When it comes to blockchain and non-fungible tokens (NFTs), there are three types of people with varying degrees of knowledge on this new form of technology: those who have never heard of NFTs, those who have heard whispers but don’t fully understand how it works, and those who see them as the future. Most of us fall somewhere in the first two categories, which makes this the perfect time to learn about NFTs and what role they play in the alcohol industry.
What are NFTs?
Let’s start at the beginning. NFT stands for non-fungible tokens, which are digital assets that are stored on the blockchain and bought and sold on certain platforms. If that didn’t clear things up, then think of it this way: if you traded a dollar for a different dollar, there’s no monetary difference and that would be a fungible transaction. It is an even trade. The same can be said of the majority of cryptocurrencies. One bitcoin is the same as the rest. With NFTs, things are different. Two unique characteristics of NFTs are that each one is unique and indivisible.
Initially, NFTs were sold as a way for digital artists to sell their works as one-of-a-kind. While the image can be reproduced, only the actual buyer retains full ownership. Normally, this ownership of a digital asset would be difficult to verify, but by relaying everything through the blockchain, there is a virtually incorruptible way to track authenticity. Basically, NFTs have given digital artists a new way to monetize their art and prevent counterfeiting.
The advantages associated with NFTs translate well to the world of luxury goods where authentication is essential. Collectors of premium wines and exclusive whiskies can purchase with more confidence when they use NFTs to avoid fraud and ensure authenticity. With the way NFTs work, these luxury goods are also more securely stored so there is less risk of damage, but more on that later.
What Does NFT Crypto Mean?
Currently, there are different cryptocurrencies, which are digital currencies that use encryption technology to protect transactions. Cryptocurrencies are exchanged via a secure computer network that offers a decentralized exchange so that users don’t have to go through banks. Bitcoin was the first, and subsequently has received the most attention, but other cryptocurrencies have emerged since the inception of bitcoin. Dogecoin is just one example, but Ethereum (ETH) is the platform most associated with NFTs. While other cryptocurrencies have the capability to deal in NFTs, so far Ethererum has been the only one to fully embrace and support NFTs.
Where are NFT Markets?
These tokens are sold on specific marketplaces that are comparable to Amazon, but for the digital world. In addition, each marketplace tends to have a unique niche, so one marketplace may be better than the others simply based on the assets you are interested in purchasing. Blockbar and BarrelFinance are two good places to start if you want to browse the market for rare wines and spirits.
The Basics of Wine NFTs
As you might expect, blockchain technology has quickly evolved to go beyond solely digital assets and now incorporates the ability to use NFTs to purchase physical objects and real-life experiences. Purchasing an NFT directly ties your transaction to the physical art, music, video, wine, or whiskey that you want to purchase.
When you purchase an NFT, you are essentially speculating and hoping that the item will increase in value on the marketplace. Since NFTs are centered on the idea of scarcity, there is a chance that someone will want to purchase your NFT. By no means is this guaranteed, but rarity does drive up prices on items. For anyone who loves wine or whiskey, the NFT marketplace provides the perfect opportunity to acquire unique and rare bottles. In fact, many wineries and distilleries are attaching a tasting experience and/or a unique piece of artwork to a limited release to enhance the wine NFT value.
In addition, some wineries are solely NFT based. For example, Hello Fam is only offering NFT launches where an NFT translates into a 6-bottle case of their Fam Genesis Vintage 2021. Buyers will receive a unique piece of digital art as well as the physical asset of the wine, which will be stored in a temperature-controlled facility that is completely insured. Customers can either sell or trade their NFTs on the marketplace or redeem – also known as “burn” in the NFT world – their NFT to receive their wine.
Whiskey makers and aficionados are also entering NFT marketplaces. The brand Glenfiddich was one of the first to offer whiskey NFTs. During their first foray into the new BlockBar marketplace, which specializes in luxury spirits, they offered 46-year-old bottles that also spent 23 years maturing in a second Armagnac cask. Each bottle was represented by 15 NFTs. Keep in mind that NFTs are a reflection of the asset’s real-world value, but also factor in other variables that fluctuate with the market. The batch of 15 bottles sold out in just a matter of seconds for $18,000 (or 4.7 ETH) each.
Within 24 hours, bidding on BlockBar had driven up prices and bottles were selling for between $189,000 and $288,000. The founders of BlockBar expect other major brands to follow suit and have been in contact with producers from every sector of the spirits industry. The success of the Glenfiddich NFTs have provided a template for other brands to follow.
While bidding on jewelry, art, and other expensive items isn’t a new phenomenon, NFTs are helping to lower the risks that can come with investing even if you go through a reputable auction house like Sotheby’s or Christie’s. With this more traditional type of investing, customers can’t pay in cryptocurrencies and there is still the risk of fraud. You could end up spending thousands of dollars on a fraudulent bottle of wine or whiskey.
In addition, having to handle and transport physical collections introduces the potential for breakage, water damage, and destructive exposure to extreme temperatures. There is also the risk that an investor will give into temptation and open the bottle. These risks, compounded with the fact that authenticity is difficult to confirm, make NFTs a more practical option for collectors and investors.
BlockBar has addressed many of these issues by immediately transporting the bottles from producers to a secure and climate-controlled storage facility in Singapore. The bottle can remain safely in one spot while trading happens and the NFTs continue to change hands on the digital marketplace. In addition, since BlockBar is blockchain-backed, every transaction is recorded so that the authenticity can always be traced. In this way, NFTs are providing a safer way to buy and sell luxury items, including whiskey and wine.
Metacask is another specialized marketplace where collectors can buy and sell casks. Like other NFT marketplaces, ownership is immutably tracked for a more secure experience. Metacask is different in that it publicizes sales prices for a completely transparent marketplace. Typically, cask NFTs will start at a few thousand dollars, but can also reach into the tens of thousands.
Just like other NFT bottles, casks are stored at a distillery or protected under bond at a designated location. The owner can hold on to the cask for as long as they like and hope that they receive a profitable return on their investment as the liquor ages. When they are ready, the owner can either sell the NFTs or pay someone to bottle the casks for their personal use.
Bars are also entering the NFT game and looking for ways to not only make money but market their business. Food brands have set an example for how this might work. For instance, Pringles sold a digital image of a golden canister titled “CryptonCrisp.” This created marketing buzz and helped improve brand recognition. Bartenders are putting their own spin on this concept by selling NFTs for digital images of cocktails, cocktail recipes, and entire cocktail menus. Although copyright laws don’t apply to recipes because they are deemed as facts, NFTs can provide a way for bartenders to “mint” the recipe and provide historical documentation of the recipe’s origins.
Restaurants are also finding ways to incorporate NFTs into their business models. For example, the Quality Eats NFT includes dinner for six, an original drink recipe, and one free “Into the Ether” cocktail per visit. Buyers can burn their NFT and enjoy a delicious dinner at any location or sell the NFT. While these are just recent examples, bars and restaurants are excited about the opportunities that NFTs present and they are working to find new ways to leverage new marketplaces.
The Bottom Line on Whiskey NFTs and Wine NFTs
NFTs can feel confusing at first, but once you understand the problems it is trying to solve, things start to come together a little bit more. For collectors and beverage aficionados, wine and whisky NFTs present a unique opportunity to purchase rare bottles that have the potential to skyrocket in price. So, whether NFT is a new abbreviation for you or you are an NFT expert, hopefully, this has helped to bring things into focus and give you an idea of the potential that NFTs have across the beverage alcohol industry. For now, it will be exciting to see how alcohol and hospitality brands develop new ways to sell unique items and experiences.
What is an NFT?
NFT stands for non-fungible tokens. They are used to represent digital art and other collectibles as verified assets that can then be traded on a blockchain-supported marketplace.
What is the NFT market?
An NFT market is simply where you go to buy and sell NFTs. The easiest way to think about it is as an Amazon for NFTs. There are different marketplaces to choose from and many of them specialize in certain items.
What does NFT crypto mean?
Ethereum is the main cryptocurrency that is used to purchase NFT. This helps to create secure and traceable transactions that help to verify authenticity.
What is a wine NFT?
NFTs for wine represent a bottle or case of wine. When you purchase a wine NFT, you can either “burn” it and collect your wine and any other items associated with the NFT, or sell it on the marketplace.
What is NFT whiskey?
Whiskey producers are also selling NFTs that represent a rare bottle. Owners can sell the NFT on the marketplace or redeem their NFT for the bottle.
How are NFTs shaping the beverage alcohol industry?
NFTs are helping to create a safer and more secure way to invest in and collect luxury spirits and rare wines. Owners can have their investment safely stored until they are ready to collect or sell and the authenticity will always be verifiable.
What is an NFT drink?
An NFT drink can be a piece of digital art of cocktail or a unique recipe that can only be seen by the owner.
What is Metacask?
Metacask is a marketplace where collectors can purchase entire casks.