Bitcoin $8.3 million, surprise permanent burn...Thought it was a counterparty, but it's a burn address?

▲ Bitcoin (BTC)

Five unidentified addresses sent 107 BTC to a permanent burn address, making $8.3 million worth of Bitcoin (Bitcoin, BTC) unrecoverable.

According to cryptocurrency media outlet Bitcoinist on May 28 (local time), Galaxy Research analyzed the 107 BTC burn incident, which is considered one of the most bizarre Bitcoin transactions this year. The transaction originated from five Bitcoin addresses. These addresses sent approximately $8.3 million worth of Bitcoin to an old burn address.

The addresses in question are not simply wallets where private keys have been lost. Galaxy Research explained that these addresses correspond to a hash160 value where all 20 bytes are zero. When Bitcoin's P2PKH version byte is appended and encoded, this address is generated. To spend coins from this address, a public key with an all-zero hash160 value is required. Galaxy considers finding such a public key to be computationally virtually impossible.

Galaxy suggested tax purposes as the first possibility. However, it assessed the persuasiveness of this explanation as weak. The sender might have tried to create a loss by destroying the coins. However, if most of the Bitcoin in question is old, it is more likely to result in a profit rather than a loss upon sale. The possibility of renouncing assets for religious reasons was also mentioned. Galaxy explained that it is generally more common to donate or transfer assets to others rather than destroy them.

The possibility of the coins being related to illegal activities was also discussed. Galaxy suggested that the Bitcoin might be linked to criminal funds. If the sender believed that the laundering or usage channels were blocked, then burning could be a risk management act. Coercion was also presented as another hypothesis. This scenario suggests that a sender, threatened with blackmail or physical harm, might have destroyed the assets instead of sending the coins to the attacker.

The most striking hypothesis is an automated system error. Galaxy raised the possibility that a large exchange or Bitcoin operating organization executed the transfer using an agent-based system. In this process, the instruction “send 107 BTC to counterparty” might have been misinterpreted. “Counterparty” is also linked to Bitcoin's old burn mechanism. This address has long been known as a burn address. If the automated system confused a real counterparty with a burn address label, an irreversible loss might have occurred.

Galaxy was unable to identify the sender. It also stated that all hypotheses remain speculative. Galaxy said, “We may never know who sent 107 BTC and why.” This incident is not a simple mistaken transfer. It remains a mystery why $8.3 million worth of Bitcoin was sent to an unrecoverable address.

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