- Paxos has confirmed that it controls the wallet that paid over $500k for a single Bitcoin transaction.
- The firm’s attempt to recoup the exorbitant fee now faces resistance from F2Pool following a misunderstanding between both parties.
- The incident draws attention to the complexities of crypto technology and raises questions about how Bitcoin fees work.
On September 10, a single Bitcoin (BTC) transaction grabbed headlines for setting a new record for the highest-ever USD fee on the network: $510,750.
The crypto community initially speculated that PayPal was behind the costly transaction that paid over 481,000 times the average fee on the day. However, Paxos has since admitted the error.Â
The decision on whether or not the prominent stablecoin issuer recoups this massive fee has now been left to the crypto Twitter community following a misunderstanding with F2Pool, the miner of the transaction block.
F2Pool Debates Refund
In a statement on Wednesday, September 13, Paxos confirmed that it controlled the wallet that paid out 19.8 BTC or over $500k in fees to send out about 0.074 BTC (worth approximately $1,916 at the time). The firm stated that the abnormally high fee resulted from a “bug,” which has been fixed.
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While Paxos asserted that it had initiated contact with F2Pool to recoup the funds, the miner no longer seems eager to agree to a refund.
At the time of the incident, F2Pool had given the erring user, now confirmed to be Paxos, a three-day window to reclaim the fee. But, it appears that a time zone disparity may have sparked a misunderstanding between both parties.
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"I was annoyed and regretted agreeing to refund that 20 BTC. Especially when I saw the person claiming it kept saying EST instead of EDT/UTC. Last time a Zcash guy did that, I blocked his entire company," F2Pool co-founder Chun Wang wrote in a Twitter statement on Thursday, September 14.
Along with his statement, Wang has launched a Twitter Poll to decide Paxos’ fate. At the time of writing, 36% of respondents favor the fee distribution to the miners, 28% support a full refund to Paxos, 21% contend that the fee should be frozen, and 15% support a halfway split between miners and Paxos.
The recent Paxos error draws attention to the often-overlooked complexity of blockchain technology and raises the question of how blockchain fees, particularly on the Bitcoin network, work.
How Fees Work on the Bitcoin Network
Bitcoin network fees are typically a small amount of BTC paid to incentivize miners to include a transaction in a block. The higher the fee, the more likely a transaction will be picked up by a miner and processed on the network. Fees vary based on network congestion and transaction size.
Depending on the wallet solution the user employs, they may be able to input a custom fee for their Bitcoin transaction. However, this can lead to what is known as a “fat finger error,” where a user accidentally inputs a fee value typically greater than they had initially intended.
On the other hand, solutions that set the fee for the user are not infallible, as highlighted in the case of Paxos, where the firm asserts that a bug led to a significant fee miscalculation.
On the Flipside
- Analysis from Casa CTO Jameson Lopp suggests that Paxos did not realize the error for a long time due to the large wallet balance.
- Paxos asserts that customer funds are safe, stating that the funds in question are tied to corporate operations.
- At the time of writing, the poll initiated by F2Pool’s Wang still has nearly 13 hours to close.
Why This Matters
The $500k fee paid by Paxos is the largest on record for a single Bitcoin transaction. The firm’s hope of recovering these funds now depends on a community vote. Paxos’ error reminds users to double-check transaction details before confirming transactions, as blockchain transactions are typically irreversible.
Read this to learn more about the record-breaking transfer:
User Pays $500,000 for a Single Bitcoin Transaction: Details
Polygon’s QuickSwap intends to serve as a bridge to Cosmos. Find out more:
How QuickSwap Plans to Unite Polygon and Cosmos with New DEX
