A Bitcoin user’s attempt to consolidate their Unspent Transaction Outputs (UTXOs) resulted in a significant and expensive mistake.
Blockchain data reveals that an unidentified user paid a staggering 4 BTC ($172,000) in transaction fees on Tuesday, far exceeding the amount required to process the transaction.
A Costly Oversight
According to data from mempool.space, the transaction itself only sent 2.9 BTC to the intended recipient, making the attached fee over 133% of the transaction’s value.
By the site’s metrics, the transaction was overpaid by a factor of 29,992 times. Specifically, the user paid 1,800,890 satoshis per vByte (sat/vB), a metric used to calculate the demand for Bitcoin block space at a given time. In contrast, the standard transaction for that block paid only about 60 sat/vB.
Tomer Strolight, editor-in-chief for Swan Bitcoin, commented on the transaction, saying, “When you’re consolidating UTXOs, make sure to actually consolidate them instead of turning one into a fee.”
UTXOs, or Unspent Transaction Outputs, represent individual BTC transfers held separately within a user’s Bitcoin wallet. These transfers can be seen as chunks of bitcoin controlled by the user, some larger than others, and collectively forming the user’s wallet balance.
In general, it is advisable to avoid splitting one’s BTC into numerous small UTXOs, especially for economic reasons. When sending large sums of BTC later, a fee must be paid for each UTXO that moves, making the transaction more costly with more UTXOs.
On-chain data suggests that the user with the high fee was attempting to consolidate their UTXOs to address this issue, a technique for merging several smaller outputs into a larger one. A few days prior, the same user had received two Bitcoin transactions, each worth 2.9 BTC and 4.03 BTC, which corresponded to the values of their Tuesday transfer and fee, respectively.
Will the User Be Reimbursed?
Although Bitcoin transactions and fees are technically irreversible, miners who receive overpaid fees have occasionally refunded them.
For instance, in September, Bitcoin mining pool F2Pool returned funds to Paxos after the latter accidentally paid $500,000 in Bitcoin transaction fees.
Months later, mining pool giant Antpool reimbursed an anonymous user’s record-breaking $3.1 million fee to miners.