How does Mastercoin avoid double-spend attacks without it's own blockchain? Bitcoin's main innovation is the blockchain, responsible for making sure that the same bitcoin cannot be spent twice.

Mastercoin rides on top of bitcoin, but does not have it's own blockchain.

How does Mastercoin avoid double-spend attacks?
The answer is double-layered:


Mastercoin uses Bitcoin for timestamping. It's impossible to revert the transaction at the Bitcoin level without doing a Bitcoin double spend (super costly).
Mastercoin clients track the state of the system including how much is stored at each address. If a client double spends by sending two contradicting Mastercoin transactions, the second one will be discarded as an invalid spend by any client that parses the transaction stream.