Ethereum co-founder Vitalik Buterin proposed on June 1 a new framework for building stablecoins and price-tracking crypto assets that eliminates the forced liquidations these systems typically use to maintain stability. Buterin detailed the approach in a research post co-reviewed by Vladimir Novakovski and Curve developers, aiming to let users hold an asset that tracks a target price using only ETH as backing without relying on a centralized issuer. The proposal addresses the core challenge algorithmic stablecoins have faced: maintaining a peg without the risks introduced by real-time price oracles and automatic sell-offs when collateral values drop.
Buterin Identifies Liquidation and Real-Time Oracle Risks
Current algorithmic stablecoins maintain balance by pairing every bet with an opposite bet and 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. Liquidations require a price feed that is both accurate and instant, which Buterin argued 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.
Buterin's Options Model Splits ETH Into Two Tokens
Buterin's framework replaces the borrowing model by splitting 1 ETH into two tokens that always add back up to that same 1 ETH. The system checks the price once, on a set future date, to decide how the ETH is divided between the two tokens. 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. Buterin described the approach as "flipping the problem on its head" and making synthetics "rely only on 'slow' oracles."
Framework Introduces Gradual Drift Trade-Off
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.
FAQ
What did Vitalik Buterin propose on June 1?
Vitalik Buterin proposed on June 1 a new framework for building stablecoins and price-tracking crypto assets that eliminates forced liquidations by splitting 1 ETH into two tokens that always sum to 1 ETH, with price checked once on a set future date.
Why does Buterin's framework avoid real-time oracles?
Buterin argued that real-time oracles are very hard to make safe because they rely on a small number of automated reporters, leave no room to correct mistakes, and block cheaper, slower methods that would make price feeds more secure.
What is the trade-off in Buterin's options-based model?
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, though Buterin conceded the asset could not be treated as plain dollars for everyday payments or taxes.
