Panicked Bitcoiner mistakenly pays almost $60K BTC in fees

Update 1:17 pm UTC: This article has been updated with the corrected US dollar figure that the user paid at the time.

One presumably panicked Bitcoin user paid almost 0.75 BTC (worth around $60,000 at the time) in a replace-by-fee (RBF) transaction fee.

The transaction in question was sent about 30 minutes after midnight UTC on April 8. It was the second attempt at performing an RBF that changed the transaction's target address, sending 0.48 Bitcoin ($37,770) with 0.2 BTC of change ($16,357).

Second Bitcoin RBF transaction. Source: Mempool.Space

Anmol Jain, vice president of investigations at crypto forensics firm AMLBot, told Cointelegraph that the original transaction featured a “default or conservative” fee. The first RBF raised the fee to nearly double the amount and changed the output address.

Both of those transactions are waiting for a confirmation that will never come. This is because the much higher fee RBF transaction took its place with the same output as the second RBF transaction — presumably, an attempt to bump the fee to ensure that the RBF is processed rather than the original transaction.

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The transaction has signs of a panic-induced error, with the user sending a subsequent transaction fast to prevent the original transaction from being included in a block and becoming final. Jain suggested some potential explanations:

The second RBF transaction also added an additional input unspent transaction output (UTXO). This UTXO contained nearly 0.75 Bitcoin (BTC). The change was mistakenly included as part of the fee, likely because the user failed to update the change address or misjudged the transaction’s structure.

Another possibility raised by Jain is that the user got confused between a fee in absolute terms and one set in satoshi per virtual byte (transaction size) or that the automated script behind the transaction contained a bug. The wallet could allow setting a fee in satoshis, which could lead to a scenario where the fee is set way too low, a warning about the low fee and an overcorrection:

Related: Bitcoin user pays $3.1M transaction fee for 139 BTC transfer

RBF is a widely misunderstood and controversial feature of Bitcoin. Bitcoin transactions are considered non-final until they are included in a block, with further confirmation by more blocks in the same chain.

Transactions in the mempool are at the mercy of miners — who are expected to be profit-driven. Bitcoin developers foresaw that with multiple conflicting Bitcoin transactions, the financial incentive would be to process the one paying the higher fee.

There is no easy way to prevent Bitcoin miners from simply including the transaction that was sent first, and it is also not straightforward to establish which transaction was submitted first due to the decentralized nature of the network. Consequently, this incentive was recognized in the RBF feature, allowing users to edit unconfirmed transactions by submitting an alternative transaction with a higher fee.

This led to some controversies in the past, with Bitcoin Cash (BCH) proponent Hayden Otto claiming that RBFs allowed for Bitcoin double-spends back in 2019. In contrast, Bitcoin Cash has removed the feature and claimed that unconfirmed transactions sent on that network are final and secure to accept.

Still, with the way blockchains function, RBF-like transactions were confirmed to occasionally occur on Bitcoin Cash either way. This is because RBF is just an implied property of a Bitcoin-like consensus mechanism that was formalized as a feature.

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