Core Contracts

The mint function is responsible for issuing new debt tokens, ensuring that a borrower’s debt balance is accurately tracked while incorporating interest accrual via a usage index. However, the function incorrectly scales debt amounts due to improper order of operations when calculating amountToMint. Specifically, the function calculates amountScaled using amount.rayDiv(index), but then adds an unscaled balanceIncrease directly to amountToMint, leading to an overestimation of debt issuance. Below is the relevant code snippet:

This results in amountToMint being larger than it should be, meaning that:

1. More debt tokens are minted than the borrower actually borrowed.

2. The borrower’s recorded debt becomes inflated, leading to incorrect accounting of total outstanding debt.

3. Over time, the protocol accumulates unintended excess debt, increasing systemic risk.

Impact

Debt balances become overestimated, leading to inflation of the total supply of debt tokens.

Mitigation

Ensure amountToMint correctly accounts for scaling by applying rayDiv(index) consistently to both amount and balanceIncrease before summing them.