Blockchain technology’s potential to massively change the way we store, exchange, and control information is at the threshold of hitting mainstream adoption with no signs of slowing.

NFTs will play a major role. While not yet universally adopted, NFTs have become widely acknowledged within a very short period of time.

For better or worse, everyone has started talking about NFTs - mainstream and independent media, governments, your mom... It seems like just a matter of time before everyone is jumping on the bandwagon.

Except for the fact that currently, NFTs are frankly, incredibly dumb.

Spend thousands on a  less than enthused ape? Dumb.

How about millions on a low-res punk? Even dumber.

What do Gwyneth Paltrow, Logan Paul, and Lindsay Lohan have in common? They are all pushing the sale of worthless NFTs. There must be something there.

Despite all of its fanfare for being a technology capable of disrupting industries, the mainstream adoption of NFTs to date has been underwhelming.

Why aren’t we leveraging this incredible technology to do more?

To us, that is where the true value of NFTs comes into play - utility.

Let’s not just use the capabilities of NFTs to create something of speculative value in the virtual world, but instead, use it to do something incredible in the real world.

We believe that NFTs should offer some form of real-life benefit, whether it be an exclusive experience or rare items. Let’s incorporate NFTs in a way that protects real businesses and real people, as it’s capable of doing and designed to do.

Imagine if NFTs provided an opportunity to combine a cutting-edge technological solution to problems facing a five hundred-plus-year-old industry – Whiskey.

There’s no doubt that the Whiskey Industry is well established. There’s everything from big players manufacturing at a massive scale for global distribution to smaller craft distillers limited to conducting sales on-site where the whiskey is distilled. This range of models does not mean the industry does not have its own set of problems. The largest areas for opportunities lie with the distillers, whiskey brands, and the secondary market.

MARKETING & GOVERNANCE

Like most collector items, part of a bottle of whiskey’s value is derived from its uniqueness.

Understanding this, whiskey brands will add the labels "Single barrel" or "Small batch" to their bottles to communicate the scarcity of the contents it holds.  However, the terms "Single barrel" and "Small batch" today sadly, are largely used as marketing gimmicks. There is no federal regulation or governance limiting a certain amount of production to be classified as "Single barrel" or "Small batch". One of the world’s most popular Rye whiskeys, Michter’s Rye, has “Single Barrel” printed in prominent red letters on its label yet it is produced and manufactured at a mass scale.

Connecting bottles in a release with an NFT collection puts true meaning behind the terms "Single barrel" and "Small batch".

By associating a limited release bottle with an NFT and storing it on the blockchain, it acts as a public record – distillers and consumers will know exactly how many bottles are available and, if desired, view the ownership of those individual bottles.

This will empower distillers to mean what they say when labeling a bottle  "Single barrel" and "Small batch", increasing the value of the limited release through the confirmed scarcity of the collection on the blockchain. Consumers can rest assured that it isn’t just a marketing gimmick, but instead, they are holding on to a limited release that was not mass manufactured.

SUPPLY CHAIN & SALES INSIGHTS

It's a complicated process to get a bottle of whiskey to appear on a shelf. A distillery must work with a distributor who works with the liquor stores to sell cases.

• A distillery is reliant on communication from the distributor as to the sales performance of the release.

• When communication from the distributor is unclear, a distillery is not receiving the most up-to-date information or worse – inconsistent information.

• The distillery lacks real-time sales insights.

Instead, consider the benefits of releasing an NFT collection on the blockchain.

Distilleries could have accurate and real-time data on how the release is doing down to the bottle level. Knowing the true availability of bottles at any given time can help them make data-driven decisions for the production of their next release as well as insights into how quickly the availability of the release becomes scarce.

END CONSUMER PURCHASING & THE SECONDARY MARKET

Buying anything is always subject to the access and the means to do so.

Access to the right location at the right time and holding credentials to enter a certain area are examples of this.

The means to do so are determined by possible limitations such as age and money. Purchasing a bottle of whiskey in a modern-day scenario would require that the consumer must 21 in the U.S., have enough money, and be at the liquor store at the time when the bottle is on the shelf.

This problem is compounded when a limited-release bottle makes its way to the shelves.

It’s no longer as easy as snagging a bottle off the shelf. Instead, limited availability may mean waiting for hours in line, possibly even camping overnight.

The stakes to purchase this exclusive bottle have increased – does an end consumer have the time to wait in line for hours for the potential access to a bottle of whiskey? Many people don’t.

A new purchasing opportunity surfaces when those who waiting in line to purchase their whiskey resell it at an inflated price to those who could not be there to purchase it. It snatches profits the original whiskey producer will never see.

This secondary market is where the true value lives of NFTs for limited-release whiskey.

Typically retailers and distilleries sell at a standardized price.

This initial price is set based on the availability of bottles at their highest point. From that point forward the bottles hit the retailer shelves and the first bottle is sold, instantly increasing the value of all remaining bottles due to supply and demand economics.

It is, however, not reflected on the shelf. The demand for the limited release or scarce bottles is still present yet the supply has diminished.

Unfortunately, the capacity to do so at scale today is not feasible for a number of reasons. However, it is theoretically possible through the use of NFTs.

• A distillery may choose to control its own supply by creating an artificial scarcity. They may decide to release 100 bottles at a specific price to see how it fairs – whether it is snatched up immediately or whether it takes some time for the supply to diminish. This aids a distillery in setting the price for future releases.

• If the first drop was gone within a matter of seconds, the distillery might elect to drop a 2nd round of the same bottle at a higher price in another NFT collection, thus increasing their profit. If it does not do as well the distillery anticipated they might consider adjusting the price to move their product.

The beauty of all of this is that the distillery can do this without an individual having taken a single sip of the whiskey. Therefore generating revenue to be put towards future batches earlier than expected.

Distilleries currently are only able to realize the profit on the sale of whiskey up to the point that it hits retail sales. However, limited release whiskies may often go on sale off-books via peer-to-peer sales in a secondary market.

Within the secondary market, prices for the same bottle may go far beyond the initial profit realized by the distillery, often for multitudes of what the original sale price of the whiskey may have been. This is an enormous miss for the distillery where additional revenue may be realized. In the way that the industry is currently set, there is no capacity for the distilleries or the whiskey brands to participate in the secondary market.

The backbone of NFTs is supported by something called a smart contract.

In layman's terms, a smart contract is a code that defines the behavior and allows the NFT to interact with the blockchain. Within these smart contracts, you may define a royalty percentage that may be split amongst different wallets and individuals.

Associating limited release whiskies with NFTs empower distilleries and whiskey brands to capitalize on the royalties that may be defined within the smart contract. So when a whiskey, in the form of an NFT, goes on sale on the secondary market the distillery or whiskey brand now will see a part of the revenue within the secondary market.

A primary use case for the revenue realized on the secondary market when an NFT is associated with a bottle of whiskey may be seen with the NFT collection, Party Horses Pregame. Party Horses partnered with Maker’s Mark to sell 2,000 relabeled bottles of Maker’s Mark bourbon as NFTs. The first month alone on the secondary market saw 1,016 transactions with a transaction volume of $120,975. If this was a distillery or whiskey brand that had launched the NFT that had established a standard 5% royalty this would be $6,048 with 0 expenses meaning that is pure profit. And, as of 2 months after the release, 81% of the NFTs still remain unredeemed. If a distillery or a whiskey brand were to launch an NFT collection with an even more scarce release, the sky's the limit!

CONCLUSION

As with every other industry, the whiskey industry has its own challenges and until we choose to address them they remain a barrier to further efficiency, profit, and ultimately success.

By associating NFTs with limited-release whiskey, distilleries and whiskey brands are taking the steps in the right direction. They are not only the leaders who recognize problems. They become the pioneers and trailblazers courageous enough to attempt to solve them.

Things that are unfamiliar to us can be intimidating and new technology definitely falls within that category. In times of doubt and treachery into the unknown, lean on those willing and able to help.

The Whiskey Network is launching in 2022 that empowers distilleries and whiskey brands to solve some of the industry's most prevalent problems by incorporating blockchain, decentralization, and NFT technology. You can stay up-to-date by signing up on WhiskeyNetwork.io or following on Twitter or Instagram –  @Whiskey_Network.