PROBLEM:
Recenter operations were burning ~137,866 KRK tokens instead of minting
them, causing severe deflation when inflation should occur. This was due
to the liquidity manager burning ALL collected tokens from old positions
and then minting tokens for new positions separately, causing asymmetric
supply adjustments to the staking pool.
ROOT CAUSE:
During recenter():
1. _scrapePositions() collected tokens from old positions and immediately
burned them ALL (+ proportional staking pool adjustment)
2. _setPositions() minted tokens for new positions (+ proportional
staking pool adjustment)
3. The burn and mint operations used DIFFERENT totalSupply values in
their proportion calculations, causing imbalanced adjustments
4. When old positions had more tokens than new positions needed, the net
result was deflation
WHY THIS HAPPENED:
When KRK price increases (users buying), the same liquidity depth
requires fewer KRK tokens. The old code would:
- Burn 120k KRK from old positions (+ 30k from staking pool)
- Mint 10k KRK for new positions (+ 2.5k to staking pool)
- Net: -137.5k KRK total supply (WRONG!)
FIX:
1. Modified uniswapV3MintCallback() to use existing KRK balance first
before minting new tokens
2. Removed burn() from _scrapePositions() - keep collected tokens
3. Removed burn() from end of recenter() - don't burn "excess"
4. Tokens held by LiquidityManager are already excluded from
outstandingSupply(), so they don't affect staking calculations
RESULT:
Now during recenter, only the NET difference is minted or used:
- Collect old positions into LiquidityManager balance
- Use that balance for new positions
- Only mint additional tokens if more are needed
- Keep any unused balance for future recenters
- No more asymmetric burn/mint causing supply corruption
VERIFICATION:
- All 107 existing tests pass
- Added 2 new regression tests in test/SupplyCorruption.t.sol
- testRecenterDoesNotCorruptSupply: verifies single recenter preserves supply
- testMultipleRecentersPreserveSupply: verifies no accumulation over time
Co-Authored-By: Claude Opus 4.5 <noreply@anthropic.com>
