Stablecoin issuer Paxos ended up producing 300 trillion PayPal USD (PYUSD) tokens on the Ethereum blockchain without intending to on Wednesday afternoon and announced a “technical error” as the reason for the incident.
The on-chain data shown by Etherscan reveals that the minting event took place at 3:12 p.m. ET from a Paxos hot wallet and the tokens were freshly created at the PayPal smart contract for PYUSD. For a very short time, the total value of the newly created tokens equated 300 trillion dollars, which is almost eight times the total value of what the world produces in a year and a lot more than the U.S. national debt of 37 trillion dollars.
Referring to an announcement made on X (previously Twitter), Paxos lets their audience know that they have not only found the issue but also fixed it within 30 minutes and all the tokens forged in error were instantly burned.
“The excess PYUSD was burned by Paxos upon the immediate identification of the error. There is no support or security compromise. Customer funds are safe and sound. We have fixed the problem at its source,” the company stated.
The short-lived anomaly led to communication interruptions that spread through decentralized finance (DeFi) networks. The lending protocol, Aave, quickly took PYUSD-related markets off the trading board to avoid any liquidity or pricing changes that could result from the situation.
Throughout the incident, the price of PYUSD temporarily diverged from its one-dollar peg and then returned to normal after the burn transaction had taken place. Paxos later effectuated another normal minting of 300 million PYUSD, which had nothing to do with the error, as a part of its planned liquidity management
Several blockchain experts remarked that the quickness of Paxos in recognizing and fixing the problem contributed to the prevention of a possible chain reaction that would have affected different Ethereum-based protocols.
After a short technical mishap, PYUSD is still ranked as the sixth-largest stablecoin worldwide by market capitalization and is worth around $2.6 billion according to The Block’s pricing data.
The instrument of stability to the crypto world, which was introduced as a joint venture with PayPal, is at the core of the strategy of PayPal to digitize the payment space with the help of blockchain technology. It provides users with a regulated dollar-backed token for transactions and on-chain settlements.
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