Vitalik is messing around with DeFi underlying architecture again. The idea of replacing the liquidation mechanism with options is quite interesting. Slow oracles are indeed much safer than real-time price feeds, but we still need to figure out how to solve the slippage issue during rebalancing.

ME News report — June 2nd (UTC+8): Vitalik posted on the X platform stating that it is worth considering and trying to build index-tracking assets based on options rather than debt—i.e., using options as the foundation for DeFi rather than CDPs and liquidation mechanisms. This design can avoid extreme price fluctuations causing severe and global liquidation effects, allowing exposure to the index to deviate from the preferred exposure in a smoother, second-order manner. Its key advantage is that it does not require an instant oracle and can run based on a slow oracle, which predicts the type of oracle used by the market. The design has a clear disadvantage, namely the need for periodic rebalancing, and it still remains to be clarified whether, and how, rebalancing can have sufficient slippage resistance. Vitalik added that, compared with relying on oracle mechanisms that must provide answers in real time and could be induced to give incorrect real-time answers without any time for human intervention to correct them, he believes that holding the assets placed in such mechanisms…