What Happened?
A Bitcoin user incurred an exorbitant transaction fee of nearly $60,000 due to an operational error. The core of this incident revolves around a user who, while utilizing the “Replace-by-Fee” (RBF) feature, possibly due to a slip of the hand or other reasons, paid a fee far exceeding what is typically required, resulting in significant financial loss. Experts believe that this exorbitant fee incident was likely the result of a mistake caused by anxiety or operational error, such as entering an incorrect value or misunderstanding the unit of the fee.
Bitcoin User Loses Nearly $60,000 Due to Operational Error
In the early hours of April 8, a Bitcoin user, while conducting a transaction, seemingly due to an operational error, paid a staggering fee of nearly 0.75 bitcoins, which equated to about $60,000 at the time. This incident has once again sparked discussions about Bitcoin transaction fees and the “Replace-by-Fee” (RBF) feature. The “Replace-by-Fee” is a feature in Bitcoin that can be thought of as a “remorse remedy.” When a user’s transaction has not yet been confirmed, they can resend the same transaction with a higher fee, allowing for quicker processing.
According to data from the blockchain explorer Mempool.Space, this transaction occurred approximately 30 minutes past midnight on April 8. This was the user’s second attempt to modify the transaction using the RBF feature. Initially, the user intended to send 0.48 bitcoins (approximately $37,770), but due to a low fee setting, the transaction remained unconfirmed by miners. The user likely intended to slightly increase the fee using the RBF feature, but possibly due to anxiety, a slip of the finger, or an issue with the wallet software, ended up paying nearly 0.75 bitcoins in fees (around $60,000), which was almost more than the amount he originally intended to transfer.
Experts believe that the user might have been eager to prevent the original transaction from being packaged into a block and confirmed, thus quickly initiating a subsequent transaction. However, when entering the fee, they accidentally input the wrong comma or period, “perhaps they originally intended to use 30.5692 satoshis (the smallest unit of Bitcoin), but due to haste or a slip of the finger, accidentally input 305,692 satoshis.” Alternatively, they might have confused the units of the fee, thinking they were merely paying a little extra, only to end up with an astronomical number.
How to Use the “Replace-by-Fee” Feature?
The so-called RBF allows users to initiate a new transaction to “replace” the original one if they find that the fee set was too low and the transaction has not yet been confirmed by miners. The new transaction will include a higher fee, making it more likely that miners will prioritize processing the new transaction. The interfaces of different Bitcoin wallet software may vary slightly, and users should confirm whether their wallet supports the RBF feature before using it. This article will use CoolWallet App, a cold wallet company in Taiwan, as a demonstration of the RBF operation process.
Step 1: Initiate the Original Transaction
Initially, operate as usual by entering the recipient address, transfer amount, and setting a fee in the wallet. However, sometimes in an effort to save money, a lower fee may be set, or if the Bitcoin network is congested, this can result in the user’s transaction remaining in a “pending” status. Before proceeding to the next step, check whether the RBF feature is enabled; some wallets have it enabled by default, while others require users to enable it manually. Alternatively, during transaction sending, some wallets offer an option for users to choose whether to allow the transaction to be replaced by RBF. For CoolWallet, the “Increase Fee” button will only appear if the following conditions are met:
– The cryptocurrency being sent is USDT (OMNI) or BTC.
– The transaction is an RBF (Replace-by-Fee) transaction.
– The transaction includes a single recipient address and a single sending address. Currently, CoolWallet App only supports single address sending and does not support transactions with multiple different sending or receiving addresses.
Step 2: Find the Unconfirmed Transaction
In the personal wallet transaction history, locate the transaction that is still in “pending” or “unconfirmed” status.
Step 3: Initiate the Replacement Transaction
For this unconfirmed transaction, the wallet typically provides an option similar to “Increase Fee” or “Replace by Fee.”
Click on this option.
Step 4: Set a Higher Fee
The wallet will prompt the user to reset the transaction fee, allowing them to input a higher amount than before, which will attract miners to prioritize processing the new transaction. The wallet will usually offer some suggested fee options based on current network congestion.
Of course, users can also increase the transaction fee further within their means through the “Edit” button. However, if the user’s BTC balance is insufficient to cover the intended transfer amount plus transaction fees, the fees will be deducted directly from the transfer amount.
Once the new fee and recipient address are confirmed, the wallet will broadcast this new “replacement” transaction to the Bitcoin network. Upon receiving the new transaction, miners will see that its fee is higher than that of the original transaction, thus making it more likely that they will prioritize packaging this new transaction into the next block. Once the new transaction is confirmed, the original transaction with the lower fee will be considered invalid and will no longer be processed by miners.
Controversies and Discussions Regarding the “Replace-by-Fee” Feature
Although such a feature seems convenient, “Replace-by-Fee” is a highly debated function within Bitcoin. It was originally designed to allow users to increase fees when they are insufficient to ensure transaction completion. However, it is controversial primarily because it allows changes to transaction content before the transaction has been officially confirmed. This means that a user may first purchase something with one transaction, but before the seller receives the money, they can use another transaction with a higher fee to transfer the money elsewhere, potentially causing a “double-spending” issue. Some even worry that this could be exploited by malicious actors for fraud.
Thus, cryptocurrencies like Bitcoin Cash (BCH) have eliminated this feature entirely, as they prioritize the immediacy and certainty of transactions. Therefore, RBF can be seen as a double-edged sword, having both advantages and disadvantages, and different communities and users hold varying opinions on it, which is why it has remained a topic of discussion.
References: cointelegraph, CoolWallet