Paxos Receives BTC Refund After Paying $500k Excessive Fee in Transaction Error

By: Eliza Bennet

Blockchain infrastructure firm Paxos inadvertently overpaid the transfer fees in a Bitcoin transaction, resulting in an erroneous fee of $510,000, nearly 480,000 times the average network fee. The company accepted responsibility for the mistake, attributing it to a bug in a single transfer. Remarkably, Bitcoin miner F2Pool, who received the overpayment, refunded the 19.8 BTC overpayment back to Paxos.

The erroneous transaction occurred on September 10, 2023, when Paxos attempted to transfer 0.074 BTC, valued at less than $2,000, but the transaction fee was an astounding 19 BTC, equivalent to around $510,000. This unexpected gaffe resulted in the highest transaction fee ever recorded on the Bitcoin network. The address associated with this transaction, which has been involved with over 60,000 transactions, appears to have miscalculated the change output, leading to the overblown transaction fee.

Despite widespread speculation about PayPal’s potential involvement due to resemblances in transaction behaviors, Paxos confirmed that the incident only impacted corporate operations and that customers' funds were safe. They declined to confirm or deny any relation with PayPal. It is noteworthy that before refunding the amount, the Bitcoin miner asked their followers about their course of action where the majority voted to distribute the money among other Bitcoin miners. Blockchain data shows the refund transaction occurred on September 15, 2023.

In conclusion, this incident serves as a lesson in the importance of meticulous verification in cryptocurrency transactions. Additionally, Paxos’ prompt acceptance of responsibility and transparency, as well as F2Pool's gracious return of the overpaid fees, illustrates the collaborative spirit within the Bitcoin community.