Ethereum co-founder Vitalik Buterin proposed a new framework for building synthetic assets and algorithmic stablecoins that replaces forced liquidations with options as the foundational primitive instead of debt-based positions.
In a post published Monday to the Ethereum research forum, Buterin argued that the core vulnerability of existing algorithmic stablecoin designs is their dependence on real-time oracles — price feeds that must provide binding, instantaneous valuations to trigger liquidations when collateral falls short.
That dependence, he wrote, creates a single point of failure that is both technically difficult to secure and practically impossible to protect against oracle manipulation with any meaningful recourse window.
Buterin’s solution
His proposed alternative strips out liquidations altogether. The system splits one unit of ETH into two assets — a protected position and a leveraged position — tied to a given strike price and maturity date.
