Flicking through the latest Whisky Magazine, there's a very good article by James Bunting about whisky NFTs... WAIT! Come back! I know you're probably rolling your eyes Thinking "Haven't we done NFTs? Arn't they dead?" but this article looks into Blockbar and the way they've approached it. Blockbar are one of the highest profile players in the whisky NFT space. Essentially offering unique picks, they have partnered with distilleries including the Dalmore and Ardbeg and the blend brand Monkey Shoulder to produce a different type of offering, the NFT backed with actual whisky. The interesting thing with these tokens is two fold; each token relates to a bottle of physical whisky, and if the token is redeemed for a bottle then the token is destroyed. This is not an uncommon practise in many other fields of investing. Gold and precious metals may be bought but held by a trusted third party, and wines held by brokers may be bought, sold and traded without ever physically moving. In this case the value of the bottle can fluctuate over time, but as it is only the token being traded then it becomes a way to easily trade whisky as an asset without shipping the bottles left and right. One other clever aspect of Blockbar’s business model is that they’re not trading in rare bottles that exist on the open market. This isn’t about investing in Pappys, Macallans and Yamazakis which have their value set on the open market and at auction, but rather than by securing exclusive bottles and working with the distilleries in marketing these bottles to give them a legitimacy and profile they might not if it was an indepent bottling of a cask sourced on the open market, or with restrictions from a distillery. This rarity gives the whole process something missing from many NFTs – Scarcity. Digital art NFTs operate on a similar market to baseball cards. In those markets the value of the rarest cards goes up amongst a sea of ordinary high volume cards which may fluctuate in value with some being worth a little more or less based on the tastes of the buyer, but never reaching the stratospheric value of the most expensive. Many digital art NFTs are marketed on the basis of being one of one, or a limited series, but when everything is scarce then it stops being notable. In Blockbar’s model however there may be 400 bottles of whisky and therefore 400 tokens and the whisky is not available outside of those tokens. The scarcity comes not from the tokens, but 400 bottles out of thousands made by a particular distillery. These tokens are then stored and traded on the public Etherium blockchain, allowing anyone to see the provenance of a token and verify its authenticity. However, Blockbar only allow trading of tokens on their own market. Essentially they have created a scarce product, and a market to trade it within. What this sort of whisky-via-token-issue does is make whisky primarily a tradeable asset. It is making flipping whisky the primary objective instead of drinking it. This may already be the ambition for some, not having a bottle in your hands, replaced with a token that rises and falls in value, changes the focus of the offering and the target customers. It does also open up the ability to trade bottles for those not in an area of distribution, as pointed out in Whisky Magazine. What will be interesting to watch is how the virtual market interacts with those priced in Dollars, Pounds and Euros. Operating in cryptocurrencies will be a barrier for many whisky collectors, but once a rare bottle hits the open market in traditional currencies then it not only sets a marker for that whisky, but also could see the token value move in comparison. If you've made it this far, I'm happy to discuss or answer questions about the tech. I'm not an evangelist for it, and I think it's one technique, not _the_ answer.
Posted by Chris Ratcliff at 2023-05-05 20:29:22 UTC