Vitalik: Building index-tracking assets based on options rather than debt is worth considering and experimenting with

Odaily Planet Daily News Vitalik posted on platform X, stating that building index-tracking assets based on options rather than debt is worth considering and experimenting with, using options as the foundation of DeFi instead of CDPs and liquidation mechanisms. This design can avoid severe and systemic liquidation effects caused by extreme price volatility, allowing exposure to the index to deviate from the preferred exposure in a smoother, quadratic manner. Its key advantage is that it does not require an instantaneous oracle; it can operate on a slow oracle, which is the type of oracle used by prediction markets. An obvious drawback of this design is the need for regular rebalancing, and it remains to be clarified whether and how rebalancing can be sufficiently resistant to slippage.

Vitalik added that, compared to relying on oracle mechanisms that must give real-time answers and could potentially be induced to give incorrect real-time answers within a window of time without human remediation, he considers holding algorithmic stablecoins embedded within such mechanisms to be safer.