  Liquidations in Decentralized Finance (DeFi) are both a blessing and a curse
-- whereas liquidations prevent lenders from capital loss, they simultaneously
lead to liquidation spirals and system-wide failures. Since most lending and
borrowing protocols assume liquidations are indispensable, there is an
increased interest in alternative constructions that prevent immediate
systemic-failure under uncertain circumstances.
  In this work, we introduce reversible call options, a novel financial
primitive that enables the seller of a call option to terminate it before
maturity. We apply reversible call options to lending in DeFi and devise
Miqado, a protocol for lending platforms to replace the liquidation mechanisms.
To the best of our knowledge, Miqado is the first protocol that actively
mitigates liquidations to reduce the risk of liquidation spirals. Instead of
selling collateral, Miqado incentivizes external entities, so-called
supporters, to top-up a borrowing position and grant the borrower additional
time to rescue the debt. Our simulation shows that Miqado reduces the amount of
liquidated collateral by 89.82% in a worst-case scenario.
