How Would the Risk of a 51% Attack Affect the Collateral Requirements for a Decentralized Options Protocol?
A high risk of a 51% attack on the underlying asset would force a decentralized options protocol to significantly increase its collateral requirements. This is a necessary defense against the risk of the underlying asset's price being manipulated or a double-spend occurring.
Higher collateral acts as a safety buffer to absorb potential losses from sudden, artificial price movements, protecting the protocol's solvency and the integrity of its options contracts.
Glossar
Decentralized Options
Architecture ⎊ Decentralized options represent a paradigm shift in options trading, moving away from centralized exchange reliance towards blockchain-based smart contracts for execution and settlement.
Collateral Requirements
Condition ⎊ Collateral requirements stipulate that an asset or security must be pledged to secure a financial obligation or position.
Collateral Management
RiskFunction ⎊ Collateral Management encompasses the systematic oversight, valuation, and maintenance of assets pledged to secure obligations, particularly crucial in leveraged derivatives trading and decentralized finance lending.