# kaal:claim:3396542-021

**Claim.** The DAO is insolvent when the present value of expected cash flows from new policies falls below the expected cash outflow on currently outstanding policies, and in that state the value of a token is negative.

**Type.** condition  **Support.** argued

**Source quote.**

> The DAO will be insolvent if the value of the DAO becomes negative - in other words, if the Present Value (PV) of expected cash flows from new policies is less than the expected cash outflow from currently outstanding (old) policies. If the DAO is insolvent, the value of a token will be negative.

**From.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, *Decentralized Underwriting* (2019), V. MODEL, 3. DAO Insolvency, page 18

**Cite as.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542

**Verify.** sha256 of source PDF `ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20et%20al.%20-%202019%20-%20Decentralized%20Underwriting.pdf

**Failure mode.** DAO insolvency with negative token value  (family: valuation-and-pricing-failure)

**Topics.** tokenomics, economics, dao

**Keywords.** insolvency, token-valuation, dao-design, solvency

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