US-based blockchain firm Paxos has reportedly overpaid a record $500,000 fee for a single Bitcoin transaction due to a software bug. The New York-based company, known for its stablecoins PYUSD, BUSD and USDP, admitted to the mistake after an initial misunderstanding that had led some to believe that PayPal (NASDAQ:PYPL) was responsible for the blunder.
The transaction, which took place on Sunday, saw Paxos move just 0.074 BTC (approximately $1,911) to Binance. The fee paid for this transaction was a staggering 19.82 BTC (around $511,512), according to data from IntoTheBlock and Whale Alert. This is significantly higher than Bitcoin's average transaction fee at that time, which was approximately $2.
The payment was initially thought to have been made by a seasoned Bitcoin user due to the history of over 120,000 transactions associated with the sender's account. However, an unidentified user under the alias 'mononaut' suggested on Monday that PayPal was responsible for the excessive fee. This claim was later refuted by a PayPal spokesperson who explained that Paxos, their infrastructure partner, was responsible for the error.
In a statement given to crypto news outlet The Block on Thursday, a Paxos spokesperson confirmed the overpayment: “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."
Chun Wang, co-founder of F2Pool, the mining pool that mined the block containing the transaction, expressed regret over agreeing to refund the excessive fee. Despite initially promising to hold the fee for three days in case anyone claimed it, Wang expressed annoyance and regret on Wednesday. According to him, there was a disagreement with Paxos over the timezone used when counting these days.
As of Thursday, the situation remains unresolved with no new updates from Wang about the massive transaction fee. This incident is a record for the Bitcoin ecosystem, but not the first of its kind. A similar incident occurred in September 2021 when an Ethereum-based exchange, DeversiFi, paid a massive 7,676 ETH (worth $12.3 million at the time) in fees to move $100,000. The erroneous fee was later refunded.
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