This article intends to provide a comprehensive guide to anyone invested in exploring blockchain technology and the wealth of opportunities. It could guide understanding how the system works, the use of NFTs, and how NFTs are going beyond the construct of digital collectibles. The article will also give a vivid insight into the next generation of NFTs and how it could be a disruptive solution across sectors.
The global luxury wines and spirits industry is one such industry that is taking note of NFTs to bring in the Phygital model that could revolutionize the sector and drive it forward. The industry was valued at $970 billion in 2019 and is expected to reach $1,411 billion by 2027.
With living standards increasing globally, the purchasing power and intent towards purchasing premium quality products are also rising. While most of the consumption is often associated with special occasions such as celebrations, the market caters to a sect of enthusiasts who genuinely appreciate their spirits.
While the market is on steady growth, a major roadblock is geography, where the products would not be able to reach their desired users due to several concerns. Alongside this, the growth of counterfeit spirits is also on the rise. These challenges will need to be taken away if progress continues and reaches the expected valuation in the next 5-6 years.
If you've been scrolling your social feeds in the last few months, you would have come across the term NFT. NFTs, or Non-fungible Tokens, took off in the previous two years and are revolutionizing the world with their constant innovation.
Non-fungible Tokens don't make anything clear on what it means. The term 'Non-fungible' means it is unique and cannot be replicated. Compare that with any cryptocurrency tokens such as Bitcoin or Polygon; they are fungible - where you can trade one for another and end up having the same thing.
Something like a painting is non-fungible. If you buy a painting, you can hang it in your living room, and you will be the sole owner of it - no one else will have it.
That's the same promise that NFTs live on, but digitally. When it comes to digital objects, owning something can be tricky because there can be thousands of copies. Instead, with any NFT you purchase, you can trace its originality and confirm its authenticity.
Thanks to blockchain technology, you could have thousands of copies of the same digital asset, but only one real product would be there. NFTs today aren't just limited to the above categories - it could be anything digital, but a lot of excitement currently is built around selling digital art.
The world of digital asset ownership took off in the last two years. NFTs aren't anything new, they've been there since 2014, but 2020 and 2021 brought them to light. NFT collections brought in a whopping $25 billion in sales in 2021, and there is still potential for the industry to multiply.
In 2020, sales volume from NFTs was just $82.5 million; this value increased by 200 times last year.
But this is just the start of everything and the foundation for even bigger success stories. At least 80% of the NFTs available right now are housed in the Ethereum blockchain (a drop from 95% in 2021), and other blockchains are also taking strides in implementing their marketplaces to provide space for NFTs.
Put simply, tokenization is converting a physical or virtual asset into a digital unit - aka welcoming your digital asset to the blockchain. Tokenization removes the territorial blockers and the intermediaries and opens up your asset to the world.
You can tokenize almost anything - art, videos, or real estate. Tokenization is the actual innovation in the field of ownership and the way we invest in assets. Companies continuously look at the token economy as a way to create new markets and capitalize on the opportunity. The global token market is expected to reach $4.8 billion by 2025.
The gaming industry has already embraced tokenization. The National Basketball Association (NBA) has the best implementation with their NBA Top Shot, a venture allowing fans to trade exclusive versions of tokenized highlights. A Lebron James NFT, a video of him doing a dunk, sold for more than $200,000.
Several other industries are taking note of tokenization and are bringing in disruptive innovation. Tokenization works in a way where a combination of numbers and letters replaces customer details. This, too, isn't new but has been there since the 1970s, popularly used by financial firms.
Imagine you have a farm worth $100 million. Thanks to tokenization, you can fractionize the farm's ownership and provide this to a broader group. Instead of giving complete ownership through shares, you can create a digital token - let's say each token is worth 0.1% of the farm, and you sell these chunks. These chunks could be sold as tokens, and anyone owning one could be an investor. This opens up more ownership and investment opportunities and reaches a worldwide audience.
Similarly, there are other tokens in different spheres. Alcohol tokenization is another exciting field where we see tokenization taking over the industry. NFT Wine, NFT Beer, and NFT Gin tokens are a few of the emerging popular tokens, providing enthusiasts, collectors, and investors a part of an exclusive line of spirits. These tokens are innovative in that they offer the opportunity to even go beyond the construct of digital assets and bring in physical ownership.
With the pitfalls in the current system, the alcohol industry is rapidly advancing with the use of NFTs to bring in a system that will ensure the key attributes of the spirits remain unhindered in the changing world.
According to a European Union Intellectual Property Office report, fake wine and spirits cost the global drinks industry about $3.18 billion each year – and experts predict that a staggering 20 percent of all wines sold are fake.
In such an environment where a majority of forgery and tampering occurs, there is a growing concern that the luxury spirit industry will become a crisis.
NFTs provide a viable solution
Being cautious and learning to detect a fake bottle can only get buyers so far, though. That's why NFTs are such a promising addition to the industry. NFTs allow real-time tracking of the wine bottles and help provide authenticity and verification on the blockchain.
Many large suppliers, including Pernod Ricard, William Grant & Sons, and Moët Hennessy, have begun offering NFTs via BlockBar, created in 2021 by the family behind Duty-Free Americas.
What makes NFT Whiskey and NFT Gin implementation even more inclusive is that it provides a ground for more exclusive distillers that produce limited exclusive spirits and capture the audience.
Several artisanal distillers worldwide produce fine blends that get stumbled on big spending and commercialized players. This results in the efforts of these distillers who take the time to produce some of the fine blends missing out. NFTs make it all even...
For example, in the case of YEN Gin, known to be one of the finest blends from Christchurch, brewed with the help of local artisans, with an unmatched blend that has undergone years of research, there is a new opportunity for them to be a part of something bigger.
Through the use of NFT Gin implementations, the distiller has the opportunity to reach the right target group with their limited stocks of luxury Gin. This is one of the first implementations of NFT Gin and is a compelling case study for any other artisanal luxury spirit brewer.
NFT Wine isn't a new blend that we see in the market but an attempt from the luxury spirit makers to innovate the industry. Especially in the niche of luxury spirit producers, the key roadblocks in the current system have been authenticity and exclusivity.
These two concerns have always led wine manufacturers to stay in a box and not drift away. However, NFT Wine changes it all.
Relying on the concept of Phygital products, these NFTs make wine a highly liquid asset. Here, the concept is straightforward. The refinery produces a limited set of bottles per batch, and the winery would then tokenize each bottle and link it with a wine NFT.
The NFT Wine digital collectible token will then be listed in a blockchain and on a platform for trading. Here, individuals will get the opportunity to own an NFT and then shortly be eligible to receive their bottle of fine wine.
Combining NFTs with wine ensures that the existing roadblocks are eased out, and the true enthusiasts and investors get an opportunity to get their hands on one.
Wine has proven itself to be one of the most resilient alternative assets over the past 30 years, yet access to investing in wine has been primarily restricted to a small group.
NFT backed by quality wine represents a significant step forward in opening up wine investing to a much larger community.
The combination might sound like an unusual pairing, but the luxury industry and NFT wine make sense. Wokenwine is one such initiative. Several other luxury wine refineries are trying to bring in blockchain technology to ensure that the industry continues to thrive against the odds.
This also is an opportunity for winemakers to increase their income. With no intermediary present, they have the chance to build a pathway to establish a direct connection with the customer - the creator receives the maximum reward and not the intermediaries.
Similarly, NFT Whiskey collectibles have also sparked popularity. Just like NFTs have transformed the art and sports industries, it is bringing the innovation spark to the alcohol industry.
While it might seem odd, NFTs are set to be the frontier for luxury drink brands. The NFT Whiskey tokens follow a similar approach to NFT Wine tokens, where you will not be simply purchasing an NFT but also receive a physical bottle as you confirm ownership of the token.
Global whiskey brands have already started their attempt to tie themselves to tokens and use NFTs as a Golden ticket-styled manner to purchase their luxury whiskeys by bringing in the Phygital concept.
Glenfiddich has already made its attempt by listing a limited spirit through NFTs. 15 NFT tokens, each representing a bottle of a 46-year-old Glenfiddich that spent 23 years of secondary maturation in an Armagnac cask, were sold for $18,000 per bottle, paid for with Ethereum.
NFT fine dining is another avenue that is emerging where food outlets allow users to make a reservation only by owning an NFT. Restaurants enable users to hold the native token to be a part of the club.
Big tier brands such as McDonald's, Pizza Hut, and Burger King earlier utilized NFTs as fast-food collectibles. Building on the case study, there is a better implementation of NFTs where exclusivity is coming to play.
The rise of NFT-themed restaurants is in a way where you will need to be a part of a collective that holds a certain NFT to make a reservation. This model is now followed in leading restaurants to be private dining spaces which members with the NFT could gain access to.
Most luxury-tiered NFT Gin and NFT Wine token holders also receive this benefit on top of everything else for being a part of the community. YEN Gin, for example, plans to provide access to selected private restaurants for its members. This is a part of the exclusivity plan that they've built around and their focus on community growth.
Based on the NFT, there will be options open for holders to also use selected bars that are exclusive and open to only a limited customer base. The NFT Gin token YEN Gin goes a step further to introduce private sessions with the creators to share thoughts and knowledge sharing, laying their importance on the project's priority on their consumer base.
Phygitall isn't a word that does roll off the tongue too quickly and is a buzzword that is increasingly becoming popular. Phygital is a product that bridges the gap between the physical world and the digital sphere. The objective is to bring the best of the digital world blended with that of the physical experience.
Phygital is the next trend of NFTs where individuals could own an NFT but also have a physical product or service. NFTs have dropped from the successful year of 2021, but the growth of Phygital products is set to carry the industry through to new levels.
The fall of cryptocurrency markets found its way to the NFTs, as Bitcoin dropped from a record high of almost $70,000 in 2021.
NFTs have often been related to digital artworks and collectibles, which has led to the question 'of whether it is actually worth the hype?'. With Phygital products, a range of physical ownership for an experience, a niche product, or some real-world utility that individuals could enjoy.
For example, with the NFT Gin-based spirit, YEN Gin, you could be purchasing an exclusive and unique NFT through the blockchain and also be able to get a version of this spirit for you to consume or store. The approach is similar to art and designerwear, where you could purchase a wearable in a game, which could be sent to you as an actual physical product.
This way, you would have the product in the metaverse and real-life.
Blockchain was one of the most searched and exciting terms in 2020 and 2021 with the unprecedented rise of cryptocurrency. A blockchain is a ledger that is shared around two nodes in a computer network. As this database is shared, it stores information electronically.
In other words, blockchain is a mechanism for recording information where it is virtually impossible or difficult to change, hack or cheat. It is like a digital ledger of all the transactions so that every record is stored securely, and you could cross-reference them later.
Each block has a selected set of transactions, and when a new transaction occurs, a new record is added to every participant ledger. A simple example of understanding blockchain better is Google Docs.
When a Google Doc is shared, the same document is sent to all the parties instead of copies. This creates a decentralized distribution chain with access to the document. And all these people could make changes in real-time - nobody is blocked away, and every change is tracked and seen.
However, one distinctive difference is that data on the blockchain cannot be modified once written. Of course, blockchain technology is more complicated than a Google Doc, but you get the reference.
Blockchain's usability is diverse, but its well-known usage is cryptocurrency and tokens such as Bitcoin and Ethereum. These cryptocurrencies are digital currencies, and in contrast to cash, these currencies are tagged to a public ledger with blockchain with an enhanced cryptographic security system where all online transactions are recorded and secured.
Bitcoin is often misused to refer to blockchain and cryptocurrency, but these are entirely different. The first blockchain that came into existence was Bitcoin in 2009. The Bitcoin blockchain is only the technology where the currency is used, while the term Bitcoin is only one form of cryptocurrency.
Other leading cryptocurrencies that have established blockchains include Ethereum ETH (which has tightly knit with the NFTs), Polygon (POLY), XPR, and Cardano (ADA).
As blockchain gains popularity, implementing the technology in the supply chain is crucial as it will aid in bringing more transparency to the entire workflow. In simpler terms, blockchain will ease the whole process.
One of the biggest pitfalls in the existing system is that there are unavoidable gaps in communication and transfer errors that eventually lead to more time spent on validating data.
This is a highly advantageous supply chain management system, and that's why so many companies utilize it – but it's about to go one step further. New technological advancements in blockchain present promising optimization and improvement opportunities across the supply chain.
Implementing blockchain in your supply chain has the potential to significantly increase transparency and traceability, in addition to reducing costs.
For example, in the case of YEN Gin which produces its delicate blend of gin in the outskirts of Christchurch, New Zealand, managing its supply and distribution gets relatively straightforward. With every transaction recorded on the blockchain, the NFT Gin could be traced easily, improving transparency.
Through this, the producers and the customers who receive their bottles of exclusive spirits could easily trace their origin and the products' characteristics. Another innovation YEN Gin brings is the NFC-powered tamper detection label ensuring that the physical and digital identities are identical.
These labels on the bottle of the NFT ensure that the chain-of-custody data is captured all along the supply chain with the help of blockchain technology.
The concept of renting is similar to that in real life - a person who owns a certain NFT has the opportunity to rent it out to someone who needs it for a brief time.
There are NFT marketplaces that have this option where they use Defi-like blockchain tech to facilitate secure transactions to guarantee that the NFT is temporarily owned by a selected wallet (user) and then returned when the rental is ended.
There are two types of lending - collateralized and collateral-less.
On a marketplace, owners can list their rental options, and renters can borrow the NFT on either option. The differentiation is, however, at the point where collateralized lending will need the rentee to hold collateral worth more than the NFT to safeguard the lender's interest.
In a non-collateral agreement, the borrower does not receive the actual NFT but a wrapped NFT that restricts a few functionalities. Once the rental agreement is completed, the wrapped NFT is burned. Both of these options will require the borrower to pay rent.
A Soulbound Token (SBT) is a new application from the NFTs where the token you purchase is non-transferable and cannot be removed from your wallet. SBTs can act like real life is a permanent token that is non-transferable. These SBTs are like the achievement badges you unlock in a video game when you reach a certain level.
But SBTs aren't just limited to achievements - you can tie them to any trait, product, or real-life product.
Like the name sounds, SBTs are tagged to your soul, meaning that you will own them for your lifetime, and nobody can take it from you. The idea behind SBTs is that it is a fix for reducing theft and scam.
Trust is built with the SBTs, and communities want to invest in SBTs in a way that builds trust and leads to something much bigger. With trust being an integral concept behind the upliftment and the popularity of NFTs, SBTs have become an even more powerful form of digital collectible, especially with projects that include NFT Gin and NFT Wine.
In the sphere of phygital products, where there is duality, Soulbound Tokens bring in a sense of trust, faith, and credibility to the NFT and the project that you are investing in. It also acts as an entry and to be recognized as an exclusive member of a selected community.
Exclusivity is an important feature we see in NFTs and luxury products. Along with exclusivity comes inclusion - to be a part of something special that not everyone has access to. The avenue of NFT Wine is built in this promise where most wineries are taking note of SBTs to provide access to true wine connoisseurs through Phygital NFTs and avail access to an exclusive club.
Similarly, the NFT Gin tokens are becoming excessively popular alongside the other alcohol NFTs with their soulbound nature. The NFT Gin range that YEN Gin tries to implement wants its customers to be closely connected and be more than just a spirit brand. The SBTs make it a reality, and everyone that purchases the NFT automatically qualifies to be a part of an exclusive private "YEN FOREVER CLUB ''.
Through this exclusive space, which is only accessible by holding the NFT, holders get to benefit from the various loyalty programs and eventually build to be a robust community.
The move by Mark Zuckerberg and Facebook to venture into a metaverse company increased the chatter around what a metaverse is. The metaverse is an integrated network of a world alongside the physical world where you spend your digital life. It will be where you and the rest of the people have an avatar, and you will interact with them through your avatar.
Essentially the metaverse is a 3D version of the internet which is the next step of evolution and could co-exist and be accessed in real-time. There are near implementations of the metaverse already intact such as Fortnite, the online shooter game. Users can engage, interact and earn virtual currency inside the game, but the significant difference is that it does not cease to exist when you switch off - you will be logging, but the world will continue to be alive.
This opens up a wealth of opportunities for individuals, brands, and firms to bring a new dimension to virtual reality. NFTs are expected to play a crucial role when we see the metaverse in action, with them being the transactional and functional building blocks.
Think of the metaverse as the second life you get to live. When you enter the metaverse, you will start again fresh where you could be doing whatever you want - or do things you never thought were possible.
You could purchase real estate, create games, socialize and collaborate remotely. The metaverse could revolutionize how we work and bring remote working to the next dimension.
You wouldn't need to spend time on the road or travel larger distances to meet friends or make it to the office - you could be making connections right from home.
The basic idea for the metaverse isn't complicated, and brands have many opportunities to explore. There are already quite a few developments as brands try to be early adopters.
Coca-cola is launching a soft drink NFT that is centered around loot boxes with Coca-cola-themed wearable NFTs, a sound visualizer, and a friendship card (revival of the 1940s trading cards)
Nike has partnered with the nascent metaverse to launch Nikeland, a branded virtual space, and has a partnership to build virtual footwear. This NFT footwear is hosted on Roblox and Nikeland.
Adopting the metaverse will offer unlimited space for events and festivals. In contrast to the current state of events and large-scale festivals, there is always a limiting factor and several other blockers such as travel and costs.
But with the introduction of the metaverse, all of these would be eliminated - the metaverse breaks all the barriers. You could host large-scale conferences, and attendees could participate from anywhere worldwide - no travel necessary.
The same goes for music festivals, where ticket holders could join the event wherever possible.
The first of this sort occurred in the shooter game Fortnite featuring Travis Scott in 2020 amid a worldwide lockdown, where thousands of players joined to be a part of the show.
Concerts and festivals were primarily based on ink and paper to grant access. With digitization, digital credentials were a thing, but with metaverse events, NFTs are the gamechanger.
Events in the metaverse would be virtual, and the essence of these events is that they would break barriers that were long-existing and hard to evade. But still, there are concerns on how to validate access and entry to the concerts and provide an experience that is not equal to visiting a concert in real life but better.
In such a scenario, NFTs could act as the token to provide access where concert organizers could use NFTs as tickets for these concerts. The entry into the metaverse will be based on the NFT you would purchase.
For event organizers, this will ease the entry discrepancies and prevent any counterfeit tickets from getting validated. Collectible NFTs could be made available, which could be tiered based on the value and the rarity.
A step further into the metaverse festivals, organizers could be providing lifetime access to NFTs using SBTs and selected NFTs with VIP access. These rarer tokens could open up experiences that a normal NFT holder would not experience.
With the advantage of blockchain, verification and access would be simplified and easily administered.
Coachella already has a pilot running for their festival on the metaverse, where they have an exclusive set of 10 NFTs that provide the holder lifetime passes. Holders of these tokens, as long as they remain in their wallets, could join the Coachella Festival in the metaverse every year.
Additionally, the organizers are releasing a Sight and Sounds collection with 10,000 digital images and sounds that would entail access and a few more added benefits.
The Phygital metaverse model is a solution for the real world to sustain its relevancy to the metaverse. While it is challenging for several sectors to entirely switch to the metaverse, the answer to getting started lies in Phygital.
Especially in avenues such as retail, luxury products, and fashion, Phygital is the most relevant shift brands should take now. This will see better relationships with customers and personalization and eventually create a comprehensive community that rallies around the brand (CRM done).
Web2 was all to do with digital marketing, where the web became consumer first and driven by data. Much of this growth happened around centralized platforms like Facebook, Instagram, and YouTube that influenced the growth and grew alongside.
But web3 will be different. Web2 redefined the front-end of the internet. Now, web3 will look at advancing the back-end, powered by data transferring ownership from private entities to private citizens.
In the case of web2, marketers will solely be held acquiring, engaging, and retaining. But with web3, the construct goes beyond the customer - it includes all of the stakeholders.
However, web3 is likely to usher in the next big leap in marketing - community marketing.
Web3, however, will not be one big community but a mix of different niches that co-exist. The focus will be primarily on building closely knitted one-to-one (peer-to-peer) communication through the creation of communities.
For NFTs, exclusivity plays a key role. Inclusivity, community, and communication will play a key role. Here, the remaining marketing tools that were vividly used - PPC, CRM, and targeted pushes- will not play an influential role. Instead, communities will thrive...
For example, with YEN Gin, the entirety of their fine liquor is built around creating a community and expanding. It might seem a step back from the outset, but this community's capabilities are beyond measure.
The NFT Gin initiative from YEN Gin makes this happen as they plan to create exclusive communities around their consumers. Earlier, consumers were just numbers on an excel sheet, and today, the consumer will be a real person with a name with whom the brand interacts.
Through the YEN Forever Club, this becomes a reality. With every purchase of YEN Gin, through the NFT Gin, you receive access to an exclusive community of enthusiasts and investors that share the same passion as you.
You also receive first hand access to the creators to establish a two-way channel, lead to better connections, and eventually build personal ties. This level of community marketing will be the next, cutting through the noise at the web2 level.
The YEN FOREVER CLUB is a vivid representation of the future.
A decade back, if someone told you that a digital file containing art sold for over $90 million, you would think it was a joke. But this is true in 2022, where NFTs have taken the centre of attraction with record-breaking sales.
The Merge was the most expensive NFT sold in history, at $91.8 million in 2021. Designed by renowned digital artist Pak, he broke the record for the most valuable living artist in history, surpassing the 1986 Rabbit painting by Jeff Koons.
The First 5000 Days NFT was another NFT that was a benchmark for the rest for quite some time. The art by digital artist Mike' Beeple' Winkelmann fetched $69.3 million.
Several other collections make record sales in NFTs - with pieces of digital illustrations in the NFT universe. The Bored Ape Yacht Club (BAYC) is a collection of visual arts featuring different portraits of Apes and caught worldwide attention.
CryptoPunks is another implementation of this with 10,000 NFTs of digital illustrations. In May, the collection reached a valuation of $2 billion.
Right now, we are looking at the future of NFTs. Earlier, until now, NFTs were on one dimension of ownership. NFTs were designed to be fraud-proof digital certificates, but now we are seeing them go further with the concept of ownership and authenticity. In practice, NFTs can be attached to anything from digital or abstract to a serious and tangible good.