A Paycoin address slated for testing and marked for destruction has instead been quietly transferring funds to trading platforms, raising questions about the cryptocurrency's management and supply int
A Paycoin address slated for testing and marked for destruction has instead been quietly transferring funds to trading platforms, raising questions about the cryptocurrency's management and supply integrity.
The address in question was supposed to operate as a development tool. Developers at Paycoin said the coins there would disappear once testing concluded. Instead, the address accumulated massive holdings through staking at a 350 percent annual rate, compounding daily, before funds began moving to Bittrex, Cryptsy, and PayBase in small batches under 100 XPY each.
Paycoin uses a tiered staking model built around Prime Controllers and Orion Controllers alongside traditional proof-of-stake minting. The system auctions off 52 Prime Controller slots every six months to the highest bidders, who then earn either 10, 20, 100, or 350 percent annual returns. Those who don't win the auction become Orion Controllers, collecting the standard 5 percent stake without compounding obligations, and can bid again at the next auction.
When the mysterious address surfaced on Paycoin's rich list, Hashtalk forum users traced its origin. Developer Joe Mordica confirmed it belonged to the company and explained that staking had malfunctioned across several Prime Controllers. "This is our address that we are using to test staking with," he wrote on the forum. "You can see on the blockchain looking at the other addresses the staking hasn't been working as expected so this is another node used for testing latest fixes."
Mordica said the coins would be burned—sent to an address whose private key no one controls, removing them from circulation permanently. He hasn't posted on the forum since, leaving a 27-day gap.
Three days ago, the testing address began moving coins out. Transactions flowed to exchange deposit wallets in small increments, making the funds difficult to trace once they hit trading platforms filled with thousands of daily transactions.
Josh Garza, who founded both GAW and Paycoin, acknowledged the movement on Hashtalk. He blamed a communication breakdown inside the company. "A few weeks ago, a member of GAW was testing coins and told everyone those coins would be destroyed after the testing was done. Through a series of internal communication challenges, this was never completed," Garza wrote. He added that a separate problem had emerged: Prime Controllers were compounding coins when they shouldn't be. Under the original whitepaper, they should earn only 5 percent on the principal holding from an escrow account fed by losing bids. "Prime controllers should not be compounding coins. The stake rate should only be applied to the principle coins. This will be resolved as the source for Paycoin is updated in the future."
Garza said he asked his team to calculate the excess coins created through compounding and announced both sets would be destroyed. "We are committed to being transparent and upholding the highest standards with Paycoin," he wrote.
The explanation left gaps. Forum users asked why the test ran on the main blockchain rather than a separate test network. They asked why coins weren't burned immediately as promised instead of sitting and staking for weeks. Garza did not address these questions.
When asked directly, Garza shifted tone. "Why is it that we have only heard from your publication when there is something interpreted as negative? Otherwise, we never hear from you guys? I was just about to write something about this to my 64k twitter followers. Care to comment?"
The 350 percent Prime Controller rate itself represents a problem. It arrived in December without explanation and differs sharply from what Paycoin's whitepaper outlined. The rate was supposed to vary based on bids from those seeking Prime Controller status, connecting supply directly to demand. How the current rate is calculated remains unclear.
Once coins land on exchanges, tracking them becomes nearly impossible. The only way to correct an oversupply would be for Paycoin or PayBase to burn equivalent coins elsewhere—assuming they even know the full scope of what escaped into circulation.
This represents the latest disturbance around Paycoin and GAW Miners. The promised price floor for Paycoin that PayBase maintained fell through months ago, replaced by an honor system still awaiting launch. Reports have surfaced of SEC interest in the company. The Prime Controller mechanism itself has drawn scrutiny. Heavy moderation on the official Hashtalk forums has censored discussion of these topics.
Garza said he handed the matter to his chief marketing officer. He had been active on forums discussing other issues, so his delegation of this response raised questions about why he couldn't answer directly. No statement from the CMO has arrived.
