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Author Topic: Bitstamp TX Fee Exploit - Fee 1.16% instead of 0.2% [Bitstamp Fixes on May 15th]  (Read 14017 times)
Boxman90
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May 06, 2014, 11:07:34 AM
 #1

Edit 09-05-2014: Bitstamp is increasing their trading limit to $5 on May 15th, after which the exploit as described in this post will no longer be possible.

After a response from Bitstamp, this post has been slightly edited. Bitstamp replied to my inquiry and I will discuss Bitstamp's response at the end of this post.

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I want to bring this all to your attention, because everyone trading at Bitstamp is affected negatively by a faulty implementation of the Transaction Fee Calculation on Bitstamp's side, which by definition always favors Bitstamp. At the moment this bug appears to be 'by design', but can be easily fixed.
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Bitstamp rounds their transaction fee off to the nearest cent decimal upwards. If you have a transaction of $11, the fee (0.002*13) is $0.022, which gets rounded off as $0.03. This is mentioned clearly in ther Terms of Service and I think that's okay.

The bug/faulty implementation:
The essence of this bug lies with the minimum order limit in combination with their fee rounding policy. Bitstamp's minimum order limit is $1. Because it is possible to place an order at 20% above market price, the effective minimum order limit is $0.86. A $0.86 order at 0.2% fee should be charged 0.002*0.86= $0.00172, which, due to their rounding, gets rounded off to $0.01. This is almost 6 times the actual fee. The problem is that this stacks up, leading to an actual exploit that always favors Bitstamp:

The actual exploit:
You place a sell wall at a certain price, agreeing upon 0.2% fee over that entire sell wall. A system/bot repeatedly makes many of the tiny buys into your BTC sell wall. Each of that buys is charged with 6 times the accepted fee. When this continues untill your sell order is completed, you will have effectively paid 6 times the fee over the entire sell order, instead of the 0.2% you thought.



Hypothetical Example:

When I put in a sell order of 20 bitcoins at $432.01, and some bot for some reason makes a LOT of mini tiny buys into it, you get an enormous fee percentage as a result. It is important to note that I as a seller have no control over the way somebody buys into my order! I am powerless then, and moreover I did not consent to having my order bought in increments that are so small that it disadvantages me while it sends 6 times the fee to Bitstamp. This system makes that fee 1.16% instead of 0.2%. This problem affects everyone.

I just had a 20 BTC sell order there. This bot for some reason buys into it with many tiny buys, each buy worth 0.86 USD. Every one of them get's a transaction fee of 0.01 USD because of their rounding. The proof is below. This example is hypothetical because I did not let the bot eat my entire wall that way, I pulled the order before he got that far.

In essence this 'trick' makes me pay a fee of 0.86/0.01*100% = 1.16 PERCENT. While I'm entitled to a transaction fee of 0.2%.

Everyone affected by these tiny buys/sells is charged almost 6 times the money. Let that sink in guys. A transaction fee of 1.16 percent because their system allows too small orders. They force this upon you and essentially, (by intentional design or not, it doesn't matter, you are at heavy disadvantage) take your money illegitimately due to this transaction fee bug/misimplementation.

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Hypothetical calculation example:
--------------------------------------
Say I wanted to sell 20 BTC at $432.01, and it is bought completely by these mini buys:

The fee of this transaction should be 0.002*20*432.01 = $17.28
Due to the trick, actual fee is: 0.0116*20*432.01 = $100.23

Fee I agreed on when putting in sell order: $17.28
Actual fee that would be paid due to the exploit: $100.23


Bitstamp illegitimately takes 83 dollars in this scenario
---------------------------------------

As I said, I didn't let it come that far, I pulled my order before it could eat through my order that way.

Picture below is proof of the behavior.

Proposed fix: Make $5 orders the minimum for both API and Web interface. Preferebly $6 to also avoid exploits through setting orders above 20% of current market price. Then all problems are solved




---------------------------------------------------

Bitstamp did reply to my inquiry about their transaction fee calculation.

Quote
The rounding up which occurred in your case was in accordance with our notice provided in the Fee schedule section of our website. Fiat currencies, unlike Bitcoin, have two decimal places, therefore the smallest fee Bitstamp can charge for its services can never be below $0.01.

Bitstamp does not sell or buy bitcoins nor does it manipulate how orders are executed. If a sell was executed for one client (you in this case) this means that another Bitstamp client had his buy order executed on the opposite side of the trade.

As you are probably aware that "If you try to commit an order with price greater or lower than 20% of the current market price, our system will ask you for additional confirmation." (available in our FAQ: https://www.bitstamp.net/faq/). Due to such actions, it is sometimes possible that a user can perform a trade which is lower than $1 in value when placing an order which is higher than the market price at the time when it was executed.

They further explain their rounding policy, which is fine, but did not explain (yet) why the order limit is then not $5 so that the exploit as mentioned in this post cannot happen. The fact remains that an order limit of $1 in combination with the rounding off to $0.01 causes any order of $1 or smaller to be charged five times the fee.

Whether or not the low $1 order limit is intentional in order to harvest these fees or not, I will leave upon you (the community) to decide. The willingness of Bitstamp to change the order limit will show us as a community if it is intentional or not.

---------------------------------------------------

Edit 09-05-2014: Bitstamp is increasing their trading limit to $5 on May 15th, after which the exploit as described in this post will no longer be possible.

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May 06, 2014, 11:30:57 AM
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Very messed up if correct.

Its price is not a very relevant factor in its adoption....
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May 06, 2014, 11:43:22 AM
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This is a shambles if correct, they could be stealing $100,000s a month in this way.

Have you posted this in the Bitstamp thread or on reddit? I would very much like to hear what Stamp has to say for themselves.

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May 06, 2014, 11:48:20 AM
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https://www.bitstamp.net/fee_schedule/


the minimum buying order is $1.... it is really strange that someone could execute a $0.86 buy order

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May 06, 2014, 11:50:21 AM
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I see they actually intend and understand this ripoff. If they want more money, they can simply split orders up into smaller ones, brilliant.

1.16% fee in place of a promised 0.2% fee is inexcusable, and this is for a sum of 8640 USD, so not just "dust". This rounding borders on a scam.

"Bitcoin had been transformed from an anarachistic challenge to the financial status quo, to the crypto spawn of Satan, fuelled by cut-throat greed and delusions of avarice." - MatTheCat
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May 06, 2014, 12:05:54 PM
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Then its their API that isn't restricted to minimum trade of $1.
The minimum trade amount needs to be changed to $5 on both api and website, so that the charged fee always remains @ 0.2% fee of a trade.

How Ripple Rips you: "The founders of Ripple Labs created 100 billion XRP at Ripple's inception. No more can be created according to the rules of the Ripple protocol. Of the 100 billion created, 20 billion XRP were retained by the creators, seeders, venture capital companies and other founders. The remaining 80 billion were given to Ripple Labs. Ripple Labs intends to distribute and sell 55 of that 80 billion XRP to users and strategic partners. Ripple Labs also had a giveaway of under 200 million XRP (0.002% of all XRP) via World Community Grid that was later discontinued.[29] Ripple Labs will retain the remaining 25 billion"
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May 06, 2014, 12:06:57 PM
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Then its their API that isn't restricted to minimum trade of $1.
The minimum trade amount needs to be corrected  o $5 on both api and website, so that the maximum charged fee is $0.01, ( 0.2% fee of trade)

Agree, simple solution and no side can complain. $5 is plenty small enough per order.

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May 06, 2014, 12:07:58 PM
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Then its their API that isn't restricted to minimum trade of $1.
The minimum trade amount needs to be changed to $5 on both api and website, so that the charged fee remains 0.2% fee of trade

Yep, this.

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May 06, 2014, 12:08:48 PM
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Then its their API that isn't restricted to minimum trade of $1.
The minimum trade amount needs to be corrected  o $5 on both api and website, so that the maximum charged fee is $0.01, ( 0.2% fee of trade)

Agree, simple solution and no side can complain. $5 is plenty small enough per order.
That's a good solution, but will Bitstamp be so inclined as to give up this profit? I hope they are.

Maybe we can complain loud enough so as to pressure them.

"Bitcoin had been transformed from an anarachistic challenge to the financial status quo, to the crypto spawn of Satan, fuelled by cut-throat greed and delusions of avarice." - MatTheCat
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May 06, 2014, 12:20:15 PM
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yes I think $5 is a good minimum for an order, it would also reduce bots spamming their engine and API...
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May 06, 2014, 12:25:45 PM
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Then its their API that isn't restricted to minimum trade of $1.
The minimum trade amount needs to be corrected  o $5 on both api and website, so that the maximum charged fee is $0.01, ( 0.2% fee of trade)

Agree, simple solution and no side can complain. $5 is plenty small enough per order.
That's a good solution, but will Bitstamp be so inclined as to give up this profit? I hope they are.

Maybe we can complain loud enough so as to pressure them.

They have to if they want to be seen as a CREDIBLE exchange, as this glitch affects ALL its customers.
Its a 'rookie' mistake to even have different rules for api and website.

How Ripple Rips you: "The founders of Ripple Labs created 100 billion XRP at Ripple's inception. No more can be created according to the rules of the Ripple protocol. Of the 100 billion created, 20 billion XRP were retained by the creators, seeders, venture capital companies and other founders. The remaining 80 billion were given to Ripple Labs. Ripple Labs intends to distribute and sell 55 of that 80 billion XRP to users and strategic partners. Ripple Labs also had a giveaway of under 200 million XRP (0.002% of all XRP) via World Community Grid that was later discontinued.[29] Ripple Labs will retain the remaining 25 billion"
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May 06, 2014, 12:47:12 PM
 #12

as if 0.5% for < $500 isn't ridiculous enough, the most honest and reliable exchange in my experience so far has to be btc-e with their 0.2% flat rate, why would you even use bitstamp in the first place  Undecided

its stupidity tax.
+1 lol
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May 06, 2014, 12:47:23 PM
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its stupidity tax.
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May 06, 2014, 12:48:20 PM
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Oh c'mon guys, this is math 101. This happens with so many transactions on a lot of things on a daily life. It's rounding and normal.

OP did transactions with a BOT lower than $1 as per indicated limitations. He probably was hoping that he would not pay transactions fees.

If you are doing that many transactions, just do larger transactions where rounding is in your favor. Why is he making thousands of really small transactions? He's probably just slowing down their system anyway.

I'm on with Bitstamp on this one.

Here's an example where I paid less than 0.5% because of rounding:
I bought 0.08774 BTC and only paid 0.047%
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May 06, 2014, 12:49:33 PM
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Oh c'mon guys.

OP did transactions with a BOT lower than $1 as per indicated limitations. He probably was hoping that he would not pay transactions fees.

If you are doing that many transactions, just do large transactions. Why is he making thousands of really small transactions? He's probably just slowing down their system anyway.

I'm on with Bitstamp on this one.

OP was the one being bought into by someone making trades lower than $1.

By allowing it Bitstamp are slowing down their own system if you think this sort of activity would slow it down.

Troll fail.

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May 06, 2014, 01:01:08 PM
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Not trolling. I'm just exposing this is how rounding works in many scenarios. Even when you pay taxes at your store.

OP was selling, this small transaction rounding problem doesn't happen if you are buying BTC, only if you are selling in small chunks.
Just try it on the exchange and you will see.
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May 06, 2014, 01:02:22 PM
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Oh c'mon guys, this is math 101. This happens with so many transactions on a lot of things on a daily life. It's rounding and normal.

OP did transactions with a BOT lower than $1 as per indicated limitations. He probably was hoping that he would not pay transactions fees.

If you are doing that many transactions, just do larger transactions where rounding is in your favor. Why is he making thousands of really small transactions? He's probably just slowing down their system anyway.

I'm on with Bitstamp on this one.

Here's an example where I paid less than 0.5% because of rounding:
I bought 0.08774 BTC and only paid 0.047%

I had a 20 BTC sell order there. Someone (maybe even Bitstamp splitting up orders) bought into that with tiny orders, causing me to pay 6x the fee I am supposed to pay. I had no choice in that matter. When hitting the sell button I agreed to sell at 432.01 at a fee of 0.2% over 20BTC, not 1.16%.

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May 06, 2014, 01:08:31 PM
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Not trolling. I'm just exposing this is how rounding works in many scenarios. Even when you pay taxes at your store.

OP was selling, this small transaction rounding problem doesn't happen if you are buying BTC, only if you are selling in small chunks.
Just try it on the exchange and you will see.

It can happen to EVERYONE on any type of order whether  Buy/sell - market/ limit , as long as bots are nabbing/putting trades with < $5 trade ( or equivalent in btc)

How Ripple Rips you: "The founders of Ripple Labs created 100 billion XRP at Ripple's inception. No more can be created according to the rules of the Ripple protocol. Of the 100 billion created, 20 billion XRP were retained by the creators, seeders, venture capital companies and other founders. The remaining 80 billion were given to Ripple Labs. Ripple Labs intends to distribute and sell 55 of that 80 billion XRP to users and strategic partners. Ripple Labs also had a giveaway of under 200 million XRP (0.002% of all XRP) via World Community Grid that was later discontinued.[29] Ripple Labs will retain the remaining 25 billion"
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May 06, 2014, 01:09:30 PM
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Not trolling. I'm just exposing this is how rounding works in many scenarios. Even when you pay taxes at your store.

OP was selling, this small transaction rounding problem doesn't happen if you are buying BTC, only if you are selling in small chunks.
Just try it on the exchange and you will see.

You are trolling because you dont seem to grasp how the transaction was carried out. OP had no say in the chunks they were sold in, he didnt add them in chunks of less than a dollar.

Oh right well as long as it doesn't effect you when your buying just taking money off you when your selling.

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May 06, 2014, 01:10:12 PM
 #20

Show me the screenshot to that. Because I just made one bigger transaction and it correctly got the fee.
In fact, it made a 0.47% fee, less than 0.5% because it rounded to the cent.

The screenshot is in the OP  Roll Eyes

EDIT: You have less than $500 30 day volume, I dont think you trade enough to notice and certainly not enough where you would care about this so your position is not surprising.

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