# Liquidated USDO from BigBang not being burned after liquidation inflates USDO supply and can threaten peg permanently

BigBang liquidation swaps collateral for USDO but never burns the repaid USDO, minting unbacked supply that inflates USDO and threatens the peg.

- Payout: Contest reward
- Severity: high
- Program: Tapioca DAO
- Credited: unsafesol
- Disclosed: 2023-11-16
- Write-up quality: 6/10
- Original: https://github.com/code-423n4/2023-07-tapioca-findings/issues/1355
- Library page: https://bugbountylibrary.com/r/c4%3A2023-07-tapioca%3AH-10
- Tags: domain:web3 impact:funds-loss impact:integrity kind:contest platform:code4rena sev:high tech:evm tech:solidity technique:source-review vuln:accounting-error

**Target:** BigBang market liquidation logic (Solidity contract)
**Root cause:** The liquidation path swaps collateral into USDO and pays fees but omits the burn step that _repay performs, leaving repaid USDO in the market unbacked.
**Steps:**
1. User deposits collateral in BigBang and borrows USDO (minted).
2. Position becomes liquidatable; liquidator calls liquidation, collateral swapped to USDO.
3. Fees extracted and distributed, but remaining repaid USDO is not burned (unlike BigBang#_repay at L734-736).
4. Redundant unbacked USDO shares remain in YieldBox and enter strategies.
5. USDO supply exceeds collateral backing, breaking overcollateralization and peg.
**How found:** Compared the liquidation code path against the _repay function, noticing _repay burns USDO while liquidation does not, despite both repaying debt.
**Exploitation:** Any liquidation event leaves unbacked USDO in the market/YieldBox; repeated liquidations compound the unbacked supply, diluting USDO backing and stranding value in strategies.
**Escalation:** Repeated liquidations accumulate unbacked USDO, progressively inflating supply and threatening the peg protocol-wide.
**Insight:** When auditing mint/burn accounting, diff every code path that retires debt against the canonical repay path; liquidation, fee, and emergency paths often skip the burn that keeps supply backed.