Either by mistake, misfortune, or an attempted misdeed, an anonymous Litecoin user paid a $17,500 fee on a Litecoin transaction that was worth under $1000. The transaction took place on Thursday, May 23rd, and was mined by the China-based mining pool LTC.top in block 1636831.
The fee was so massive that it caused the average transaction fee on the Litecoin network to jump from $0.05 to $0.70. Transaction fees haven’t been that high since Litecoin was worth $400 a pop at the end of December 2017.
Cryptoglobe theorized that the address that sent the transaction most likely belongs to a crypto business due to its high balance (322.6 LTC and) and high transaction volume (more than 2500 transactions since the address’ creation last year.)
A Clever Method of Money Laundering?
A number of theories have spawned on social media as to what could have led the wallet to pay such a ridiculously high fee.
The simplest explanation is just human error–someone set the fee too high and paid it before noticing.
However, other members of the crypto community have speculated that the high transaction fee could be an attempt at money laundering or “washing” coins (exchanging coins associated with nefarious activity.)
”You Can Put Mining Rewards on Your Tax Sheet”
“Mining rewards are clean money. It’s a legal industry making a profit,” wrote Reddit user LucySeesDiamonds. “You can put mining rewards on your tax sheet. And if anyone was tracing the dirty BTC’s, you could always deny that they were yours because you simply got your rewards.”
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“If I cleaned my LTCs this way, I could say I lost my old coins and bought new ones OTC from miners,” the user continued. “Then I can sell them immediately without taxes because I haven’t made any profits with those ‘new’ coins.”
Another Reddit user explained that this is possible because miners get to select which transactions they want to process. “Usually you broadcast [a transaction] to the whole network (to as many miners as possible) to maximize the chance of it being included in the next block,” the user wrote.
“Miners can also choose which transactions they will include. If they wanted to, they could mine a block with only a few of their own transactions, but then they’d lose out on fees.”
The reasons for this could have been associated with tax evasion–however, others have pointed out that the high fee could be an attempt to disassociate coins with crimes they may have been used to pay for.
There don’t seem to be any other reports of outrageously high fees on low-level LTC transactions. However, if a trend starts to form, the money laundering theory could be more plausible.
Finance Magnates interviewed Litecoin creator Charlie Lee last year. To hear that interview, click here.