Ethereum co-founder Vitalik Buterin has just formulated a major scientific proposition. The latter aims to definitively eradicate the mechanism of forced liquidations in DeFi. Published on June 1, 2026 on the ETHResearch platform, this conceptual model aims to replace traditional debt architectures with financial structures backed by options contracts.
In brief
- Vitalik Buterin proposes replacing CDPs with a system based on financial options.
- The solution would reduce reliance on real-time oracles.
- The DeFi proposal remains at the research stage and is not yet implemented on Ethereum.
The Buterin model: replacing debt with options
In a research post published Monday on ethresear.ch, Vitalik Buterin proposes to build index tracking assets. These would rely on options contracts rather than the debt structures that underpin much of DeFi today.
The objective: to allow users to obtain a exposure to a basket of crypto-assets (similar to an index fund) without ever risking a sudden liquidation.
Rather than instantly losing a position when prices move unfavorably, exposure would gradually diverge from a target allocation. This potentially makes the more resilient system in times of volatility.
Less dependence of DeFi protocols on oracles
Another key advantage concerns price oracles. These are data streams that indicate to DeFi protocols the value of assets in real time. Most DeFi applications today depend on oracle updates in near real time. These can become targets of manipulation during periods of turbulence.
In his noteButerin asserts that a option-based system could work with slow oracles, similar to those used by prediction markets. Which would reduce the risk of DeFi protocols acting on incorrect price data. This would be particularly relevant for algorithmic stablecoins, which have historically been vulnerable to these failures.
Limits not to be ignored
Buterin himself recognizes that this system would require a regular portfolio rebalancing. It also states that it remains uncertain whether these adjustments can be made cost-effectively enough to avoid transaction costs or excessive slippage.
The concept therefore remains theoretical. It has not yet been implemented on Ethereum. On the other hand, it illustrates a growing desire to rethink the basics of DeFi by favoring robustness over leverage.
With this proposal, Vitalik Buterin continues his reflection on the structural weaknesses of DeFi. It remains to be seen whether this vision can be transformed into a viable solution for the Ethereum ecosystem. If this system were to emerge, it could redefine the way millions of users interact with decentralized finance.
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