“Recession always encourages entrepreneurialism and innovation. It does that every time because when people have no options they look at other things.”

– Theo Paphitis

As Keyspace Studio’s newest Advisory Board member,@FrankieDTanikie.eth(Web3 moniker), says, “The economic outlook heading into the 4th quarter of 2022 is highly uncertain at a time when humanity is undergoing rapid and dramatic technological change.”

However, this dualism is nothing new:

• July 1990: The US entered a recession in July 1990, marking the end of what was then the longest peacetime economic expansion in US history; and on August 6, 1991, Tim Berners-Lee introduced the public to the World Wide Web ushering in Web1.0

• April 2000: The dot-com bubble burst–in dramatic fashion–in April of 2000, leading the NASDAQ to lose 25% of its value in a single week. Then, in 2001, Steve Jobs and Apple would launch both Mac OS X and the iPod, foundational innovations that would set Apple on a course to be the first trillion-dollar market cap company. Two decades later, this period, reflective of Web2.0, also saw the emergence of the social platform business model with early versions of Amazon, eBay, and Google demonstrating the power of two-sided marketplaces and centralized control.

• 2007-2009: The Great Recession of 2007-2009 wreaked havoc on the global economy at the dawn of the mobile internet era; in 2007, the iPhone was launched and helped birth a host of social-local-commerce apps like Uber, Square, Instagram, and Airbnb

• Pre-Internet: We can go even further back and see that the founding of General Motors was in 1908, during a recession; Hewlett Packard founded in the late depression era of the 1930s; Microsoft founded during the 1970s oil embargo

Some of the most innovative companies arose from harsh economic times taking advantage of technological developments that were taking place at the time–and as the saying goes, “the strongest steel is forged in the fires of hell.”

We are now experiencing something that feels similar; significant economic headwinds at a time when great technological shifts are accelerating, and new paradigms are born faster than we’ve ever seen.

• Over 100 years ago, there was an unprecedented change in the global economy due to the convergence of three innovations – electricity, the telephone, and the internal combustion engine.

• Today, the global economy is undergoing a radical transformation due to artificial intelligence, blockchain technology, robotics, quantum computing, and genomics, to name a few. More converging forces are moving exponentially faster than we’ve ever seen in the past.

What does this mean? It means innovation is accelerating faster than ever in history, despite the macroeconomic conditions, and opportunity is both abundant and omnipresent.

This set of companies innovating during times of economic challenge does not imply that every company launching or starting in the current environment will be successful. Still, it is an encouraging set of facts that suggest this is no time to slow down and sit on the sidelines.

We discussed in the last blog post the migration from NFT1.0 to NFT2.0.

• 2017-2021: NFT1.0, or “the PFP” era, corresponded with Gartner’s “Peak of Inflated Expectations.” A time where Web3 projects overdosed on FOMO (fear of missing out), and corresponding digital-gold-rush investors couldn’t spend fast enough

• 2022: Expectations have come crashing down, and it would be safe to say we are planted firmly in the “Trough of Disillusionment,” with the volume on some of the largest NFT marketplaces off over 95% from their peak.

But does this mean we’ve witnessed the death of Web3 and NFTs? Not even close.

There’s been a massive shakeout and a lot of learnings to make the next generation of solutions stronger and more sustainable. So now, we are moving from NFT1.0 to NFT2.0 or from the “Trough of Disillusionment” to the “Slope of Enlightenment.” Ultimately ending up in the ‘Plateau of Productivity.’

A small sampling of recent announcements just in September 2022 provides market evidence that NFTs are very much alive:

• Starbucks Odyssey experience will allow members to earn and buy digital collectible stamps (NFTs) that will unlock access to new, immersive coffee experiences.

• Walmart announced the launch of two immersive experiences in Roblox. Called Walmart Land and Walmart’s Universe of Play, the spaces offer unique interactive content and entertainment for customers

• Tyler Hobbs and Dandelion Wist demonstrated the power of high-quality established NFT artists by generating $17m in proceeds in a single hour with the mint of their QQL generative art project.

Brands, in particular, see Web3 strategies as targeting thehighly attractive GenZ demographic, projected to control over $33T in assets by 2031, surpassing Millennials. The GenZ population views their ability to engage with brands far beyond writing Yelp reviews; GenZ wants to co-create experiences, have a stake in the success of the brands they identify with, and share a mission in which they believe.

Experiences and shared goals will define NFT2.0’s use by major brands and marketers, and beyond the technology, there are forces at play driving this shift. Privacy laws are growing increasingly complex and fragmented around the world. Digital platforms are restricting the use of tracking technology. Brands that rely on more open access to data must find new ways to connect and engage with their customers, and NFTs are demonstrating their role in an overall marketing plan.

NFT2.0 represents a platform to engage individuals during this rapid technological change. We will look back on this time when companies who continued to build through the uncertainty of the environment fortified their position in the hearts and minds of their customers. This is “no time to slow down.”