With the explosion in value and popularity of cryptocurrencies, it's not so surprising that non-fungible tokens, or NFTs, would follow in their tracks. But news that an NFT recently sold for over $2 million really caused a stir and again raises the question: Is this a new, special asset class with longevity or just the NFT version of the Squid Game cryptocurrency?
Well, it wasn't exactly the NFT itself that was so valuable, but rather the cask of Scotch whisky, equivalent to about 608 bottles of 51% alcohol by volume whisky, that was attached to it and a digital image of a painting of the cask that was represented by the NFT that brought the auctioneer's gavel down. Let me explain.
Sailing on a whisky river
There's something special about The Macallan, a revered single malt Scotch whisky, aged in oak casks, or barrels, seasoned by Oloroso sherry or bourbon. Founded in 1824, The Macallan Distillery in Scotland can produce as much as 15 million liters of the spirit annually, which can sell for between $60 for a double cask 12-year-old to $7,800 for a crystal decanter of The Macallan M.
Two weeks ago, though, a rare cask of 30-year-old Macallan whisky sold at auction for a stunning $2.3 million, breaking the previous record of $1.9 million set in 2019, also for a bottle of Macallan.
With a potential for over 600 bottles of whisky from the cask, that makes the average cost per bottle for the winning bid over $3,780 per bottle, quite possibly a bargain!
While connoisseurs will say every bottle of Macallan is unique, what set this particular one apart from others is that Metacask, which says that it is "the world's first NFT marketplace for whisky cask investments," commissioned artist Trevor Jones to create an abstract painting of the cask called The Angel's Share.
An NFT commemorating the artwork, along a digital image of the oil painting, was included in the Macallan cask auction, giving the winning bidder all three items: the whisky, the digital image of the painting, and the NFT of the image (token enthusiasts might see it as having won the token and getting a very exceptional Scotch whisky in the bargain).
Creating a better record of authenticity
This might become a more common experience as the NFT helps further establish provenance for ownership of a cask. The digital tokens are a type of virtual certificate of authenticity that one could present to prove ownership of a physical asset, such as the whisky bottle or the artwork. Auctions for wines and spirits have a long, luxurious history extending back to Christie's founding in 1766, but whisky's popularity has taken off in recent years, and Scotch now sits atop the auction house list.
Yet because NFTs are so new and reside within a blockchain, the same digital ledger utilized by Bitcoin (BTC 2.07%) and other types of cryptocurrencies, there is a sizable skepticism about their existence. It's still difficult to explain how ownership of a digital image of something physical actually has utility or value.
Marketplaces like Metacask, which function as platforms much like Amazon or eBay, but for digital assets, may be able to help bridge that gap by normalizing NFTs and introducing them to new markets.
Still a lot to prove
So while the headline-grabbing news that an NFT sold for $2.3 million isn't quite correct, or at least needs more nuance to explain (for example, how much did the NFT's inclusion add to the uniqueness of The Macallan cask?), it's clear NFTs are slowly gaining acceptance.
And if those who can afford to pay such prices for a bottle of Scotch whisky, however rare and exceptional it is, start buying into this new and growing niche of the crypto world, it may yet establish itself as a force for wealth creation in the future.