Paxos Sandbox migration to Bitcoin Testnet4

What is Bitcoin Testnet3?

Bitcoin Testnet3 is the third major public Bitcoin testing network, launched in 2011 to provide developers a safe environment to build and test Bitcoin applications without risking real BTC. It mirrors Bitcoin mainnet's functionality – including proof-of-work, transactions and block mining but uses worthless test bitcoins (tBTC) that can be freely obtained from faucets. 

However, because Testnet3 has been running for so long, its blockchain has grown large, and it has suffered from network instability issues such as:

• "Block storms" - extremely rapid block creation leading to inconsistent chain behavior. 
• Fee volatility - periods where network spam caused artificially high test fees. 
• Congestion and unreliable coin distribution from faucets due to abuse and spam. 

What is Bitcoin Testnet4?

Bitcoin Testnet4 is the new public test network introduced by the Bitcoin developer community (BIP, 2024) as a replacement for Testnet3. It is designed to be cleaner, lighter and more stable while maintaining compatibility with existing Bitcoin tools. 

Key characteristics:

• Improved stability – fixes Testnet3's "block storm" issues with adjusted difficulty rules. 
• Predictable fees and block times
• Smaller blockchain - shorter history and faster initial sync for new nodes. 
• Fresh coin supply and new faucets
• Supported in Bitcoin Core v28 and newer. 

Developers and Node infrastructure providers are encouraged to migrate to Testnet4 for future testing. 

What is happening to Testnet3?

Bitcoin Testnet3 is being phased out. While it remains online and operational today, the Bitcoin Core development community is looking to decommission support due to its instability. Network node operators are in the process of winding down support for testnet3 and transitioning to testnet4.

How will Paxos support crypto deposit and withdrawal testing?

Paxos will be integrating its sandbox environment with Bitcoin testnet4. We will enable the testnet4 connection for customer use and testing. Testnet3 support will be discontinued on December 15, 2025. We ask that you pause your testing of crypto deposits and withdrawals during the switchover process, which is expected to take the full day. Crypto transfer activity made during this time may encounter errors or not be processed.

How does the change to Bitcoin Testnet4 impact my testing?

• Paxos platform balances: the change to Testnet4 will not affect any balances you hold on platform with Paxos. 
• External wallet balances: external wallet balances acquired via withdrawals from Paxos can no longer be used with the Paxos sandbox environment. Deposits to Paxos of tokens on the Testnet3 network will not be credited to your account. 
• External wallet configuration: developers must update their Bitcoin testnet wallets in order to test deposits and withdrawals to/from Paxos using the testnet4 network.
• Blockchain explorer: developers should use https://mempool.space/testnet4 to search for test transactions.