PayPal made a mistake and paid the highest transaction fee in the history of Bitcoin: R$2.5 million

In a surprising event, global online payments giant PayPal reportedly paid a Bitcoin transaction fee worth a whopping US$510,750, equivalent to more than R$2.5 million.

The incident was initially thought to be human error, but has now been traced back to an issue within PayPal’s processing system, according to a report from Mempool’s Mononautical. This is the highest fee ever paid for a Bitcoin transaction in dollars.

The investigation into the payment, which attracted widespread attention when it was first reported, has led to some unexpected discoveries. The overpaid fee was sent from a hot wallet using the address “bc1qr3…zpw3”, which began operations in June this year.

Activity on the blockchain associated with this address indicates automated processing of fiat-denominated withdrawals, resembling the behavior of an inactive wallet labeled PayPal on oxt.me, specifically “bc1qhs…kx4n.”

Bitcoin transaction fees are typically determined by market demand and network congestion. They can vary significantly, but a fee that exceeds $500,000 for such a small transaction is considered highly unusual.

PayPal made a mistake and paid dearly

The transition from the old wallet to the new “bc1qr3…zpw3” can be clearly observed on the blockchain through an intermediate address, “bc1qlm…yvaf”, adding further evidence to the software bug theory.

To confirm this discovery, known PayPal withdrawals were tracked on the blockchain, leading to the conclusion that the issue likely originated from PayPal’s internal management system.

“All evidence now points to a software error as the cause of the error,” Mononautical said. “I really feel for the developer who wrote this code – it’s such an easy mistake to make, and should have been caught in review.”

Furthermore, the entire system was running “completely unmonitored,” as PayPal failed to notice or stop the erroneous withdrawals for nearly 24 hours.