What would happen if I blended (liquified) onions and then reduced the result?
You would first boil the onions and then most likely burn them.

1st: boiling. Caramelization needs higher temperatures than 100 Celsius but as far as there is water in the mixture, temperature won't rise. Therefore you'll get boiled onions.

2nd: burning. Once the water is gone temperature rises very fast and since caramelization takes time you get to burn them first.

Chopping vs blending:

Chopped onions keep the fluids inside the cells and release them gradually. This makes the temparature rise over 100 °C and prevents it to go too high. This way is much easier to set the stove to the right temperature.

Water and oil:

Water and oil don't like each other very much so trying to add oil to a watery mixture is a bad bad idea. Chooped is the only way if you use an oiled pan.

Notes:


Caramelization happens around 120-165 Celsius, below the browning is too slow and above will be fast burnt
If you want carmelized onion paste, blend afterwards.
To speed up the process and get a paste at the same time you can add baking soda to the onions. Maillard reaction (browning) is much much faster in alcaline environment, which you'll get by adding the baking soda. Also cells will degrade and you'll end up with a paste. Worth a try just to see the results.


Guide:
Here is a guide to carmelized onions from serious eats where they address the how and the why.