Vitalik Buterin suggests option-based DeFi to reduce liquidation risk

Ethereum (ETH) founder Vitalik Buterin has proposed a new DeFi structure that utilizes options instead of Collateralized Debt Positions (CDPs) and forced liquidations. Writing on the Ethereum Research forum, Buterin suggested that DeFi's foundation could be built on options rather than the prevailing CDP and liquidation mechanisms. He explained that while the current model triggers mass liquidations during sharp price swings, an option-based structure would allow the difference between target and actual exposure to widen more gradually. Buterin also noted that using delayed oracles, similar to those in prediction markets, could reduce dependency on real-time oracles and mitigate risks from price manipulation or malfunctions. He added that he would personally feel more secure holding an algorithmic stablecoin built on such a framework than one reliant on real-time oracles.