Wave Four: Combination — Asset-Backed NFTs
In the seventh part of this NFT series, we explore the real world use cases for NFTs through asset-backed tokens.
Editor’s Note: This is the seventh part of our NFT series! We’re grateful to continue this correspondence with everyone in the DeFi Singapore community. If you’d like to contribute in any way, check out the details at the end of the article. Otherwise, let’s jump back in again!
No matter which way we look at it — NFTs are community-driven.
The most fascinating thing about Wave 3 is that, unlike the previous waves, communities that would’ve otherwise never existed are now forming and rallying around the possession and investment of these community-owned NFTs.
It is the power of community that raises awareness, creates hype, fosters a sense of belonging, and raises the floor price of any burgeoning NFT project. In turn, the crazy sales volume allows the creator of the project to further incentivise long-term holders through added utilities.
Today, we’re transitioning into Wave Four — which is really a combination of the previous three Waves — Asset-Backed NFTs
From digital collectibles with added utilities to the formation of exciting creativity-driven and sustainable communities — we are witnessing a thing of the future before our very eyes. It is crazy to think that NFTs are still in their nascence and it’ll only continue to evolve.
From the first Three Waves, we see a steady progression in the development of the NFT market. In this post, we will be talking about the Fourth Wave — Combination. In this Wave, you’ll start to see eclectic combinations of the previous Three.
First off, what are asset-backed NFTs?
Asset-backed NFTs are relatively self-explanatory.
It loosely means that the price or value of a particular NFT is backed by a real-life, physical asset.
Owners of Asset-Backed NFTs usually have two options — redeem the physical asset at any given time or within a specified period or keep the NFT for investment which can be resold at a higher price point on a Secondary NFT marketplace like Opensea (given the item appreciates in value over time).
Now before we get all too technical and bore you to sleep, think about valuable physical assets (and their approximate annual market values) like sneakers (USD$79 billion), wine (USD$360 billion), diamonds (USD$90 billion), and watches (USD$7 billion) etc.
The market value for these items are mind-boggling — in the range of billions of dollars. With the proliferation of blockchain technology, it is a safe bet that these numbers will only continue to explode.
Now that we’re done with the preamble, we’re going to take a look at some Asset-Backed NFTs on the market. Ready? Let’s go!
Diamonds — Icecap
Everyone knows the popular phrase that was written for Broadway which was later popularised by Marilyn Monroe — “Diamonds are a girl’s best friend”. But it seems that blockchain is the new best friend.
Icecap is a company that utilises blockchain technology to sell their diamonds. Each NFT is backed by a GIA (Gemological Institute of America)- grade diamond and housed in a vault protected within the Dubai Multi-Commodities Centre.
Customers have two options — leave the diamonds vaulted and resell their NFTs on the marketplace at a later time for profit or redeem the physical diamonds themselves.
The current floor price for the entire collection stands at 3,100 USDC with its most expensive diamond going for 22,528 USDC and can be found on NFT Marketplace OpenSea.
Icecap CEO Jacques Voorhees was known to be responsible for introducing the online trading of diamonds back in the 1980s which caused waves and transformed the industry. Again, with the advent of blockchain technology — it seems that he is taking another big shot yet again.
Now, let’s take a look at another asset — alcoholic beverages.
Alcohol and liquor aficionados are some of the world’s most willing buyers — ready to pay top dollar for a bottle of wine or an exclusive collection of the finest liquors. As it stands, the total market value stands at USD$1trillion worldwide.
Whiskey — Blockbar
BlockBar is a wine and spirit NFT marketplace launched in October.
Powered by the Ethereum blockchain, the company offers NFTs directly from luxury liquor brands. Each NFT is backed by a physical bottle and consumers have the ability to trade in their digital bottles for physical ones or allow BlockBar to store it for them in a facility located in Singapore.
The platform has an impressive portfolio of brands — Dictador, Glendfiddich, Penfolds, and The Dalmore — with Glenfiddich being the first to partner with the NFT platform. For the launch, 15 bottles of Glenfiddich’s 1973 Armagnac Cask Finish Single Malt Scotch Whisky were put up on sale at USD$18,000 per bottle.
Wine — VineArt.org
VineArt.org bridges wine and crypto by digitising wine ownership and has a marketplace for wine investment, trading and purchase. Additionally, it offers services like art design for wine NFTs, price advisory for future wine prices, e-catalogues, and wine NFT minting.
As a Decentralised Autonomous Organistion, all records and data like financial transactions are recorded transparently on the Polygon blockchain. Additionally, it allows for structured voting and complete community involvement.
This is a monumental step for an industry that has long depended on auctions or third party suppliers — allowing buyers from all over the world, unrestricted by the limitations of being a member of an “inner circle”. Since NFT drops come directly from brand owners, doubts over buying an inauthentic product are eliminated.
We are already seeing real word use cases for cryptocurrencies in traditional markets and these NFTs are only going to propel that proliferation.
Any market that deals with physical items faces a host of problems such as ownership disputes, poor due diligence in record-keeping, and counterfeits.
NFTs are the perfect solution for these markets. With Asset-Backed NFTs, these items are registered on the blockchain as digital tokens with unique digital signatures which are openly viewable to all. Tracking these items and verifying their legitimacy becomes effortless because of a decentralised ledger that records any activity that occurs.
Additionally, counterfeiting runs rampant in these markets. For example, special wine collections are easy to counterfeit because most people don’t have the palate of a wine connoisseur. Regular people would have to rely on the vendor and price to judge if a wine is of a high quality or not.
With an NFT, provenance of said wine bottle eliminates fakes and can be tracked.
In the next article, we’ll dive into Dynamic NFTs!
THIS IS NOT FINANCIAL ADVICE
Cryptocurrencies like NFTs are nascent and in very early-stage startups. They are heavily subjected to speculation on the secondary markets and should never be treated as a form of investment.
Our write-up is a humble attempt to show the technological advancements and innovation that the blockchain technology possesses.
Readers are advised to engage their own financial advisors and do their own due diligence before making their first purchase.
All information expressed here are in the views of the writer based on the date of article.
We are looking for industry leaders to co-create this together. Please write to [firstname.lastname@example.org] for your interest to participate in this community-written project.
LESLIE DANIEL CHAN. Founder, DeFi Singapore