If the margin call is not met, the
clearing house attempts to close the contract and liquidate the assets. But
if the prices change so fast that the margin account becomes negative before
the position can be closed, the party owes money to the clearing house. If
this cannot be paid, the party is bankrupted and will have their assets seized
in an attempt to pay the debt. In this case, the clearing house covers the
losses to the opposing party such that all trades that occur on exchanges
can be honored[5](p. 30).
Such a scheme has worked well for a system with trusted parties where
property can be confiscated and contracts enforced. But trust, confiscation,
and enforcement are not the currency of the realm in the world of blockchain.
Automatic settlement is. Therefore, we require that contract are altered to
not permit negative balances, since this would necessitate enforcement by
a non-blockchain entity. This means that the negative value of a contract

must be capped and that the value of a transfer that a contract should dic-
tate must also be capped.