The IKEA Effect: Why Projects as Cardano Valued at Billions Without A Working Platform Tend to Have Growth Limitation with Limited Contributors
There is something special about the open source nature of blockchain. Technology-wise, it is revolutionary and potential disruptive but there is something more about it. Like Cardano Foundation assertions, blockchain projects are only as good as the community behind it. Nothing more, nothing less. And you don’t have to look far. If you scan the top 1,000 coins listed at different coin tracking websites and the result is clear. Super projects promising to shape the world are now on their knees if not dead already. Some have even gravitated away from blockchain adopting centralized operations completely disregarding investment from the communities struggling for a quorum.
In fact, most blockchain projects have inactive communication channels as participants left in droves as the market turned to soar this year. This was expected because, in the wave of last year x1000 gains, projects attracted mercenaries keen on turning in quick bucks. What they did is invest, join the project’s official communication channels, muted them and perhaps set a reminder for when their tokens would be unlocked. They didn’t emotionally invest in the project by making a contribution or having this feeling of being part of the community and as such, there is no connection to the project.
That’s where the problem lies. In a conclusive study, scientists realize that participation breeds pride which in turn make members draw value for their work. Anything that involves labor for realization is valuable especially if there is hands-on participation. It doesn’t matter the practice. This is called the Ikea Effect named after IKEA, a Swedish furniture retailer.
Wikipedia Defines the Ikea Effect as a cognitive bias “in which consumers place a disproportionately high value on products they partially created”.
What this means is that the actual task of constructing something—furniture of being a code contributor etc, causes people to value their creation.
Since it’s something psychological, the effect is visible in the crypto market. By actively becoming involved in a crypto project through code contribution, which is the closest analogy to building but with high barriers to entry due to technical requirement and the simple fact that it is actually hard to create money, to mining, education and project advocacy or even simple hodling, participants are connected to the project. You can see this happening every day in the space. Advocates like Gavin Andersen, Nick Szabo, Jed McCaleb, Vitalik Buterin and even Roger Ver are connected to their respective platforms because they were involved from the very beginning. They did work hard for the project.
It was arduous and happened at a time when the market had modest market caps. Then they did it not for money—as mercenaries do but for the love of the tech. Once their innovations were hardened and beliefs solidified through mainstream adoption, they grew and became part of the whole. With this, we can dig deeper and conclude that projects that have multi-million valuation before they actually roll out anything is prone to have profiteers not interested in the projects but out there searching quick gains. It’s my opinion that blockchain start-ups should grow from the bottom up, attract visionaries who are interested in the mission and vision statement of the project.