[beefield]

>are incapable of being under-collateralized.

Knowing pretty much zero about DAI (and honestly, not too interested to spend any time to learn), this still sounds incredible. Does that incapability hold even if prices of whatever underlying assets are not continuous? Like, at one point of time the asset is trading at 100 dollars, and at the very next moment it trades at 1, with no possibility for anyone to trade at 50 at any point in between?

I very much assume not. If you think that is laughably stupid to assume that prices would not be continuous, well, you are in good company, even some Economics Nobelists have fallen on that trap. And lost billions. In that case you may want to spend some time researching what comes up when you search for LTCM.