Whenever you run a command from another entity using /execute, such as

/execute @e[type=blaze] ~ ~ ~ setblock ~ ~ ~ stone

it does not run the command from the location of the entity. It instead runs the command from the location of the block/player that is running it. In this case, it would place stone in the location of the player, and if it was run from a command block, it would replace the command block with stone, just as long as there is a blaze to run the command.