The exact history of whiskey production is hard to isolate and recount, partially because the process of distillation has been around since pre-roman times and partially because of the incomplete records during our forefathers’ amber innovation.
However, let’s say that since the 15th century in Scotland and Ireland, something resembling our modern day tipple has been produced, sold and revered in homes, taverns and atop hillsides!
Strangely, but understandably the modality of delivery hasn’t changed much over the last 700 years. Whether by cask, bottle or glass, our interactions with whiskey ownership and consumption have been limited to storing, ageing and drinking the hallowed amber nectar.
The problem for the whiskey industry is that bottling and serving is something that occurs 5 to 25 years after the distillation process, meaning that there is a long and slow pay off for the capital invested in distilleries and the master craftsman that artistically curate the products we buy.
That, however, might be about to change. The advent of NFTs (Non-fungible tokens) has created a buzz around digital counterpart ownership, fractional investment, value exchange markets and more. Let’s find out more about why NFT’s will revolutionise the whiskey industry.
The Size of the Prize
The Whiskey market globally is worth $63 billion, with Europe, North America and APAC driving the majority of the demand growth year on year.
Although 60% of the market represents blends, the single grain proportion of the market is diversifying with a wide range of premium, high-end premium and super premium products coming to market fuelled by investors rather than consumers.
These investors understand that the value represented by these highly sought after artisan products can deliver returns that are 20 times greater than that of commodities like gold and silver.
Unsurprisingly, shrewd, high net worth individuals are quietly amassing collections in the understanding that they are prospecting on the value of rare, limited runs which are outstripping other investments due to the levels of demand and the scarcity of the product.
For instance, a Bowmore Black in its original wooden box, which was distilled in November 1964 went to auction at Christie’s last year with a reserve price of $20,000. So, the value of these items should not be underestimated.
The difficulty in some respects lies not in the investor demand, but in the supply.
Why Disruption is Inevitable
There are a range of intricacies in the whiskey market for distilleries, as many have to be propped up for many of their early years by investors with deep pockets and patience, as sharing your early output with producers who sell blends only usually occurs after 3–5 years.
Many of the more exclusive and limited product lines can take multiple decades to mature and come to market, meaning that the stock and its value is incredibly illiquid, whilst remaining a cost burden in terms of storage, planning and management.
For distilleries, it makes sense to leverage technology to create innovative new ways to access markets, consumers and capital which was previously inaccessible.
On the other side of the market, interested investors are hampered by a lack of opportunity, a lack of flexibility in the marketplace and a lack of stock availability.
By democratising access and allowing the marketplace to innovate to fulfil demand, new investor segments can be grown both demographically and geographically, whilst developing the knowledge base and appetite of new entrants to create value for themselves through their investment and by proxy for the distillers, producers and holding groups.
What NFTs Enable
NFT’s create the opportunity for physical assets, whether bottles, casks or other real world items to be aligned with an immutable and transparent digital record of investment and ownership.
For example, Kinsale Spirit Company recently auctioned an NFT that represented a 200 litre cask of rare Irish Whiskey. This allowed a new market of whiskey aficionados to participate in the auction and invest in a way that is unique, innovative and provides support to the companies ongoing success.
NFT’s can ensure safe, secure, peer-to-peer exchange globally 24/7, this means that the once prohibitive rare whiskey market can function without the red tape and bureaucracy that has impeded it’s growth in the past.
One of the many ways in which NFT technology may continue to drive innovation is in fractional ownership, where groups or collectives may be able to invest in the digital assets tied to super premium whiskey in a way that previously would have been the preserve of high net worth individuals, democratising access to the marketplace and community.
DramEx and the Future of Whiskey Investing
DramEx is a first of its kind decentralised marketplace for whiskey. It is the brainchild of Ernest Cantillon.
The DAO will allow participants to purchase NFTs through their marketplace, which can then be held, traded and physically redeemed through DramEx. They will also release a Dram token which will provide governance voting rights to holders, membership rewards and yields for staking.
DramEx are creating a new template for what whiskey investment could become over the next 10 years. At the same time as leveraging digital technologies to democratise investment, they are also ensuring that the DAO supports talented independent distillers and young boutique distilleries to access similar markets to the established distillery networks, who may be seen to have a monopoly on the investment market.
Regardless of whether you are an avid NFT collector, a whiskey aficionado or a crypto enthusiast, the future of whiskey investment is somewhere you’ll be wanting to keep a close eye on.
Unlike in 1494, where a handwritten note mentioning “aquavitae” was seen as the first written note on whisky production in Scotland, the future of whiskey investment will have an immutable, transparent record forever on the Blockchain!