Miner Returns over $500 K BTC Transaction Fee Overpayment to Paxos

2023-09-28, 03:15

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## [TL; DR]
The crypto miner, F2Pool, returned $500 K worth of <a href="/ar/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> that Paxos paid by mistake.

F2Pool acted responsibly by returning the overpaid BTC amount.

Digital wallets pay transaction fees when  sending, receiving or trading cryptocurrencies. 
## Introduction
The good thing about blockchain based transactions is that they are immutable, reliable and transparent. Also, anyone or any parties are free to verify them as they are tamper-proof. However, due to certain bugs or human errors decentralized protocols may execute wrong transactions. In this article, we explore how an honest miner returned bitcoins that were [transferred to its wallet](https://www.gate.io/blog_detail/1355/how-to-transfer-crypto-anonymously "transferred to its wallet") by a mistake. 
## A Bitcoin Miner Returned Over 500K BTC
A bitcoin miner, F2Pool, returned 19.8 BTC worth around $500 K which Paxos mistakenly transferred to its account. Basically, Paxos wanted to transfer only 0.074 BTC which was worth less than $2,000. Nonetheless, a bug in the system led to the inflated transaction fee which was probably the highest fee recorded on the bitcoin network in recent years.

Related news: [New York Regulators Probes Stablecoin Issuer, Paxos](https://www.gate.io/blog_detail/2285/new-york-regulators-probes-stablecoin-issuer-paxos "New York Regulators Probes Stablecoin Issuer, Paxos")

There are a few explanations for that overpayment anomaly. For example, Jameson Lopp, co-founder of CasaHODL, believes that the transaction amount was inflated due to a bug on the exchange or the payment processor system. Since the address had executed over 600 000 transactions, it might have made a mix-up in the process.

Based on the transaction output some people have suggested that the mistake might have been linked to PayPal. However, Paxos refuted that PayPal was responsible for the mistake.

Some analysts also suggest that the overpayment could have been a result of a copy and paste error during the processing of several transactions to different wallet addresses. In that case, the F2Pool address could have been copied and pasted several times.

Whatever explanations have been given, Paxos accepted full responsibility for the mistake and said that it only affected its corporate operations. There were no other customer accounts, apart from that of F2Pool, the crypto miner, that were affected.

After realizing its mistake Paxos contacted F2Pool to claim the overstated transaction fee amount. Nonetheless, Chun Wang, co-founder of F2Pool said that the reversal claim was made outside the stipulated time as a result of time zone differences. The standing rule is that overpaid fees should be claimed within three days. Failure to do so would result in the redistribution of the fees among the miners.

Wang stated: “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 <a href="/ar/price/zcash-zec" target="_blank" class="blog_inner_link">Zcash</a> guy did that, I blocked his entire company.”

However, there was much debate in the crypto community on X (formerly Twitter) about whether or not to return the overpaid amount to Paxos. In a subsequent poll 37% of the participants said that the amount should have been redistributed to the miners.

27% thought that the F2Pool should return the overpayment to Paxos. The rest were divided on whether or not to return the total amount to Paxos or to divide it in a 50/50 manner between Paxos and the miners. Nonetheless, in the end F2Pool returned the full amount to Paxos.

F2Pool confirmed that it had returned the funds to Paxos. [It wrote on X](https://twitter.com/f2pool_official/status/1702600488963940669 "It wrote on X") (formerly Twitter), "After conducting identity verification, we have confirmed the ownership of these BTC, and fully refunded the fee to the sender."

In response [Jameson Lopp commented on F2Pool](https://twitter.com/lopp/status/1702642904089477372 "Jameson Lopp commented on F2Pool") for returning the funds in an amicable manner.  He said, "Bitcoin is an adversarial network, but on the flip side it's also a cooperative network.”

He added, "Miners are humans too, and they realize that people make mistakes. While retaining egregious transaction fees makes for a nice short-term profit, returning those funds is the humane decision."

The action of both parties, Paxos and F2Pool, has shown that there is accountability and trustworthiness among many players in the blockchain sector. Also, the fact that F2Pool verified the mistake using bitcoin explorer shows that there is transparency in the crypto sector. 
## Cryptocurrency Transactions
We have noted that bugs on a network can lead to mistakes when sending and receiving digital assets. In this case, the mistake involved sending transaction fees to a mining pool.

In simple terms, transaction fees are charges levied to a wallet that sends digital assets or executes any other transactions such as trading cryptocurrencies on an exchange. Part of the amount levied is remitted to the miners that validate transactions on a specific blockchain.

Cryptocurrency exchanges and other trading platforms charge transaction fees when people buy, sell or transfer digital assets like cryptocurrencies and non-fungible tokens (NFTs). For instance, every time an individual sends BTC using the blockchain network it charges a [bitcoin transaction fee](https://www.gate.io/hot_news/detail/114/which-exchange-offers-the-lowest-transaction-fee-to-buy-bitcoin "bitcoin transaction fee").

The fees serve several purposes such as limiting harmful transactions on the network. If there are no transaction fees the system may experience many unwanted messages. In addition, these fees also sustain cryptocurrency exchanges and [other DeFi trading platforms](https://www.gate.io/blog_detail/1672/10-best-defi-protocols-to-invest-during-bear-markets "other DeFi trading platforms") as they are the main source of their revenues.

In most cases, the fees are very low. However, they may increase when there are many transactions on a network during a specific period. The transaction fees on the bitcoin network are paid in BTC while those on [Ethereum blockchain](https://www.gate.io/bitwiki/detail/102/ethereum "Ethereum blockchain") are paid in Ether (ETH).

Related article: [How long does it take to mine 1 bitcoin](https://www.gate.io/de/blog_detail/90/how-long-does-it-take-to-mine-1-bitcoin "How long does it take to mine 1 bitcoin")
## Mining Rewards
The mining reward, also called block reward, is the amount of cryptocurrency which a crypto mining company gets after validating transactions.  Currently, for instance, when a bitcoin mining firm adds a block to the blockchain it gets 6.25 BTC. Some mining firms form [mining pools](https://www.gate.io/bitwiki/detail/4/mining-pool "mining pools") to increase their computing power and reward.

However, the amount of bitcoin that firms that mine BTC get per successful block decreases every time when there is a bitcoin halving event. The next bitcoin halving event will take place in April 2024 which will result in the reduction of the miners’ rewards from 6.25 BTC to 3.125 per successful block.

Read also: [How to use cloud mining to mine Bitcoin in just one click?](https://www.gate.io/blog_detail/250/gate.io-observation-how-to-use-cloud-mining-to-mine-bitcoin-in-just-one-click "How to use cloud mining to mine Bitcoin in just one click?")
## Conclusion
F2Pool returned close to 20 BTC when Paxos made a transaction fee overpayment by mistake. The transaction error could have occurred as a result of a glitch on Paxos’ network. Nonetheless, the cooperation between F2Pool and Paxos shows that crypto firms and individuals can be accountable and responsible.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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