If you’re new to the world of NFTs, or non-fungible tokens, this article will do a better job of breaking it down for you than I can here.
But if you’re pressed for time, NFTs are unique data, stored on a blockchain-based ledger for authenticity and ownership purposes, that represent virtual things like art and media.
As an example, you could purchase the rights to a digital artwork and your ownership of that art would be represented by the NFT. Even though you would have nothing physical in your hand, like a pink slip or the actual art itself, the NFT would prove you own the idea of this art.
Sound complicated?
Well…get up to speed quickly—people are already selling NFTs for millions and millions of dollars. How many millions? Try $69 million, which is the sum that Beeple sold the NFT to his digital artwork for a few weeks ago.
Does the buyer own the actual piece of art? No. Just the idea of it.
NFTs can also represent moments in time, or historical firsts. Like how Jack Dorsey just sold his first Tweet for $2.9 million. Someone now owns the idea of that.
Many collectors expect NFTs to replace sports cards in the future, as now you can own the digital representation of a card and not have to worry about getting it scratched or damaged for valuation purposes.
I’m expecting a bubble so big that, when it pops, people will be so stupefied they won’t know what hit them. But maybe I’m the naive one because I’m not making millions of dollars.
I got an email from the WWE this week about the upcoming release of special Undertaker NFTs, representing historic moments in his career. Who’s determining the value of these things when they can literally be fabricated at will?
To be clear, I don’t think the idea of an NFT or the blockchain ledger is the bubble. I think the idea of arbitrarily assigning astronomical values to assets that have not yet proven their worth is the bubble.
What does this have to do with whiskey? Quite a lot, actually.
The idea of whiskey has been growing in value for the last decade, as rare bottles and historic labels continue to fetch lofty prices at auction houses. Those prices have affected MSRPs in the process, as global drinks companies and retaliers realize their liquids are worth more and more every day.
The problem I see looming for the increasing valuation of these whiskies is consumption. More and more people are buying whiskies they don’t plan on drinking, which means there are more and more bottles just sitting there in homes all over the planet. Hence, supply for rare whiskies is increasing because no one is opening their bottles, while more whiskies continue to be released.
Consumption is decreasing because the purchasing of rare whiskey has become more about the hunt, and less about the enjoyment. It’s now a contest for guys who like to text photos to their friends and say: “Look what I got.”
To me, it’s the same motivation that would drive someone to purchase Dorsey’s first Tweet. You go to their house for dinner and they show you their collection of rare NFTs, purely for the bragging rights.
But the value of those whiskies and NFTs (and, in turn, the “look what I got” opportunity) depends entirely on their scarcity, or the perception of their scarcity. Each bottle may be one of a kind, each NFT completely unique, but what happens when there are millions and millions of unique rarities?
When the idea of owning the idea of something becomes less impressive, the value of the idea of owning that idea becomes less valuable.
Once people realize how much Weller is actually in the world, how cheaply Buffalo Trace can make more of it, and how unspecial it actually is, you’re going to see a lot of disappointed collectors.
I fear the same fate is coming for NFTs and the unique taste of millions.
As more people wake up and realize that life’s value consists of the appreciation of moments, rather than the documentation of them, the value of artificial experiences will hopefully decline.
-David Driscoll
