Paxos recovers its $500,000 'fat finger' Bitcoin transaction fee

[kryptqnick]

It's wonderful that such a big amount of money was returned. I can't imagine what those who made such a costly mistake were feeling, and I remember people voicing concerns in the thread that they don't think it's likely that the funds will be returned. Reading the discussion, I don't buy that this transaction was intentional. I think it was an honest mistake, and we shouldn't blame the person responsible for it, as sometimes terrible mistakes just happen, and it's hard to understand how they happen beyond the fact that making mistakes is a part of human nature.

[digaran]

That's very strange. What if I owe some money to a friend? Should that transaction be equally taxable with realized profit from an investment?

Actually stock and paper gold market investments are tax free here to save the government from bankruptcy, and other financial transactions require evidence and justifiable reason for the banks to process the transaction, it's related to FATF rules, the gov refused to join international FATF, but they are enforcing it's rules domestically.

If you are buying a car, you need to provide the bank with official documents of the deal to let you transfer the money to the seller, they charge the tax for such deals before registering the car to your name. And if you owe a friend, you can't send more than $4,000 per day without officially approved docs. It's a circus in general, the laws of taxation.

In the case of paxos, I believe that pool has to answer to it's government wherever they are located, and all the documents of all financial transactions globally goes to FATF headquarters for assessment. The new universal rule of finance; everyone is a criminal doing money laundry unless legally proven otherwise with evidence. 

[philipma1957]

That's very strange. What if I owe some money to a friend? Should that transaction be equally taxable with realized profit from an investment?

Actually stock and paper gold market investments are tax free here to save the government from bankruptcy, and other financial transactions require evidence and justifiable reason for the banks to process the transaction, it's related to FATF rules, the gov refused to join international FATF, but they are enforcing it's rules domestically.

If you are buying a car, you need to provide the bank with official documents of the deal to let you transfer the money to the seller, they charge the tax for such deals before registering the car to your name. And if you owe a friend, you can't send more than $4,000 per day without officially approved docs. It's a circus in general, the laws of taxation.

In the case of paxos, I believe that pool has to answer to it's government wherever they are located, and all the documents of all financial transactions globally goes to FATF headquarters for assessment. The new universal rule of finance; everyone is a criminal doing money laundry unless legally proven otherwise with evidence.

I have to agree with this attitude in a lot of countries it seems like the governments enforce that way.

Ties in with soldered batteries in a cell phone so that is is always a spy device in the name of anti-terroism.

[Pmalek]

So it was a big company mistakenly sending 20 bitcoins as fee and then a large mining pool who happened to mine that block, and at the end they returned the coins with no problem? Why does that sound very generic and usual? Lol.

Well, it's not the first time that something like that happens. I remember similar cases from the past, but not that many. I don't know who the senders were, and it's not important. My point is, the mining pools returned the coins in those cases as well.

I have no updated information about new crypto laws, but I'd assume once you mine a block, no matter what, all the coins are yours. In legal terms of course.

Which laws and from which countries refer specifically to Bitcoin mining rewards? Do they even understand it to write effective laws for mining?

[Odohu]

Makes you wonder how a company of such size($2.4 billion as per Forbes) makes such an amateur mistake. Like, probably just having a second person(which I'm pretty sure they can afford) to double check the transaction setups will mitigate such mistakes.

I doubt if a company can make such a mistake, it is really not adding up. No one can send $10,000 transaction without double checking and sometimes checking it several times. Saying it was a software for automatic transaction does not make sense as well because it was not a bulk sending. The only thing that is making sense is that it was delibrate, the purpose of which I do not know.

Makes you wonder how a company of such size($2.4 billion as per Forbes) makes such an amateur mistake. Like, probably just having a second person(which I'm pretty sure they can afford) to double check the transaction setups will mitigate such mistakes.

Weeks ago, it was reported after analysis that it is error from an software which is responsible for processing transactions automatically. I doubt that it is an error but an intentional setup to create some fud on the market.

Rather than create fud, I think this even sound as positive news for Bitcoin and the entire Bitcoin community. It demonstrates the love and transparency that is possible even among Bitcoiners.  The people involved might  just want to be in the news; such news is good for all of us.

[digaran]

Which laws and from which countries refer specifically to Bitcoin mining rewards? Do they even understand it to write effective laws for mining?

That's why I said assuming, however written or not, in crypto when you mine a block, whatever fee+block reward you receive is yours, I like it because it's more natural, like jungle. But in my country, a bunch of donkeys and cows rule and make up the laws, last thing I know to mine, you need a permit and you'd have to pay for electricity with export price.

Last time I think a similar case happened with antpool if I'm not mistaken?

This "computer error" had a good side effect, got people talking about 3 big companies, it was like an advertisement for them, I didn't know what paxos is, now I do.

[Oilacris]

It's wonderful that such a big amount of money was returned. I can't imagine what those who made such a costly mistake were feeling, and I remember people voicing concerns in the thread that they don't think it's likely that the funds will be returned. Reading the discussion, I don't buy that this transaction was intentional. I think it was an honest mistake, and we shouldn't blame the person responsible for it, as sometimes terrible mistakes just happen, and it's hard to understand how they happen beyond the fact that making mistakes is a part of human nature.

You know that people would be always have that something to say when it comes to those probabilities on which it is really that simply showing some trust issues or something that we would really be

loving to go into those things which blaming which is casual or as i said pointing out those possibilities which even if it isnt true. We would really be having those doubts or really trust issues i had said earlier. Its true that how about into those people who had made out some mistake on making use of those big amount of fees on their transactions? Usually big numbers and known companies or personalities would really be making out such noise and this is why to those miners who do able to receive such fee will normally be making out such move on giving it back
because it would really be affecting their reputation of course and this is something that they do avoid.

For those normal joes then for sure it wouldnt really be given back but well we cant really make out conclusions since we dont know if ever it did happen
about in between miners and to those who had mistakenly sent out those huge fees on their transactions.

[OgNasty]

I’m always amazed when these giant accidental transaction fees get returned by the miners that receive them. I’m not sure if I would be able to return half a million dollars from a block I fairly mined, but I’d like to think I would. Kudos regardless to all of the mining pools that do return these fees. It shows that they aren’t all about money.

[Stedsm]

All is well that ends well, a perfect saying that goes with this situation. I never thought that they'd just return it so quickly as I've also seen some instances taking place before, but only in a few cases did the miners return the fees, whereas in other cases they kept it and used it.

Technically, miners have the right not to give it back because it's the fault of sender and not the miners, miners did their job, simple. I'm shocked to see these big names involved in the transaction and how could they commit such a silly mistake.  

[Cookdata]

However, if it's an overpaid fee in a transaction, perhaps you made a mistake during the course of a transaction, they may (low chances) return the fees to you for the error.

Whatever tx fee or fee rate attached to your tx goes to the miner, even if you estimated wrongly and overpaid, there is no such return, the fees is what miners use to decide the priority of transactions in the mempool, they can't decide if you willingly overpaid or not. In a tx what returns back to you is change, if there is any. If you are spending a particular utxo, but you are not spending all of it, one of the outputs returns to you as change. Tx fee is simply inputs - outputs, that is what finally goes to the miner.

Just for the record and to prove my point, I hope you believe that miners do consider some transactions where huge fees are return. This is the second time in my life in Bitcoin I have experience this, you can navigate to OP first page and comfirm.

Mistakes are avoidable sometimes but I will really do everything in my power to avoid this because not everyone will reason with you in such kind of difficult situations, that's why concensus rule exit and is been followed by everyone to avoid this kind of things, bull run is also coming, I also hope we don't see more of this.

[Agbe]

Transaction fee can be recovered? How? This is the first time I am hearing this. And the first time when I saw the transaction fee really it was something else thay was a huge amount of money. The mining pool or the company that did it was good one. We thank God we have such companies in the blockchain. Such mistake is too expensive. The sender has learned his lesson.

[philipma1957]

Transaction fee can be recovered? How? This is the first time I am hearing this. And the first time when I saw the transaction fee really it was something else thay was a huge amount of money. The mining pool or the company that did it was good one. We thank God we have such companies in the blockchain. Such mistake is too expensive. The sender has learned his lesson.

Okay the pool or solo miner that mines the block gets the fees.



F2pool has a pool wallet so that wallet grabbed 6.25+19 = 25.25 coins.

They if the fee was not a mistake split the 25.25 coins with the miners. Their fee is say 2% or .5 coins the 24.75 then goes to the miners.

It is a multistep process.  So the pool can hold the block and the fees since it all goes to their address. then to the miners.

there are pools that auto send the coins.

ie same block of 25.25 coins 2 % to the pool operator and rest to the miners all in one step.  In this case the pool does not control the coins it is a one step process.

https://pool.laurentiapool.org/#/work

coins would go  to the miners and the pool op in 1 step

https://solo.ckpool.org/

a fee goes to pool op rest goes to solo block winner 1 step


or a single solo miner with no pool 100% got to him.

In the cases above it would have been far sloppier to get a refund back to Paxos/Paypal


I for one would be looking for a lawyer and a legal agreement to protect me from USA taxes since that would have went to a kyc address and shown as income. If I hit with  https://pool.laurentiapool.org/#/work

[Darker45]

Transaction fee can be recovered? How? This is the first time I am hearing this. And the first time when I saw the transaction fee really it was something else thay was a huge amount of money. The mining pool or the company that did it was good one. We thank God we have such companies in the blockchain. Such mistake is too expensive. The sender has learned his lesson.

1. In principle, transaction fees can't be recovered. What's paid is paid, and since Bitcoin transactions are irreversible, you simply can't take back what you've already sent. What happened here is that F2pool created a separate transaction sending Paxos an amount that was deemed extra.

2. The mining pool or company that sent it back isn't necessarily good. We won't be thanking a god for it. It just so happened that they're an identifiable company that has a public reputation and that the company who committed the error was also a popular company. I doubt F2Pool would be good enough to consider sending you back your transaction fee if you erroneously paid $2,000 for a $10-transaction.

3. Paxos should learn its lessons. At the same time, we should also learn ours. Paxos had just inadvertently shown a huge red flag. We should be more careful in dealing with it. Paxos is a trust company and it shows it might not be worth our trust in handling funds.

[davis196]

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.

[cafter]

Transaction fee can be recovered? How? This is the first time I am hearing this.

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.

[Z-tight]

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.

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.

[cafter]

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.

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.

[serveria.com]

It brings about an interesting issue. They were a business to business setup.

f2pool is large company.
paypal is large
paxos is large.

If you solo mine or mine at a few small pools there is no pool wallet coins are simply few direct to the miners.

I am U.S.A. based miners. I mine at this pool

https://pool.laurentiapool.org/#/miners
https://pool.laurentiapool.org/#/work

if we had hit it those coins go directly to us not to a pool wallet

I would have received 9.6 coins about 7.2 would have been a mistake
another miner would have received about 11.5 coins about 8 would have been a mistake
the third miner would have got 4 coins about 3 would have been a mistake

If I refund those coins 7.2 I would need quite a lot of assurance from PayPal and paxos that 194k of taxable income goes on their books not mine. I would need to create a legal agreement to refund them.

Well not my problem and some programmer is going to be in trouble for the error.

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...

[Pmalek]

Last time I think a similar case happened with antpool if I'm not mistaken?

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.

Transaction fee can be recovered?

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.

[philipma1957]

It brings about an interesting issue. They were a business to business setup.

f2pool is large company.
paypal is large
paxos is large.

If you solo mine or mine at a few small pools there is no pool wallet coins are simply few direct to the miners.

I am U.S.A. based miners. I mine at this pool

https://pool.laurentiapool.org/#/miners
https://pool.laurentiapool.org/#/work

if we had hit it those coins go directly to us not to a pool wallet

I would have received 9.6 coins about 7.2 would have been a mistake
another miner would have received about 11.5 coins about 8 would have been a mistake
the third miner would have got 4 coins about 3 would have been a mistake

If I refund those coins 7.2 I would need quite a lot of assurance from PayPal and paxos that 194k of taxable income goes on their books not mine. I would need to create a legal agreement to refund them.

Well not my problem and some programmer is going to be in trouble for the error.

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...

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.