Vitalik Buterin proposed on June 1 a new way to build stablecoins and other price-tracking crypto assets, one that swaps out the risky automatic sell-offs these systems normally rely on to stay afloat.
The Ethereum co-founder set out the idea in a research post co-reviewed by Vladimir Novakovski and Curve developers. The goal is to let users hold an asset that tracks a target price—a dollar value, an inflation measure, a commodity—using only ETH as backing and without trusting a company to issue it. When that target is the dollar, Buterin noted, the problem is the same one algorithmic stablecoins have always tried to solve.
Why Buterin Wants to Kill Liquidations
Today’s algorithmic stablecoins stay balanced by pairing every bet with an opposite bet, then forcibly closing a position when the market moves too far against it. That forced sale is called a liquidation, and it keeps the system from ending up with more debt than collateral.
The catch is that liquidations need a price feed that is both accurate and instant, and Buterin argued that kind of feed is the system’s weakest point. “Real-time oracles are very hard to make safe,” he wrote, because they rely on a small number of automated reporters, leave no room to correct mistakes, and block the cheaper, slower methods that would otherwise make price feeds more secure. Buterin has previously defended well-designed algorithmic stablecoins as a genuine pillar of decentralized finance, distinguishing them from yield products built on centralized tokens.
How Buterin’s Options Model Replaces Debt
Buterin’s fix is to “make synthetics rely only on ‘slow’ oracles” by, in his words, “flipping the problem on its head.” Instead of borrowing against ETH, a user splits 1 ETH into two tokens that always add back up to that same 1 ETH, and the system only checks the price once, on a set future date, to decide how the ETH is divided between them. Because the two pieces always total one whole, no one can fall into debt and nothing ever has to be force-sold. The setup works like a prediction market, a product that has traded for years, so it can lean on the same price feeds those markets already use and does not need instant pricing.
The trade-off is that holders drift slowly away from the exact value they want over time, rather than getting wiped out all at once, and each person chooses when to adjust their own position. Buterin argued that a little drift is fine for people who “want price stability” rather than “simulated USD,” though he conceded the asset could not be treated as plain dollars for everyday payments or taxes. The proposal extends a run of recent activity from Buterin, who has signaled zero-knowledge payments as the next global standard for digital finance and urged the ecosystem toward bolder design at the application layer.
