diff --git a/lib/dl_bmc_engine.cpp b/lib/dl_bmc_engine.cpp
index 8155b0036..e15355817 100644
--- a/lib/dl_bmc_engine.cpp
+++ b/lib/dl_bmc_engine.cpp
@@ -118,7 +118,7 @@ namespace datalog {
          expr_ref level_query = mk_level_predicate(m_query_pred, level);
          model_ref md;
          proof_ref pr(m);
-         rule_unifier unifier(rm, m_ctx, m);
+         rule_unifier unifier(m_ctx);
          m_solver.get_model(md);
          func_decl* pred = m_query_pred;
          SASSERT(m.is_true(md->get_const_interp(to_app(level_query)->get_decl())));
diff --git a/lib/dl_mk_rule_inliner.cpp b/lib/dl_mk_rule_inliner.cpp
index 2c6874adf..152e433ef 100644
--- a/lib/dl_mk_rule_inliner.cpp
+++ b/lib/dl_mk_rule_inliner.cpp
@@ -91,7 +91,7 @@ namespace datalog {
     }
 
     void rule_unifier::apply(
-        rule& r, bool is_tgt, unsigned skipped_index, 
+        rule const& r, bool is_tgt, unsigned skipped_index, 
         app_ref_vector& res, svector<bool>& res_neg) {
         unsigned rule_len = r.get_tail_size();
         for (unsigned i = 0; i < rule_len; i++) {
@@ -104,7 +104,7 @@ namespace datalog {
         }
     }
 
-    bool rule_unifier::apply(rule& tgt, unsigned tail_index, rule& src, rule_ref& res) {
+    bool rule_unifier::apply(rule const& tgt, unsigned tail_index, rule const& src, rule_ref& res) {
         SASSERT(m_ready);
         app_ref new_head(m);
         app_ref_vector tail(m);
@@ -116,7 +116,7 @@ namespace datalog {
         mk_rule_inliner::remove_duplicate_tails(tail, tail_neg);
         SASSERT(tail.size()==tail_neg.size());
         res = m_rm.mk(new_head, tail.size(), tail.c_ptr(), tail_neg.c_ptr());
-        res->set_accounting_parent_object(m_context, &tgt);
+        res->set_accounting_parent_object(m_context, const_cast<rule*>(&tgt));
         res->norm_vars(m_rm);
         if (m_context.fix_unbound_vars()) {
             m_rm.fix_unbound_vars(res, true);
diff --git a/lib/dl_mk_rule_inliner.h b/lib/dl_mk_rule_inliner.h
index 24cab4352..b93e51435 100644
--- a/lib/dl_mk_rule_inliner.h
+++ b/lib/dl_mk_rule_inliner.h
@@ -40,24 +40,25 @@ namespace datalog {
         bool           m_ready;
         unsigned       m_deltas[2];
     public:
-        rule_unifier(rule_manager& rm, context& ctx, ast_manager& m)
-            : m(m), m_rm(rm), m_context(ctx), m_interp_simplifier(ctx), m_subst(m), m_unif(m), m_ready(false) {}
+        rule_unifier(context& ctx)
+            : m(ctx.get_manager()), m_rm(ctx.get_rule_manager()), m_context(ctx), 
+              m_interp_simplifier(ctx), m_subst(m), m_unif(m), m_ready(false) {}
             
         /** Reset subtitution and unify tail tgt_idx of the target rule and the head of the src rule */
-        bool unify_rules(const rule& tgt, unsigned tgt_idx, const rule& src);
+        bool unify_rules(rule const& tgt, unsigned tgt_idx, rule const& src);
 
         /**
            \brief Apply unifier to rules.
            Return false if the resulting rule is a tautology (the interpreted tail is unsat).
         */
-        bool apply(rule& tgt, unsigned tgt_idx, rule& src, rule_ref& result);
+        bool apply(rule const& tgt, unsigned tgt_idx, rule const& src, rule_ref& result);
 
         void display(std::ostream& stm) { m_subst.display(stm, 2, m_deltas); }
 
         /**
            Retrieve substitutions for src/tgt. (second argument of unify_rules).
         */
-        expr_ref_vector get_rule_subst(const rule& r, bool is_tgt);
+        expr_ref_vector get_rule_subst(rule const& r, bool is_tgt);
 
     private:
         void apply(app * a, bool is_tgt, app_ref& res);
@@ -66,7 +67,7 @@ namespace datalog {
            Apply substitution to a rule tail. Tail with skipped_index is skipped, 
            unless skipped_index is equal to UINT_MAX
         */        
-        void apply(rule& r, bool is_tgt, unsigned skipped_index, app_ref_vector& res, 
+        void apply(rule const& r, bool is_tgt, unsigned skipped_index, app_ref_vector& res, 
                    svector<bool>& res_neg);
         
     };
@@ -178,7 +179,7 @@ namespace datalog {
             m_simp(m_context.get_rewriter()),
             m_pinned(m_rm),
             m_inlined_rules(m_context),
-            m_unifier(ctx.get_rule_manager(), ctx, m),
+            m_unifier(ctx),
             m_mc(0),
             m_pc(0),
             m_head_index(m),
diff --git a/lib/dl_mk_slice.cpp b/lib/dl_mk_slice.cpp
index 846dd6c72..77d53cf4e 100644
--- a/lib/dl_mk_slice.cpp
+++ b/lib/dl_mk_slice.cpp
@@ -259,7 +259,7 @@ namespace datalog {
             rm(ctx.get_rule_manager()),
             m_pinned_rules(rm),
             m_pinned_exprs(m),
-            m_unifier(rm, ctx, m) {}
+            m_unifier(ctx) {}
 
         void insert(rule* orig_rule, rule* slice_rule, unsigned sz, unsigned const* renaming) {
             m_rule2slice.insert(orig_rule, slice_rule);
diff --git a/lib/dl_mk_unfold.cpp b/lib/dl_mk_unfold.cpp
new file mode 100644
index 000000000..5be9aebe7
--- /dev/null
+++ b/lib/dl_mk_unfold.cpp
@@ -0,0 +1,72 @@
+/*++
+Copyright (c) 2012 Microsoft Corporation
+
+Module Name:
+
+    dl_mk_unfold.cpp
+
+Abstract:
+
+    Unfold rules once, return the unfolded set of rules.
+
+Author:
+
+    Nikolaj Bjorner (nbjorner) 2012-10-15
+
+Revision History:
+
+--*/
+#include "dl_mk_unfold.h"
+
+namespace datalog {
+
+    mk_unfold::mk_unfold(context& ctx):
+        rule_transformer::plugin(0, false),
+        m_ctx(ctx),
+        m(ctx.get_manager()),
+        rm(ctx.get_rule_manager()),
+        m_unify(ctx)
+    {}
+
+    void mk_unfold::expand_tail(rule& r, unsigned tail_idx, rule_set const& src, rule_set& dst) {
+        SASSERT(tail_idx <= r.get_uninterpreted_tail_size());
+        if (tail_idx == r.get_uninterpreted_tail_size()) {
+            dst.add_rule(&r);
+        }
+        else {
+            func_decl* p = r.get_decl(tail_idx);
+            rule_vector const& p_rules = src.get_predicate_rules(p);
+            rule_ref new_rule(rm);
+            for (unsigned i = 0; i < p_rules.size(); ++i) {
+                rule const& r2 = *p_rules[i];
+                if (m_unify.unify_rules(r, tail_idx, r2) &&
+                    m_unify.apply(r, tail_idx, r2, new_rule)) {
+                    expr_ref_vector s1 = m_unify.get_rule_subst(r, true);
+                    expr_ref_vector s2 = m_unify.get_rule_subst(r2, false);
+                    resolve_rule(m_pc, r, r2, tail_idx, s1, s2, *new_rule.get());
+                    expand_tail(*new_rule.get(), tail_idx+r2.get_uninterpreted_tail_size(), src, dst);
+                }
+            }
+        }
+    }
+        
+    rule_set * mk_unfold::operator()(rule_set const & source, model_converter_ref& mc, proof_converter_ref& pc) {
+        m_pc = 0;
+        ref<replace_proof_converter> rpc;
+        if (pc) {
+            rpc = alloc(replace_proof_converter, m);
+            m_pc = rpc.get();
+        }
+        rule_set* rules = alloc(rule_set, m_ctx);
+        rule_set::iterator it = source.begin(), end = source.end();
+        for (; it != end; ++it) {
+            expand_tail(**it, 0, source, *rules);
+        }
+        if (pc) {
+            pc = concat(pc.get(), rpc.get());
+        }
+        return rules;
+    }
+
+};
+
diff --git a/lib/dl_mk_unfold.h b/lib/dl_mk_unfold.h
new file mode 100644
index 000000000..3d20686a7
--- /dev/null
+++ b/lib/dl_mk_unfold.h
@@ -0,0 +1,54 @@
+/*++
+Copyright (c) 2012 Microsoft Corporation
+
+Module Name:
+
+    dl_mk_unfold.h
+
+Abstract:
+
+    Unfold rules once, return the unfolded set of rules.
+
+Author:
+
+    Nikolaj Bjorner (nbjorner) 2012-10-15
+
+Revision History:
+
+--*/
+#ifndef _DL_MK_UNFOLD_H_
+#define _DL_MK_UNFOLD_H_
+
+#include"dl_context.h"
+#include"dl_rule_set.h"
+#include"uint_set.h"
+#include"dl_rule_transformer.h"
+#include"dl_mk_rule_inliner.h"
+
+namespace datalog {
+
+    /**
+       \brief Implements an unfolding transformation.
+    */
+    class mk_unfold : public rule_transformer::plugin {
+        context&        m_ctx;
+        ast_manager&    m;
+        rule_manager&   rm;
+        rule_unifier    m_unify;
+        replace_proof_converter* m_pc;
+
+        void expand_tail(rule& r, unsigned tail_idx, rule_set const& src, rule_set& dst);
+
+    public:
+        /**
+           \brief Create unfold rule transformer.
+         */
+        mk_unfold(context & ctx);
+        
+        rule_set * operator()(rule_set const & source, model_converter_ref& mc, proof_converter_ref& pc);
+    };
+
+};
+
+#endif /* _DL_MK_UNFOLD_H_ */
+
diff --git a/lib/dl_util.cpp b/lib/dl_util.cpp
index 574b80599..52080ba73 100644
--- a/lib/dl_util.cpp
+++ b/lib/dl_util.cpp
@@ -615,8 +615,8 @@ namespace datalog {
         }
     }
 
-    void resolve_rule(replace_proof_converter* pc, rule& r1, rule& r2, unsigned idx, 
-                      expr_ref_vector const& s1, expr_ref_vector const& s2, rule& res) {
+    void resolve_rule(replace_proof_converter* pc, rule const& r1, rule const& r2, unsigned idx, 
+                      expr_ref_vector const& s1, expr_ref_vector const& s2, rule const& res) {
         if (!pc) return;
         ast_manager& m = s1.get_manager();
         dl_decl_util util(m);
diff --git a/lib/dl_util.h b/lib/dl_util.h
index 1a6a189ce..c73f7e762 100644
--- a/lib/dl_util.h
+++ b/lib/dl_util.h
@@ -467,8 +467,8 @@ namespace datalog {
 
     void del_rule(horn_subsume_model_converter* mc, rule& r);
 
-    void resolve_rule(replace_proof_converter* pc, rule& r1, rule& r2, unsigned idx, 
-                      expr_ref_vector const& s1, expr_ref_vector const& s2, rule& res);
+    void resolve_rule(replace_proof_converter* pc, rule const& r1, rule const& r2, unsigned idx, 
+                      expr_ref_vector const& s1, expr_ref_vector const& s2, rule const& res);
 
     model_converter* mk_skip_model_converter();
 
diff --git a/lib/lib.vcxproj b/lib/lib.vcxproj
index 975d2e88e..0206c2741 100644
--- a/lib/lib.vcxproj
+++ b/lib/lib.vcxproj
@@ -559,6 +559,7 @@
     <ClCompile Include="dl_mk_simple_joins.cpp" />
     <ClCompile Include="dl_mk_subsumption_checker.cpp" />
     <ClCompile Include="dl_mk_unbound_compressor.cpp" />
+    <ClCompile Include="dl_mk_unfold.cpp" />
     <ClCompile Include="dl_relation_manager.cpp" />
     <ClCompile Include="dl_product_relation.cpp" />
     <ClCompile Include="dl_rule.cpp" />
@@ -1009,6 +1010,7 @@
     <ClInclude Include="dl_mk_similarity_compressor.h" />
     <ClInclude Include="dl_mk_subsumption_checker.h" />
     <ClInclude Include="dl_mk_unbound_compressor.h" />
+    <ClInclude Include="dl_mk_unfold.h" />
     <ClInclude Include="dl_relation_manager.h" />
     <ClInclude Include="dl_product_relation.h" />
     <ClInclude Include="dl_rule_subsumption_index.h" />
diff --git a/lib/pdr_context.cpp b/lib/pdr_context.cpp
index ce3306c80..62d32ea63 100644
--- a/lib/pdr_context.cpp
+++ b/lib/pdr_context.cpp
@@ -1026,7 +1026,7 @@ namespace pdr {
         ast_manager& m = pt.get_manager();
         datalog::context& dctx = ctx.get_context();
         datalog::rule_manager& rm = dctx.get_rule_manager();
-        datalog::rule_unifier unifier(rm, dctx, m);
+        datalog::rule_unifier unifier(dctx);
         datalog::dl_decl_util util(m);
         datalog::rule_ref r0(rm), r1(rm);
         obj_map<expr, proof*> cache;
diff --git a/lib/pdr_dl_interface.cpp b/lib/pdr_dl_interface.cpp
index 4439d571f..aba2fe63d 100644
--- a/lib/pdr_dl_interface.cpp
+++ b/lib/pdr_dl_interface.cpp
@@ -30,6 +30,7 @@ Revision History:
 #include "pdr_dl_interface.h"
 #include "dl_rule_set.h"
 #include "dl_mk_slice.h"
+#include "dl_mk_unfold.h"
 
 using namespace pdr;
 
@@ -117,6 +118,17 @@ lbool dl_interface::query(expr * query) {
         m_ctx.set_output_predicate(query_pred);
     }
 
+    if (m_ctx.get_params().get_uint(":unfold-rules",0) > 0) {
+        unsigned num_unfolds = m_ctx.get_params().get_uint(":unfold-rules",0);
+        datalog::rule_transformer transformer(m_ctx);
+        datalog::mk_unfold* unfold = alloc(datalog::mk_unfold, m_ctx);
+        transformer.register_plugin(unfold);
+        while (num_unfolds > 0) {
+            m_ctx.transform_rules(transformer, mc, pc);        
+            --num_unfolds;
+        }
+    }
+
     IF_VERBOSE(2, m_ctx.display_rules(verbose_stream()););
     m_pdr_rules.add_rules(m_ctx.get_rules());
     m_pdr_rules.close();
@@ -187,6 +199,7 @@ void dl_interface::collect_params(param_descrs& p) {
     p.insert(":generate-proof-trace", CPK_BOOL, "PDR: (default false) trace for 'sat' answer as proof object");
     p.insert(":inline-proofs", CPK_BOOL, "PDR: (default true) run PDR with proof mode turned on and extract Farkas coefficients directly (instead of creating a separate proof object when extracting coefficients)"); 
     p.insert(":flexible-trace", CPK_BOOL, "PDR: (default false) allow PDR generate long counter-examples by extending candidate trace within search area");
+    p.insert(":unfold-rules", CPK_UINT, "PDR: (default 0) unfold rules statically using iterative squarring");
     PRIVATE_PARAMS(p.insert(":use-farkas-model", CPK_BOOL, "PDR: (default false) enable using Farkas generalization through model propagation"););
     PRIVATE_PARAMS(p.insert(":use-precondition-generalizer", CPK_BOOL, "PDR: (default false) enable generalizations from weakest pre-conditions"););
     PRIVATE_PARAMS(p.insert(":use-multicore-generalizer", CPK_BOOL, "PDR: (default false) extract multiple cores for blocking states"););
diff --git a/lib/pdr_generalizers.cpp b/lib/pdr_generalizers.cpp
index cddc2eb37..c15e8193f 100644
--- a/lib/pdr_generalizers.cpp
+++ b/lib/pdr_generalizers.cpp
@@ -683,123 +683,3 @@ namespace pdr {
     }
 
 };
-
-
-
-#if 0
-
-    void model_farkas_generalizer::extract_eqs(expr_ref_vector const& lits, eqs& eqs) {
-        expr* e;
-        rational vl;
-        bool is_int;
-        for (unsigned i = 0; i < lits.size(); ++i) {
-            if (is_eq(lits[i], e, vl, is_int)) {                
-                eqs.push_back(std::make_pair(e, vl));
-            }
-        }        
-    }
-
-    void model_farkas_generalizer::solve_eqs(expr_ref& A, expr_ref_vector& other, eqs const& o_eqs) {
-        if (o_eqs.empty()) {
-            return;
-        }
-        
-        expr_substitution sub(m);        
-        scoped_ptr<expr_replacer> rep = mk_default_expr_replacer(m);
-        rep->set_substitution(&sub);
-
-        expr* e1;
-        rational vl1;
-        bool is_int;
-        for (unsigned i = 0; i < other.size(); ++i) {
-            if (is_eq(other[i].get(), e1, vl1, is_int)) {
-                unsigned k = m_random(o_eqs.size());
-                for (unsigned j = 0; j < o_eqs.size(); ++j) {
-                    unsigned l = (j+k)%o_eqs.size();
-                    expr* e2 = o_eqs[l].first;
-                    if (m.get_sort(e1) == m.get_sort(e2)) {
-                        sub.insert(e1, mk_offset(e2, vl1-o_eqs[l].second));
-                        other[i] = m.mk_true();
-                        break;
-                    }
-                }                
-            }
-        }
-        (*rep)(A);
-        other.push_back(A);
-        A = m.mk_and(other.size(), other.c_ptr());
-    }
-
-    expr* model_farkas_generalizer::mk_offset(expr* e, rational const& r) {
-        if (r.is_zero()) {
-            return e;
-        }
-        else {
-            return a.mk_add(e, a.mk_numeral(r, a.is_int(e)));
-        }
-    }
-
-    void model_farkas_generalizer::connect_vars(ptr_vector<expr>& vars, vector<rational>& vals, expr_ref_vector& lits) {
-        switch(vars.size()) {
-        case 0: 
-            break;
-        case 1: 
-            lits.push_back(m.mk_eq(vars[0], a.mk_numeral(vals[0], a.is_int(vars[0])))); 
-            break;
-        case 2:
-            lits.push_back(m.mk_eq(vars[0], a.mk_numeral(vals[0], a.is_int(vars[0])))); 
-            lits.push_back(m.mk_eq(vars[0], mk_offset(vars[1], vals[0]-vals[1])));
-            break;
-        default: {
-            ptr_vector<expr> new_vars;
-            vector<rational> new_vals;
-            unsigned j, i = m_random(vars.size());
-            new_vars.push_back(vars[i]);
-            new_vals.push_back(vals[i]);
-            lits.push_back(m.mk_eq(vars[i], a.mk_numeral(vals[i], a.is_int(vars[i])))); 
-            vars.erase(vars.begin() + i);
-            vals.erase(vals.begin() + i);
-            while (!vars.empty()) {
-                i = m_random(vars.size());
-                j = m_random(new_vars.size());
-                lits.push_back(m.mk_eq(vars[i], mk_offset(new_vars[j], vals[i]-new_vals[j])));
-                new_vars.push_back(vars[i]);
-                new_vals.push_back(vals[i]);
-                vars.erase(vars.begin() + i);
-                vals.erase(vals.begin() + i);
-            }
-            break;
-        }
-        }
-    }
-
-    bool model_farkas_generalizer::is_eq(expr* e, expr*& r, rational& vl, bool& is_int) {
-        expr* r2 = 0;
-        return 
-            (m.is_eq(e, r, r2) && a.is_numeral(r2, vl, is_int)) ||
-            (m.is_eq(e, r2, r) && a.is_numeral(r2, vl, is_int));
-    }
-
-    void model_farkas_generalizer::relativize(expr_ref_vector& literals) {
-        ast_manager& m = literals.get_manager();
-        ptr_vector<expr> ints, reals;
-        vector<rational> int_vals, real_vals;
-        expr* e;
-        rational vl;
-        bool is_int;
-        for (unsigned i = 0; i < literals.size(); ) {
-            if (is_eq(literals[i].get(), e, vl, is_int)) {                
-                (is_int?ints:reals).push_back(e); 
-                (is_int?int_vals:real_vals).push_back(vl);
-                literals[i] = literals.back();
-                literals.pop_back();
-            }
-            else {
-                ++i;
-            }
-        }
-        connect_vars(ints, int_vals, literals);
-        connect_vars(reals, real_vals, literals);
-    }
-
-#endif
diff --git a/lib/smt2scanner.cpp b/lib/smt2scanner.cpp
index 0546fe914..b350796fc 100644
--- a/lib/smt2scanner.cpp
+++ b/lib/smt2scanner.cpp
@@ -110,7 +110,7 @@ namespace smt2 {
         m_string.reset();
         m_string.push_back(curr());
         next();
-        read_symbol_core();
+        return read_symbol_core();
     }
     
     scanner::token scanner::read_number() {