[HN Gopher] Bitfinex just spent $23.7M in fees to make a single ...
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Bitfinex just spent $23.7M in fees to make a single Ethereum
transaction
Author : dustintrex
Score : 122 points
Date : 2021-09-27 15:53 UTC (7 hours ago)
(HTM) web link (www.theblockcrypto.com)
(TXT) w3m dump (www.theblockcrypto.com)
| skazka16 wrote:
| and this is public ledger... imagine what's happening in the
| banking industry, where you can't see other people's money
| flowing around
| skazka16 wrote:
| Lol to all the downvoters. You truly believe that everything
| cryptocurrency related is a scam and money laundering, whilst
| hidden-from-public-eyes banking ledger is saint? Take you pink
| sunglasses off, please.
| hartator wrote:
| $23.7 million to transfer $100,000. It's becoming a hard sell.
| Ekaros wrote:
| 23700% in fees. Suddenly the 3-5% that is insane doesn't feel
| like that much...
| elliekelly wrote:
| > DeversiFi -- a non-custodial exchange that spun out of Bitfinex
| in 2019 -- said the transaction originated via its platform,
| which offers access to DeFi protocols "without paying gas fees."
| These transaction fees, it turns out, are paid out through one of
| Bitfinex's main wallets, which ended up footing the bill.
|
| Am I understanding correctly that Bitfinex is subsidizing
| DeversiFi transactions? How does this work? And why does Bitfinex
| do this?
| spir wrote:
| Note that DeversiFi uses StarkWare's StarkEx Ethereum scaling
| technology, and does so in off-chain data mode.
|
| This means that Ethereum transaction fees for DeversiFi's end-
| users are extremely small because they use almost no marginal
| L1 Ethereum gas.
|
| So, Bitfinex subsidizing DeversiFi's users' gas fees is not as
| expensive as it may sound.
|
| In this case, the $23.7M fee was likely in error and unlikely
| to be money laundering because the fee was paid to a random
| miner.
|
| If you're interested in Ethereum's state-of-the-art scaling
| technologies https://starkware.co
| graeme wrote:
| If the money laundering theories in this thread are correct,
| then could be related to that.
|
| But also Biftinex/Tether benefit if people lock up their USDT
| into earning schemes rather than trying to redeem them for
| fiat. It reduces withdrawal pressure and allows Tether to keep
| the game going.
|
| (This is assuming the common theories that Tether is
| unbacked/poorly backed are true. In a ponzi, managing
| withdrawals is paramount, and all the crypto high yield earning
| on stablecoins provides a way to discourage withdrawals)
|
| I haven't thought through the trading aspect though or why that
| would be subsidized. I guess it does soak up USDT as well.
|
| Edit: a couple other facts came forward.
|
| Deversifi was originally called Ethfinex, a Bitfinex spinoff
|
| The miner that got the fee is owned by Christopher Harborne,
| Bitfinex shareholder: https://protos.com/bitfinex-tether-
| digfinex-shareholder-harb...
| graeme wrote:
| I misinterpreted a tweet. Chris Harborne did not own the
| miner. His son (I think), Will Harborne, runs Deversifi,
| formerly Ethfinex.
| spywaregorilla wrote:
| They don't allow redemption of tether for dollars. There is
| no withdrawal pressure, right?
| markonen wrote:
| Who's "they" here? Remember, Bitfinex == Tether
| graeme wrote:
| Reduces pressure to withdraw USDT for fiat on exchanges.
| Tether has to support those pegs or they break. Same
| difference
| spywaregorilla wrote:
| Do they? Genuine question. How much does bitfinex support
| the price at $1 on exchanges?
| graeme wrote:
| I'm not sure if they do, but if there was sell pressure
| they would have to or peg would break. Possible there is
| not sufficient sell pressure at moment.
|
| When you sell USDT for USD on exchange, _someone_ is
| providing that dollar. If no private market participant
| willing, then peg slips. You would expect fiat
| withdrawals in downturns and peg slippage absent support.
| threevox wrote:
| Well, they officially don't guarantee that they will redeem
| Tethers, but in practice they do, at least for the time
| being. So any withdrawal pressure would be de facto rather
| than de jure
| FireBeyond wrote:
| In practice they do?
|
| Last time I checked, there were significant "limitations"
| (to be charitable... that you could only redeem holdings
| above $100K, only if you were a non-US person, and
| subject to 90-180 day holding periods.
|
| People have also offered bounties for proof of people
| having redeemed Tether, and those bounties are still
| outstanding.
|
| My suspicion is that if anyone has actually redeemed
| Tether, they are either institutional (and Bitfinex
| doesn't want to piss them off) or an insider/"friend".
| type02 wrote:
| The founders of CMS holdings talk about redeeming tether
| all the time. It's literally just the same as redeeming
| USDC or any other stable coin. And before you say they're
| insiders, Dan (one of the founders) used to work with the
| creators of USDC.
| FireBeyond wrote:
| So they're an institutional investor. Like I said.
| type02 wrote:
| An institutional investor with ties to their biggest
| competitor, bit different.
| FireBeyond wrote:
| Yes and no.
|
| Yes, USDC and USDT are different "securities".
|
| But that's like saying that in the regular market that
| because Charles Schwab and Fidelity are competitors, they
| don't have a whole lot of cooperation - they do, because
| at that scale (and with the amount of arbitrage and
| speculation in crypto), you need to cooperate with your
| competitors, or you will be iced out.
| colinmhayes wrote:
| Institutions are happy to provide arbitrage on tether ->
| any other crypto since they can redeem. Sure there's an
| extra step involved, but there's essentially no
| difference between selling to an institution for $1 of
| crypto and redeeming for $1.
| elliekelly wrote:
| > The miner that got the fee is owned by Christopher
| Harborne, Bitfinex shareholder
|
| Oddly enough I looked at DiversiFi's twitter[1] right after
| reading your update and they re-tweeted[2] someone mentioning
| DiversiFi's founder, Will Harborne. Are they related?
|
| [1]https://mobile.twitter.com/deversifi
|
| [2]https://twitter.com/dltfanboy/status/1442429899235479555?s
| =2...
| hakanito wrote:
| This is not a mistake, it's a pretty common method for money
| laundering
| eco wrote:
| I'm curious how this works. As I understand it, Bitfinex would
| have do this by not broadcasting the transaction to the network
| and instead keeps it on a single miner and it gets included
| when the miner snags a block but how does that help launder
| money?
|
| Is it some sort of deniability thing to say your hilariously
| unreasonable miner tip was mined by a random miner who may or
| may not be you? Surely regulators/prosecutors aren't this
| gullible.
| wpietri wrote:
| Regulation/prosecution is lagging way behind in this space.
| Even in traditional finance, Ponzi schemes and money
| laundering go on for years.
|
| It's also important to consider the psychology of things like
| Ponzi schemes. A bright 12 year old can understand why a
| Ponzi scheme falls apart in the long run. But for most of the
| people running them, they aren't thinking about the long run.
| They're responding to short-term incentives. An investor
| wants money back? Well there's money, so let's give some to
| them. Low on money? Go out and sell more people on putting
| money in. People have concerns? Reassure them that
| everything's fine, better than fine, amazing in fact.
|
| So the question of "do they think they can get away with it
| in the long run" is not really the right one to ask. 100% of
| their attention is on the short term. They carefully avoid
| thinking about the long run at all, because it's way too
| uncomfortable. As long as the problems are deniable enough in
| the short term, they're just going to keep going.
| toomuchtodo wrote:
| The cool part is all of these transactions are public and
| can be archived by regulators for long term forensics and
| enforcement activities while still within the statute of
| limitations. Might take years, but government can take its
| time investigating and prosecuting. Regulation can lag
| because there is no rush; the evidence is preserved by the
| very nature of the technology.
|
| https://news.ycombinator.com/item?id=28673552 (HN: Tracking
| stolen crypto is a booming business) |
| https://archive.is/s1WvQ
| wpietri wrote:
| That's a positive for sure, but regulatory latency
| enables more scamming. That added burden to limited
| regulatory capacity mean the increased scamming makes it
| likelier that the small fry will get away.
| dylkil wrote:
| Its a great way for miners to launder money. Bitfinex pays the
| fee and it turns up on the miners balance sheet, where does
| bitfinex gain?
| FireBeyond wrote:
| The recipient in this case absolutely appears to be
| "associated" with Bitfinex, who don't understand the concept
| of "arms length", so entirely 'nepotistic' transactions like
| this would be par for the course (remember the loan between
| Bitfinex and Tether, who were at the time being stated as
| independent and unrelated, yet somehow the same two people
| signed and countersigned the loan for both sides?).
| dylkil wrote:
| I read your whole comment expecting you to get to the
| evidence where bitfinex and the miner are associated...
| FireBeyond wrote:
| > DeversiFi -- a non-custodial exchange that spun out of
| Bitfinex in 2019
|
| From the article.
|
| And as said, given previous dishonesty from Bitfinex
| about all sorts of unrelated parties (they claimed to be
| independent of Tether, until that was proven a lie, and
| they are heavily intertwined with their bank, Deltec, who
| says that they have "insight into every transaction and
| Tether"), I'm going to consider Occam's Razor, here.
| fuddle wrote:
| Is it possible they are just incompetent?
| eightysixfour wrote:
| I thought all transaction fees are burned after EIP-1559 was
| implemented?
| tylersmith wrote:
| No, there are 2 parts to the fee. The base and the tip. The
| base is burned and the tip goes to the miner. This
| transaction burned 0.008493159450499633 eth (~$25) and paid
| the miner the rest.
| jtbayly wrote:
| ELI5, please?
|
| Who does the fee go to? I would have thought the miner. But if
| so, how can you predict (or control) which miner will get your
| block?
| [deleted]
| Geee wrote:
| The transaction is sent directly to the miner without going
| through mempool, or the miner itself makes the transaction.
| sliken wrote:
| Is the mempool logged? Is it possible to tell if it was a
| mistake or if they skipped the mempool?
| hedgedoops2 wrote:
| Every node operator can log their node's mempool, but the
| protocol does not ensure that mempools are consistent
| across nodes.
|
| That said, logging this might violate GDPR :)
| xur17 wrote:
| Etherscan indicates that the transaction was in the mempool
| [0]. My understanding is that this wouldn't show up if it
| was mined without releasing the transaction to the mempool.
|
| [0] https://etherscan.io/tx/0x2c9931793876db33b1a9aad123ad4
| 921df...
| Tenoke wrote:
| Is this even still possible? Since EIP-1559 miners like
| ethermine stopped including their own tx for 'free'
| presumably because you cant pick and choose anymore.
| X6S1x6Okd1st wrote:
| It certainly is. Here's a list of them:
| https://etherscan.io/txs/label/private-transaction
| kevwals wrote:
| Are they the one who's going to choose the miner?
| newacct583 wrote:
| I'd submit an answer involving jargon like "mempool"
| doesn't qualify for "ELI5". ELI4?
| Geee wrote:
| Mempool or "memory pool". It contains pending
| transactions that have been publicly broadcasted and are
| waiting to be mined into the blockchain.
| tromp wrote:
| It's also potentially risky. What if a big mining pool, upon
| noticing the huge fee mined by another miner/pool, decides not
| to mine on top of that block, but in competition with that
| block in hope of snagging the fee for itself?
| seaourfreed wrote:
| We need Ethereum to always prevent this. Or the big mining
| pool will just do this for every block and allow ONLY THEIR
| blocks to be processed. Then they get 100% of mining of the
| ETH mining fees.
|
| This reinforces by most miners being willing to join, to get
| a share in monopoly rents over miners-never-earning. The big
| mining pool(s) could let in enough to stay big enough. But
| not too many to spread the monopolistic gains by too broad a
| base.
| AgentME wrote:
| The mining pool would have to have >50% of the hashrate to
| pull that off indefinitely.
| X6S1x6Okd1st wrote:
| There's been a lot of talk about reorg due to MEV (which this
| could be considered MEV), but to the best of my knowledge it
| hasn't happened yet. This seems like a big opportunity
| because this is ~3000x bigger than the standard block reward
| throwaway1777 wrote:
| How would this work? The fees go to the miners or are burned,
| so how do the laundered funds make their way back?
| tux3 wrote:
| Perhaps instead of sending your transaction publicly in the
| Mempool, you give it to your miner friend to include in their
| next block.
| sliken wrote:
| Is the mempool logged? Is it possible to tell if it was a
| mistake or if they skipped the mempool?
| gruez wrote:
| >Is the mempool logged?
|
| Yes. For instance on etherscan there's a "Confirmed
| within x secs" indicator, which is "Estimated duration
| between time First Seen and included in block".
| pcthrowaway wrote:
| Even if it is logged, there are ways this behaviour could
| be masked.
|
| Say a colluding miner mines blocks including this
| unbroadcast transaction until they finally hit the block
| target with this transaction included.
|
| Bitfinex then broadcasts the transaction to mempool.
| After some plausible delay (but a short enough one that
| no one else gets a chance to mine it), the colluding
| miner publishes a valid block including the transaction.
| No one can confirm that the miner didn't receive the
| transaction from mempool like everyone else, and then
| 'get lucky' shortly after.
|
| I'm not saying this is what happened, I think user error
| is more likely. But it can neither be ruled out nor
| easily proven.
| X6S1x6Okd1st wrote:
| The basefee is burned, the priority fee is given to the
| miner.
| gruez wrote:
| While I don't doubt it's a method used for money laundering,
| this particular instance probably isn't it. For one, if you're
| money laundering, you don't want the transaction to show up on
| the front page of HN.
| tsimionescu wrote:
| What's another explanation for this huge fee? Your reasoning
| makes sense, but that still leaves me extremely curious.
| rfd4sgmk8u wrote:
| Its not money laundering, lol. a) Bitfinex is an exchange,
| they don't need to launder. They are the laundry! b) You
| usually want to get the money back when your launder. This
| is handing 20 million dollars to a random on the street who
| takes your transactions.
| mdoms wrote:
| > This is handing 20 million dollars to a random on the
| street who takes your transactions.
|
| Yes I'm sure it's purely coincidence that the "random on
| the street" who mined this block is a major Bitfinex
| shareholder.
| tsimionescu wrote:
| I get that point, but I was asking for what is then the
| real reason. The only two I've seen proposed are money
| laundering (perhaps by collusion with the miner) or
| mistake (accidentally confusing the transaction amount
| with the tip - still meaning the intention was to pay
| $100k in transaction fees).
| rfd4sgmk8u wrote:
| If i was to bet, my money is on a catastrophic fuck up.
| Its probably 'other peoples money' too. Some VC maybe
| lost a big bag of ether.
| pjc50 wrote:
| Using a client which has two boxes, one for fee and one for
| value transferred.
|
| ("Fat finger" errors like this are not unheard of in the
| read financial system, but that usually allows reversal)
| tsimionescu wrote:
| That still means they intended to pay $100K in
| transaction fees, is that a normal sum?
| pjc50 wrote:
| Various claims on reddit using phrases like "set the gwei
| limit the same as the gas limit" and "new EIP 1559
| transaction", which I can barely make sense of, but it
| sounds like they may have been in entirely different
| units?
|
| Anyway, be your own bank, I'm sure you can figure this
| out. /s
| mkishi wrote:
| It's a huge number but amounts to 0.4% (0.004). I have no
| idea how that compares to regular 24M international wire
| transfers, though.
| sva_ wrote:
| The base gas fee for the block is:
|
| Base Fee Per Gas: 0.000000058907049227 Ether (58.907049227
| Gwei)
|
| The paid gas fee for the transaction is:
| 0.053243669870735422 Ether (53,243,669.870735422 Gwei)
|
| Perhaps they wanted to post the transaction for 53 Gwei but
| fatfingered it? Or entered Pwei instead.
|
| Edit: This block was apparently mined by poolin pool:
| https://minerstat.com/coin/POOLIN-ETH
|
| Their rewards almost doubled
| throwaway1777 wrote:
| Yeah why not do this over time with smaller fees. With the
| ridiculous gas these days you might be able to sneak quite a
| few tx in under the guise of "nft bots" but not 7500 eth in
| one tx
| noxer wrote:
| Its been years since competing blockchains projects added fee
| limits at least in the front ends if the protocol cant allow it
| so that this does not happen. It happened many times on ETH and
| it will happen again because the devs simply dont care.
|
| BTW the money laundering idea is complete nonsense. You dont do
| that by making large transactions so that mainstream media writes
| about it and investigations are triggered. This is just the usual
| HN crypto bias that seeks for confirmation that everything cryoto
| is illegitimate.
| Ekaros wrote:
| With bitcoin you could spend lot of mining time get these fees
| with longer chain. Is that possible with ethereum too?
| danielvf wrote:
| Yes there would have been a window for that, if you could spin
| up insane hash power in minutes. However ethereum blocks happen
| on average every 13.5 seconds and this TX is now 1,558 blocks
| in the past, it's not likely now.
| danuker wrote:
| If you can react quickly, a 51% PoW attack is... still
| prohibitively expensive: https://www.crypto51.app/
| X6S1x6Okd1st wrote:
| Those figures assume that the miners other than yourself are
| honest. The big risk with MEV is that in theory it could
| trigger all miners to prioritize reorging (51% attack)
| instead of building on the longest chain.
| jagger27 wrote:
| So who got the tx fee?
| capableweb wrote:
| The block: https://etherscan.io/block/13307440
|
| Miner:
| https://etherscan.io/address/0xb7e390864a90b7b923c9f9310c6f9...
|
| Has 3% of miner power in the network it seems, fairly big.
| Seems to only been running since 2021-07-12.
| fuddle wrote:
| It looks like it's labeled as Flashbots block.
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(page generated 2021-09-27 23:02 UTC)