 6:52
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Frauder then perform a segwit2x transaction through his segwit2x software to an exchange accepting segwit2x. The transaction being larger than 1Mb block size, it is rejected on the original blockchain and he keeps his balance on the original blockchain but not on the second.

Note: just because a transaction on the 2x chain is in a block larger than 1MB, that only makes the block invalid on the main BTC chain, but the transaction itself can still be replayed on the BTC chain.

Frauder then converts his segwit2x bitcoins to an other cryptocurrency like Doge or Litecoin, and send them to an exchange not supporting segwit2x (which he converts to original bitcoin).

He does the same operation on the exchange were he sent his replayed transaction (and sends the doge/ethereums to the same exchange he sends his ethereum doge converted from segwit2x).

Up til this point, all you have done is sold your S2X and your BTC for Doge or Litecoin, you have gained nothing extra. This is equivalent to selling both your BCH and BTC for Litecoin after the BCH fork.

He then repeat the operation by resending his doubled non segwit2x bitcoins to his wallet on his computer.

Firstly, he would not have doubled the non-S2X bitcoin. Even if there was trading support for S2X, the price would be much lower than the price of bitcoin so you might only gain a small extra percentage from the sale. For example HitBTC price for B2X is currently 0.034 BTC, so in selling your B2X you would only gain 3.4% more BTC than what you started with.

Secondly, after you have purchased post-fork BTC, you would not get the corresponding S2X coins too. You would only get the BTC that you purchased. So you cannot repeat that procedure. All you have done in the method you outlined is sell your S2X coins for a small amount of extra BTC, which is fine. In general, you only get corresponding fork-coins of BTC you hold at the time of the fork, nothing if you bought them after or sold them before the fork occurred. (Unless, due to no replay protection, the coins could not be separated, in which case you wouldn't be able to sell them either).

  • Ok so please explains how transaction replay is performed. and why it’s a fraud. Because it seems I misunderstood it. – user2284570 Nov 18 '17 at 12:54
  • @user2284570 check out bitcoin.stackexchange.com/questions/61212/… :) And remember to accept the answer here if it helped – MeshCollider Nov 18 '17 at 20:28
  • In case of seg2wit2x, does segwit2x transactions would be valid on original blockchain or does transaction replaying only affect one way ? – user2284570 Nov 19 '17 at 19:04
  • @user2284570 Segwit2X has no replay protection, so transactions are valid on both ways – MeshCollider Nov 19 '17 at 20:49
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    If someone trys to send S2X coins to someone else, they would inadvertently send the same amount of real BTC to them as well, causing many users to lose funds – MeshCollider Nov 20 '17 at 13:37

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