Back in 2020, Michael Saylor, chief executive officer of MicroStrategy Inc, suggested to Elon Musk, CEO of Tesla in a tweet that he should convert the $TSLA balance sheet from USD to BTC if he wants to do his shareholders a 100$ billion favor.
As we all know, Elon Musk didn’t convert the entire $TSLA balance sheet from USD to BTC. Nonetheless, he did accumulate a sizeable amount of Bitcoin.
So what exactly was Michael Saylor’s proposal? What does it mean to convert the balance sheet from USD to BTC? To be honest, Saylor did not make it clear. My guess is Saylor either wants Musk to convert spare cash to BTC, or to sell everything including the factories and buy Bitcoin, which would be pretty radical. Actually, there are less radical ways for companies to benefit from decentralization and it is quite simple…
What I am trying to say is, it’s good for companies, or organizations to distribute some or all of its power to the members. The power distribution process is also extremely simple. Let’s first take a look at the decentralization chart below. In this all-encompassing chart, the first row is the decision-making method. Second row is membership requirement. Third row is the trust level for member admission. Recalling the political spectrum might help to understand the decentralization spectrum. After all, political organizations can benefit from decentralization, too. Memorizing this chart will help you better interpret the word decentralization next time you hear it, for you will be asking the question of how decentralized it is rather than is it decentralized.
Take Tesla for an example. Tesla is one of the most valuable companies in the world. As a traditional company, it resides near the “right” end of the decentralization spectrum, with Elon Musk as head of the management team. Although Elon Musk may be a controversial figure, he often attempted to distribute decision-making power to the general public, adopting a “far-left” approach via Twitter polls. For example, in Aug 2018 Musk tweeted he was considering taking Tesla private at 420$ a share. Such transactions worth billions of dollars have always only been discussed behind doors among a small group of people, bankers, lawyers, venture capitalists etc. These people must never disclose anything about the transaction before a decision has reached per regulation requirement. Although the transaction never came to fruition, Musk opened a pandora box of distributing power. The general mass began to realize that making such decision is not exclusive to only a small group of people. If someone genuinely cares about the progression of a cause, they should be able to participate in it and have their voice heard. Decentralization makes people feel empowered. In a traditional company like Tesla, shareholders are entitled to share company profits, but rarely decision-making powers.
Musk later had to settle with The Securities Exchanges Commission (SEC) as the SEC claimed he didn’t actually have the money secured and thus provided false statement. Musk on the other hand said he was being completely truthful. A classic “his words’ against “my words’ dilemma. This type of dilemma will become extinct if Tesla moves left towards decentralization. If the “funding” is secured in the form of crypto, Musk could simply reveal the address of the wallet and prove it. Who knows, maybe he could have even organized a fundraise via some of the protocols available on blockchain…
Musk’s inclination towards decentralization grew only stronger. He would constantly do polls that are open-to-all on issues ranging from how a company should be managed to a simple yes or no question on climate change. Before the Twitter buy-out drama, Musk was already asking for the public opinion on how Twitter should be run. In 2022 April Musk initiated a poll asking whether twitter should add an edit button. The general public showed strong interest in wanting an edit button as the result was overwhelmingly positive with millions of votes casted. However, Twitter was, at that time, and has always been, ran as a centralized traditional company. The voters and Musk can only hope Twitter management will notice the poll and consider change. Another poll he did was “Do you want Tesla to accept Doge”. 78% of people voted yes. However, people doubted if Tesla was actually going to start accepting Doge coin, and there was basically no way to hold Musk accountable for the result of the poll. These concerns are associated with centralization, where typically one or one group of humans is in charge of both decision-making and implementation. Situation like this calls for decentralization, DAO, and smart contracts. The votes can be casted on-chain, results of the poll could be executed based on smart contracts, and the voters form a Tesla DAO. If the voice of the people truly matters to Musk, I think decentralization will greatly benefit him.
Undoubtedly, Twitter is a great platform, but it is hard even for Twitter to achieve what DAO and decentralization can bring to the table. This is probably why Elon Musk said buying Twitter is an accelerant to creating the everything app “X”. From Musk’s recent actions and his manifest ideology, I firmly believe “X” is an app that leverages blockchain and smart contracts technology to create DAOs.