Topic: Paxos recovers its $500,000 'fat finger' Bitcoin transaction fee (Read 541 times)

This is good I don't know some individual can genuinely refund accidental transaction to the rightful owner. Now i believe we have trusted members in the forum.

mainly its the lack of taint.. but there are in other instances of scammers who try to sell parts of a reward as "rare sats" under many guises for a premium

what benefits a company can have if they have fresh coins? in my mind i just know one benefit: they can deposit it in exchange without any fraud issues,
what are the other benefits?

In cryptocurrency, no one is above mistakes. It can happen to anyone and that is why we are advised to be very careful during transactions. I remember not quite long that theymos made a mistake and sent coins upto $1k to a newbie who refunded him.
Although, people has been pointing towards the conspiracy way which is also very much possible. But let us assume the only thing that happened is what we are aware of, and it is fine there is a refund.

this particular event was not an orchestrated attempt to launder (due to the public broadcast of the TX pre-confirm). thus no control over where the value would end up. and also the pool itself used rewards that are linked back to the spend.. so its not like they tried to hide things

however laundering IS possible.
if you have a contract with a pool to give them value as fee's(via private pushtx rather than public relay) it will destroy the utxo taint path of the value when spent as a confirmed tx. and become a 'fresh coin' in block reward form. whereby a pool could use other rewards unlinked to the spend or other stash of coin to pay out to a new address of the spender thus the spender gets value back with different/no taint

but as i said. this event of paxos vs f2pool was not that, due to lack of organisation and methodology

however paxos does now have 19.8btc of 'freshcoin' straight from a mining reward. so although not orchestrated laundering. they do now have the benefit of freshcoin with no taint

dude you are wrong it is not money laundering. no one in their right mind would launder money it this manner.

read what franky1 said.

paxos and f2pool didnt do a private deal. this is obvious because instead paxos doing a private pushtx of the transaction to only f2pool to ensure only f2pool mined it. the transaction was released to the entire pre-confirm relay network meaning any pool could have grabbed it. it was just luck that f2pool grabbed it first and solved a block containing it.

this however demonstrates that paxos wallet software has a bug or there was a human error involved

Are you suggesting that these two companies were merely trying to gain clout on social media by showcasing these transactions? I don't think so. It's pretty clear when we look at the transaction details and how they unfolded. Both of these companies have solid reputations in the Bitcoin mining and transaction space. What we should acknowledge here is that by reimbursing the accidental Bitcoin transaction fee, they have not only earned more trust from their users but also demonstrated to the world that correcting excessive transaction fees is possible. This shows their commitment to serving the broader Bitcoin community rather than solely focusing on making huge profits.

nope F2pool did not take 'some fee' from the 19.8btc amount. they gave the full fee 100% back

looking at the original payment error
https://www.blockchain.com/explorer/transactions/btc/d5392d474b4c436e1c9d1f4ff4be5f5f9bb0eb2e26b61d2781751474b7e870fd
from                                                                   to
bc1qr35hws365juz5rtlsjtvmulu97957kqvr3zpw3       bc1qr35hws365juz5rtlsjtvmulu97957kqvr3zpw3
19.89514072                                                         0.06595313

                                                                            1FUPHrrscTwuJN93aSuNV6nHERDGyZAebM
                                                                            0.00256543

                                                                            1H1nsFGPHFNVBVbrQY2tPxnbWrxuMyGHmh
                                                                            0.00207202

                                                                            bc1qn648pv0jn4m6tpt8nvg58m69x9tq2mfr06m94r
                                                                            0.00193031

                                                                            1CVfqCNnfRYsBjEn3A592iNz96FRp32ZcC
                                                                            0.00153351

fee =19.82108632 (based on math of the above ('from' minus 'to' = fee))

the return/refund
https://www.blockchain.com/explorer/transactions/btc/1b9adb2878fce5cd1b6a11a011e3965f904829228d57cf90ca6731cd501890c6
bc1qr35hws365juz5rtlsjtvmulu97957kqvr3zpw3
19.82108632

is the exact amount of the entire fee(100%).. meaning paxos who made the error paid absolutely no fee at all to send the
small amounts to:
1FUPHrrscTwuJN93aSuNV6nHERDGyZAebM
1H1nsFGPHFNVBVbrQY2tPxnbWrxuMyGHmh
bc1qn648pv0jn4m6tpt8nvg58m69x9tq2mfr06m94r
1CVfqCNnfRYsBjEn3A592iNz96FRp32ZcC

so f2pool didnt even take a cut for the refund. nor even a fair fee amount for the transaction in question

It was a nice gesture from the mining pool. But doing so would greatly defeat Bitcoin's original purpose. Wasn't BTC created as a decentralized, permission-less cryptocurrency? Since when do we need to return TX fees because of a mistake? F2Pool returned the funds because a prominent company (Paxos) made a mistake. But what if it was an ordinary person like you and me? I doubt they will do the same.

What happened recently, tells us BTC is becoming no different than banks. After all, centralized mining pools dominate the network. This is just like ETH's "The DAO" hack where funds were returned to the original investors. The ETH blockchain was "rolled back" as a result. I believe the whole point of crypto/Blockchain tech is about transaction finality, and decentralization. Unfortunately, players with big economic interests having been moving Bitcoin away from its original purpose. As long as there's money to be made, nothing else matters. Who knows what would be of Bitcoin in the future? Just my thoughts

Looks like money launderung, haha In general, such things are quite suspicious. Also, it could be a media scandal, made solely for an ad campaign... Such things don't happen with people with no $500,000, and things that happen with people having these sums are always really suspicious... So, in general, a good news is that money can be returned in such cases.

AFAIK, They only refund the overpaid amount and take some fee from the 19BTC original fee. I remember reading the owner of mining pool rant tweet about this incident and mention about the fees IIRC.


I think it can still possibly tracked down since most of miners exchange their coins on exchange. They probably do KYC since no one would expect an insane transaction fee like this. But I wonder if he/she will refund voluntarily.

Looking at the nature of the transaction , coins were sent with an overpaid transaction fee, but seeing f2pool refunded this fee does this mean this transaction cost Paxos zero satoshis  or maybe some special deal was made and btw,what of the cost of energy consumed during the mining process is this not to be factored in??

---

I wonder how this transaction would have gone had a private miner mined this block with the ~$500k

Not if you are mining. Trust me it goes to  straight to the addresses listed if this pool hits a block
 https://pool.laurentiapool.org/#/work

I am U.S.A. my address is kyc. If I refund the 7.2 coins I need multiple certified documents from paxos to show why it was an error and I refunded overpayment.

Plus I am not sure the IRS would consider it a refund of an error they may say I simply gave them back money I did not have to give.

My mom worked for IRS 23 years My wife worked for IRS 33 years I worked for them 18 months. I am a degreed accountant from Queens College I know a bit about USA tax law and I simply am not sure what the ruling would be for this case.

I am not sure so I did a quick google search. I did not find Antpool among the first 20-30 results. But BitClub mined a block back in 2021 where some individual paid almost 300 BTC in fees by mistake. The article doesn't mention if the coins were returned or not.

In a second example I found, there is talk about an Ethereum miner who received over 7,600 ETH by mistake in fees. Those coins were confirmed to have been returned to the sender.

I am sure there are more examples, but they have been burred under the most recent Paxos and F2Pool case in the search results.

Not automatically by clicking a magical button if that's what you are asking. But the pool that mines the block with the problematic transaction can return the coins if they want.

Guys got really lucky f2pool mined the block, because most pools wouldn't even return the funds at all. Paxos should send them a tip they deserve it. As to taxation, what happens normally when somebody sends you Bitcoin by mistake and you send it back? I'm not a tax guru but there should be some easy solution...

I know f2pool's reputation was never at risk but if they didn't refund that 20BTC the people's mind may become 0.01%-1% negative(people think they are bad they didn't returned the btc which come to them by mistake), instead they returned their 20btc so the reputation is increased people will trust f2pool more. this is right move they did according to business point of view also.

Take note that F2Pool's reputation was never at risk in this situation, all they did was mine a block, and they ought to keep the block reward and the tx fees attached to the tx's in that mined block. Paxos overpaid and there is nothing wrong if the mining pool keeps the reward and distributes it to their miners, if they had done that they'll still be mining blocks and nothing changes for them in the network, Paxos and Paypal may go on a campaign against them, but there is no way for them to enforce a refund, and anybody who understands how BTC works wouldn't take them seriously.

Yes, the transaction fee which given to miners can be recovered i was also confused like you, when i first heard of it but then i asked too many questions about it here, read these further replies to know more about it.

---

F2pool have done right by refunding the fees to paxos, and also increased their reputation which is important in every business, they know 500K is not something that they harm their trust/reputation for, even a little.

F2Pool did a great job. They can tap themselves on the back. I wonder if they would have done the same "refund" if the sender was an individual, instead of a company. The Paxos employee, who paid this 20 BTC transaction fee is fired, I guess.
I probably would die from a heart attack, if I send thousands of dollars worth of BTC as a transaction fee by mistake.
Maybe that's why I'm always nervous, when I have to send Bitcoins to someone.