Tokenisation of spirits in Poland and abroad
Market trends make it very clear – consumers are increasingly quality-driven when selecting spirits. Hand-crafted varieties are gaining recognition. There’s already a huge demand for kraft beers, and the oldest wines and whiskies never occupy the shelves for long. The popularity of high-class vodka is also rising, especially in Poland’s home market. Producers of these kinds of innovative spirits always look for new sources of funding. Many of them turn to tokenisation.
Tokenisation of collector spirits
Representing unique goods as NFT no longer surprises anyone these days. New tokens appear basically every day. NFTs representing unique goods are no longer a surprise. New tokens appear basically every day. Most of them help in transferring the ownership of digital art pieces. There is no shortage of collectors who have set themselves the goal of acquiring the most prestigious NFTs.
Spouting manufacturers have been quick to recognise the great potential of the crypto industry. We all know how expensive aged or limited edition liquors can be. The cost of a single bottle can skyrocket, let alone the whole barrel. Unique spirits are recognised as collector’s items akin to works of art. And if so, they’re perfect for tokenisation. This opens up a world of new possibilities. There’s an option to digitally “split” a bottle or a barrel of unique alcohol into smaller fragments (of course, without even the need to open it). The purpose is simple: to allow smaller investors to participate. They don’t need to buy the entire container.
Spirits become nobler as they age, and thus they’re gaining value. If they’re a subject of tokenisation, the value of NFTs representing them also increases. This allows token holders to monitor the price of their liquor in a very transparent way. Traditionally, this process was much more difficult. Not to mention that even participating in the luxury spirits market exposes customers to fraud. Tokenisation deals with both these drawbacks. Again, the blockchain technology proves that it can make already known market mechanisms much safer and more accessible.
What does an investment in alcohol look like?
The potential of tokenization does not end with unique bottles, of course. Many producers have decided to The potential of spirit tokenisation does not end with unique bottles and barrels. Many producers have decided to incorporate it into their business model. There are some good examples in Poland, like Tenczynska Okovita and Six Seasons. The technology behind cryptocurrencies is very flexible, so there are many approaches to using it in spirit production.
Tokenisation of whisky barrels in production
The aging process is essential to finalising the production of many spirits. It crowns the work in the cases of beer, wine, fine spirits, and, of course, whisky. The most famous one, Scotch, matures for a minimum of three years. Without it, the beverage could never reach its final form.
The tokens in this model are emitted right before production starts. The barrel gets divided into parts – usually half a litre or seven hundred millilitres each. It draws the attention of many smaller investors, who don’t have to buy a whole barrel at once. This is very important, because investing in spirits in production usually means freezing the money for an entire period of aging. Only after this time can the tokens be freely traded. In the meantime, there’s a possibility to transparently observe a growth in their value as the liquor matures and gets more valuable itself.
How to exit the investment in alcohol tokens?
Sticking to the model described above, there are a couple of options after the alcohol maturation period ends:
- selling the tokens,
- collecting the finished product in an amount corresponding to the number of tokens held,
- leaving the spirit in its producers’ hands and sharing profits from its sales,
- staying in the investment for another period of aging (usually another 3 years in the case of Scotch whisky).
The flexibility of this system allows for a more relaxed approach to investing in alcohol. We can start it even if we do not intend to buy the whole barrel. In addition, when we want to sell the ownership of the goods, we do not need to have physical contact with them. We simply sell the tokens. This speeds up the whole process, lowers its costs and increases security.
The above example is, of course, only one of many. There are known cases of wineries and distilleries that have allowed payment in crypto for years. Some of them have gone a step further. They have offered to contract their production capacity.
Other alcohol tokenisation models
Every alcohol production facility has a certain capacity. On a given day, only a certain amount of liquor can be produced. This capacity can also be represented as tokens. These are often referred to as the “primary tokens.” Purchasing them is a kind of equipment lease.
The primary token holders are given a certain amount of produced spirits every day, and they’re fully entitled to them. But there are also derivative tokens that go into the investors’ crypto wallets. This constitutes a passive income. After some time, the value of derivatives exceeds the value of the funds that were put into the venture at the very beginning. After collecting a certain number of derivative tokens, it’s possible to just buy out the product. But there’s also a possibility of just selling the tokens themselves, even directly to the producer. The purchase price is often known in advance. This allows for an easy prediction of the return on the investment.
Considering the trends related to spirit tokenisation, it’s easy to make certain assumptions. First of all, it seems that issuers tempt with many possibilities of exiting from the investment. Most often, they’re offering to buy the finished product, sell the tokens, or remain in the investment for another period. However, this model requires investors to freeze their funds until the first batch of the product is made.
There’s also a strong motion to encourage quick investment decisions. This is primarily for two reasons. The first is that there is still a lot of scepticism in the crypto market. The second is the desire to quickly fund the production. Token issuers want to shorten the decision-making process and they incorporate various tactics to achieve this goal. It’s common to release tokens into several pools. Each successive pool means a lower rate of return. A quick decision is therefore more economically viable. This is not to say that potential investors in spirit tokens are scarce. On the contrary, it always means high turnover, and tokens sell in a matter of minutes.