It Wasn't PayPal—Paxos Fat Fingered $510,000 Bitcoin Transaction

Crypto infrastructure provider Paxos has claimed responsibility for a Bitcoin (BTC) transaction that needlessly paid a $510,000 fee to the network earlier this week.

In an email to Decrypt, a Paxos spokesperson confirmed that the company “overpaid the BTC network fee on Sept. 10, 2023,” due to a bug impacting a single transfer, which has since been fixed.

“This only impacted Paxos corporate operations,” the spokesperson clarified. “Paxos clients and end users have not been affected and all customer funds are safe.”

The transaction raised eyebrows when it was detected by blockchain sleuths earlier this week, immediately triggering speculation as to who was behind the blunder. Some jokingly considered the fee a “donation” or “sacrifice” to miners, who receive such fees as payment for securing the network.

Transactions with higher fees attached are more likely to be processed faster by miners—but average fees on a typical day range from $1 to $3. According to Paxos, the firm is in talks with the lucky miner who received its transfer to recoup the extra funds. The fees totaled 19.89 BTC, compared to the 0.074 BTC value of the actual transfer.

Analysis from @mononautical on Twitter—who works on the Bitcoin block explorer mempool.space—previously suggested that PayPal might have been behind the transaction. The address behind the transaction “closely matches the behavior of a now inactive wallet which is labeled as PayPal on OXT,” he said, referring to another block explorer.

His guess was close: PayPal uses Paxos to manage its crypto custody services, where it holds hundreds of millions of dollars in crypto on behalf of its customers.

“Single-address wallets are terrible for privacy,” added OXT. “It was trivial to unravel PayPal's entire wallet structure and payment history from one known tx.”