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Burn And Supply Control

Burn & Supply Control

SoulPeg includes administrative burn functionality to enable controlled reduction of circulating sUSDC in rare or protocol-critical scenarios. Unlike inflationary systems that continuously expand supply, SoulPeg emphasizes manual supply discipline, including the ability to retire tokens when necessary.

Purpose of Burn Functionality

The burn(address,uint256) function allows the protocol owner to forcibly remove sUSDC from any address. While powerful, this function is gated behind onlyOwner and intended solely for system-level operations:

  • Treasury cleanup: Burning dust or residual sUSDC after migration or consolidation.
  • Emergency response: Removing tokens in edge-case exploits or unrecoverable errors.
  • Manual corrections: Fixing token allocations in tightly controlled environments.

It is not available to end users and cannot be used for arbitrary token seizure.

Governance Considerations

Burning requires high trust in the executing entity. To mitigate abuse or misconfiguration:

  • The contract should be controlled by a multisig wallet (e.g., Gnosis Safe).
  • Burn usage should be subject to proposal-review-execute governance flow.
  • Ideally, the burn action is auditable via event logs (StakedTokensBurned).

No Algorithmic Supply Reduction

There is no automatic “deflation” or supply-reduction logic. Burn operations are always manual, rare, and intentional. SoulPeg avoids artificial scarcity mechanics in favor of transparent administrative tooling.

Complementary Controls

In addition to the burn() function, the protocol includes:

  • earlyRedeem(): Converts sUSDC back to USDC and burns the token
  • airdrop(): Transfers sUSDC from the treasury to users as part of distribution events
  • pause(): Halts critical mint or transfer logic if necessary

These mechanisms allow the protocol to adjust supply surfaces reactively without relying on economic games or token speculation.

Summary

Burning in SoulPeg is a governance tool, not a user action. It is part of a broader commitment to responsible supply management, controlled issuance, and defense against edge-case imbalances. By making burn deliberate and gated, the protocol ensures maximum flexibility with minimal abuse potential.