Each collateralized debt position is independent. They do not use one large pool of collateral for all DAI. Each CDP is independently liquidated as the value of

Each collateralized debt position is independent. They do not use one large pool of collateral for all DAI. Each CDP is independently liquidated as the value of the collateral drops. Can liquidations trigger price drops in ETH? Yes, and that can cause a cascade of liquidations as the collateral value falls on various CDPs. But that just wipes more debt as it cascades. MakerDAO has responsible thresholds (150%) for liquidations. It's not without risks but it's one of the good eggs.