If someone blows up their account and loses more than what they own, what does the chain do?
Basically impossible (or at least highly unlikely). The network sets a liquidation collateral percent, and if someone's collateral falls below what they've borrowed it gets liquidated to pay off the debt. MakerDAO sets a liquidation percent of 150%, so if you borrowed $1000 worth of assets and your collateral falls below $1500 a liquidation will be triggered. Most of the $1500 get sold and the user gets returned whatever is leftover.
Ok so its like a collateral account. You borrow based on what you have and unlike the traditional market, you don't have gaps (24 hour market). So its highly unlikely and will only happen when the liquidity on the market is too small on the ask side.
Thanks for the clarification.
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