Non-fungible tokens — commonly referred to as NFTs have become somewhat of a buzzword over the past few months. This is unsurprising, given that NFTs, such as that in the form of digital art, have sold for millions — with the artist Beeple’s ‘Everydays — The First 5000 Days’ selling for US$69m. However, the use of NFTs in the digital art arena has somewhat distracted us from the amazing potential of this technology. From metaverse land ownership to real-world invoices, the potential uses for NFTs are rich and varied.
Let’s find out what NFTs are, why they are useful to the whiskey industry, and how DramEx plans to leverage their potential to create a new value stream in the world of boutique distilleries, artisan products and amber investments.
What are NFTs?
Think about buying a house… how do you actually ‘buy a house’?
You employ a solicitor to broker an exchange of deeds, to transfer the ownership of a property from one party to another. So buying a house is actually an exchange of legal documentation (alongside a pot of money!).
Think of an NFT as just this. A digital contract that is a representation of ownership. The bit that seems to confuse people in many cases is the ‘non-fungible’ aspect.
To speak to this, let’s take an example of a bottle of mass produced whiskey… if you had a bottle of Tullamore Dew original and your friend also had one, you could exchange bottles and both of you would have the same product to drink and share. This is fungibility. Something that isn’t unique that can be exchanged for another identical item without any change in value.
An item being ‘non-fungible’ means that it is unique to the criteria of that item and cannot be exchanged for an identical counterpart. To keep the whiskey analogy going, let’s say… in your wine cellar you had a Dalmore 40 year old, 1966, signed by Richard Patterson! Something that is unique, individual and rare, this is a non-fungible item.
Enter NFTs. You can create ‘a digital ownership deed’ for that rare, unique bottle, which can act as a store of value, alongside the physical item and be more flexibly traded and engaged with than the current modalities of list and auction.
Now you understand what it is, let’s look into what it can do.
Why are NFTs so useful?
Well, like the digitisation of any physical process. The digitisation of ownership deeds in the form of NFTs on a blockchain (or distributed ledger) has been transformative.
It has created marketplaces that didn’t exist before, generated frictionless value exchange and has changed the way that capital can flow towards certain creators, businesses and industries.
Rather than buying, trading or selling tangible real-world items, you are enabling an internet-only digital ownership layer that can monetise reputation, creativity, output and potential.
Let’s think about it through the lens of a slow process like whiskey maturation.
After your distillation process, a Scotch Whisky (for example) needs to spend at least three years before being able to be monetised in the form of a blended whisky product. With most single malt bottles you see on the shelf of your local off-license or liquor store having been aged for 8, 10, 12 or 16 years.
Just think about that, you have invested in a distillery you believe in and craftsmen that have a proven ability and you need to wait a decade to deliver a product to market!
And, along comes an enabling technology like NFTs.
You can mint an NFT, auction it, generate capital against an illiquid stock. Now you have a digital counterpart that can be traded as many times as the investors like without the physical cask moving anywhere from its safe and secure environment and if it gets to the point where someone wants to redeem it for the bottled product, they can.
Sounds pretty special, well there’s more.
How DramEx will use NFTs?
Kinsale Spirit Co. recently sold the first ever whiskey cask represented on the blockchain as an NFT.
This historic event saw the cask — pallet no. 14730, which has been maturing in bourbon barrel since 2001, Sold for $100K, generating capital to support their new distillery, near Summercove, Kinsale.
Kinsale Spirit Co. are the launch partner for DramEx and their novel exploration of NFT technology in relation to whiskey investment has created the foundations for DramEx’s first ever community governed whiskey NFT marketplace.
DramEx will utilise NFTs to connect investors, distilleries, collectors and crypto-enthusiasts with whiskey products from casks to bottles, collectibles to ephemera. DramEx’s NFT marketplace will create new access to investor capital, opportunities to solve inventory challenges and build cross border, global interest all in a simple, frictionless environment that is easy to use and straightforward to onboard new participants to.
A first of its kind NFT marketplace for whiskey investment. What is not to like? Crypto,tick. Whiskey, tick. NFTs, tick. Exchange, tick.
It’s difficult not to get excited!
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