The Ikea Effect and Cryptocurrencies

If you’ve ever put together a piece of furniture you’ve probably experienced pride welling up inside of you when it’s finally finished. “I did that” you think to yourself as you smile; your labor leading to love. In a well documented mental bias called The Ikea Effect the task of constructing something leads people to value (and over value!) their creations.

Of course, the Ikea Effect isn’t limited to furniture. Broadly speaking, anything that requires labor to complete can induce an Ikea Effect in the subsequent construction. In the 1950s when instant cake mixes entered the average American household people were initially resistant. After all, it made the process of cooking too easy and subsequently people felt their labor and skill were worth less. Likewise, someone might undergo the arduous task of setting up a monolithic bureaucracy and subsequently overvalue the inefficient institution they’ve created.

Cryptocurrencies have their own Ikea effects. There are a lot of ways you can help “build” them up. Here’s a short list I’ve compiled:

  • Contributing to the code
  • Running a node
  • Mining
  • Building a service native to that cryptocurrency
  • Being an advocate
  • Educating others
  • Participating in a community
  • Hodling

(Comment or DM me if I’m missing something!)

Contributing to the code base is the closest analogy to building and naturally it has the highest barrier to entry. Beyond needing to understand swathes of code, cryptography, and maths, creating money is really hard and is not well suited to the mindset of “build fast and break things.” As a result, the list of Bitcoin contributors is relatively short considering its achievements, for good reason as well.

Marginally less technical are activities like running a node or mining. While not as clear of a case of building, these activities are critical to the security and success of a cryptocurrency. Each block proposed and or validated is like adding an extra screw to the table you’re brought home. Or something like that.

Technologists often forget that cryptocurrencies are as much of a social phenomenon as they are a technical innovation. Spencer Noon purports that a building an exceptional community is just as important as a technical roadmap or a go-to market strategy in his playbook on building communities. I’m inclined to believe him.

Being an advocate, educating others, and hosting a meetup are examples of how you can help build a community. You’re actively on boarding new people, disseminating ideas, and ultimately driving the adoption that will make this grand experiment successful. That is one of the highest leverage ways you can contribute.

Growing a community is one of the highest leverage ways you can contribute to a cryptocurrency.

Another group of people who will feel like they are contributing are those who hodl. While nominally a passive activity, no one can purport that its one without difficulty. It is hard to stomach the immense volatility that comes with hodling, and though you can temper your loss aversion in time, it takes a lot of work to get to that point. Hodling can rightfully be compared to labor. This is most important for cryptocurrencys which aim to be pure stores of value, a la Bitcoin, as opposed to utility tokens which provide some “work,” like Augur, Gnosis, etc.

If your community isn’t building with your cryptocurrency they aren’t becoming attached to it. When people put labor, whether that’s running a node or a meetup, into a cryptocurrency they become intrinsically invested in it. That hardens their convictions, solidifies their beliefs, and can turn people who came to your platform as a mercenaries into missionaries.

You don’t need to look any further than the past few months to believe me. Coinmarketcap’s latter pages have become a veritable graveyard; ICOs which once boasted tens of thousands of eager Telegram members now struggle with the bare minimum level engagement as their coins dive lower and lower. Their communities were full of mercenaries: people who bought in during the presale, joined and muted their Telegram channels, and put a calendar reminder up for when their tokens would be unlocked. It’s no surprise that when markets turned sour these people promptly left and never looked back. They barely put in any labor.

Another thing, if you start to contribute at the end of the process of building a table, you’re not going to value that piece of furniture as much as the person who made it from step one. Likewise, if you start to contribute to a cryptocurrency at $100 billion valuation, you’re not going feel as attached as someone who entered at a $1 million valuation. In my opinion this is a serious problem for the newest wave of projects with mega valuations. When your cryptocurrency has a billion dollar valuation before it even hits the market you’re limiting the upward growth you could have and as an extension you’re also limited the amount of building your community could potentially do.

It’s the climb, not the height of the summit, that matters.

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I write about blockchains, data, and healthcare. Sign up for my newsletter here -> http://beyondblocks.bertcmiller.com

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