Vitalik Buterin has proposed rebuilding DeFi on options contracts instead of collateralized debt, a shift that would eliminate forced liquidations entirely.
The design splits 1
$ETH into two paired assets, P and N, that always sum back to 1
$ETH - meaning the system is solvent by construction and can rely on slow, prediction-market-style oracles rather than real-time price feeds.
This directly targets liquidation cascades, DeFi's dominant failure mode since MakerDAO’s $8.32M bot exploit in March 2020. Buterin pegs the realistic drift cost at a standard deviation of just 1–4% per year, framing it as usable for price-stability goals - though not as an accounting stablecoin.
No protocol has committed to building on the spec yet, but the Ethereum Research post signals a serious rethink of how synthetic assets could work without the auction-based risk that has plagued
$AAVE,
$MKR and others for half a decade.