Not PayPal's Fault, But Paxos Fat Fingers Led $510,000 Bitcoin Transaction Fee Mishap Due To Internal Bug

Crypto infrastructure provider Paxos has taken responsibility for a Bitcoin BTC/USD transaction that incurred an exorbitant fee of $510,000. 

What Happened: The company admitted to overpaying the BTC network fee on September 10, 2023, due to a bug affecting a single transfer. 

"Paxos overpaid the BTC network fee on Sept. 10, 2023. This only impacted Paxos corporate operations. Paxos clients and end users have not been affected and all customer funds are safe. This was due to a bug on a single transfer and it has been fixed. Paxos is in contact with the miner to recoup the funds," Paxos told Cointelegraph.

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Initially, there were speculations on social media platform X (formerly Twitter) regarding PayPal Holdings Inc PYPL involvement in the transaction. However, Paxos clarified that the error was solely their own and that PayPal had no responsibility for the incident. Paxos is currently in discussions with the miner who received the excess fee to recover the funds.

Transactions with higher fees are typically prioritized by miners for faster processing. However, average fees on a normal day range from $1 to $3. In this case, the fees paid by Paxos amounted to 19.89 BTC, significantly higher than the value of the actual transfer, which was 0.074 BTC.

An analysis by Twitter user @mononautical, who works on the Bitcoin block explorer mempool.space, previously hinted at the possibility of PayPal’s involvement. The wallet address connected to the transaction closely matched the behavior of an inactive wallet labeled as PayPal on OXT, another block explorer. It is worth noting that PayPal utilizes Paxos to manage its crypto custody services, holding significant amounts of cryptocurrency for its customers.

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Why It Matters: Paxos is not the first entity in the crypto space to make such an error, resulting in substantial fees. In 2019, an Ethereum ETH/USD user lost over $300,000 by mistakenly inputting values in the wrong fields. 

Fortunately, the mining pool responsible agreed to return 50% of the lost funds.

Price Action: At the time of writing, SHIB was trading at $0.0000072, up 0.02% in the last 24 hours, according to Benzinga Pro.

Photo by Primakov on Shutterstock

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