Unbalanced liquidity affects prices

[Jeiwan]

Hello 👋

The mint function in UniswapV2Pair allows to deposit unbalanced amounts of tokens. I.e., if current ratio of reserves is 1:1, nothing forbids depositing amounts in ratio 1:2. To properly calculate the amount of LP tokens issued in such situations, Math.min is used:

v2-core/contracts/UniswapV2Pair.sol

Line 123 in 4dd5906

liquidity = Math.min(amount0.mul(_totalSupply) / _reserve0, amount1.mul(_totalSupply) / _reserve1);

However, both deposited amounts are then saved to reserves:

v2-core/contracts/UniswapV2Pair.sol

Line 128 in 4dd5906

_update(balance0, balance1, _reserve0, _reserve1);

v2-core/contracts/UniswapV2Pair.sol

Lines 82 to 83 in 4dd5906

	reserve0 = uint112(balance0);
	reserve1 = uint112(balance1);

As a result, prices get changed. Is this intentional? I have always thought that prices can only be changed via trading.

It also looks like that due to the Math.min usage, total amount LP tokens doesn't reflect reserves. Why not taking an average of amount0.mul(_totalSupply) / _reserve0, amount1.mul(_totalSupply) / _reserve1?

Yes it is intentional, you can also make a swap without transferring a pair token.

[pegahcarter]

This is a bug as the depositor receives the minimum amount of LP tokens and the Pair keeps the change. So, if we had a pair where reserve0 == reserve1, I could deposit a small amount of token0 and a large amount of token1, receive LP tokens based on my token0 amount, and the token1 is stuck in the pair (and can be arb'd back to reserve0 == reserve1.

[borseno]

It's not really a bug, but a design choice based on game theory. If we assume that the depositor is rational, they would deposit an equal value of tokens. Otherwise they get punished. The other LPs shouldn't really be punished for that too, they can take away the difference. The main point is to punish bad actors who supply irrational ratio of liquidity. Correct me if I'm wrong :)