Investment Grade Whisky Fund on the Blockchain

There are tons of use cases for Blockchain mostly related to finance compared to non finance applications. In my time I have spent years in the Banking industry and also developed many use cases as a Management Consultant working on Blockchain research.

Most of the money in Blockchain is being spent by big financial institutions on R&D in the space so you can forgive the many use cases being presented from that arena.

But lets not forget about the wider world out there. There are many opportunities for outside of the box thinking when it comes to a revolutionary technology like Blockchain.

There are interesting and cool concepts which may not be mainstream out there. I think these industries should also be looked at when assessing for the use of Blockchain. We just need more people to explore the opportunities.

I was talking to a friend the other week about Whisky and how he is sourcing and buying rare Whisky as a hobby. I thought that is quite interesting so looked a little more into it.

That’s how I came up with the idea for a Blockchain Investment Grade Whisky Fund.

Opportunity

There is something that is currently being overlooked in the Blockchain startup space I believe. Alternative investment funds are not a new thing but why isn’t anyone really talking about something like this for the Blockchain?

What about being first to market with a blockchain fund for alternative investments?

Alternative investments isn’t for everyone but they are still an attractive market for those wishing to get into something a little different. Why aren’t there more funds out there? I think it’s because it is a niche market and set up and operational costs make the whole venture not that attractive.

One of the beauties of the Blockchain is that it allows for the simplification of operational costs. No need for expensive IT infrastructure, the on boarding verifications of investors and dealing with transfers of money. Issuing paperwork and confirmations for ownership and then the whole management of distributions. The Ethereum blockchain can handle all of these through the issuing of tokens and utilising smart contracts.

You can have 5 investors or 1000 into a Blockchain Fund. The operational costs ain’t going to scale up as they would in your traditional businesses.

If you pledge Ether to an address you receive in return a token signifying your ownership stake in the fund. Simple as that, the unit registry function of funds management is taken care of.

For anyone that collects rare whisky as hobby here is a way to scale up and get similarly minded enthusiasts on board.

Why Whisky?

I picked whisky because it’s not part of a registration system like other valuable assets are. You don’t need to convince any government agency that a bottle of Whisky exists and then have to register its existence. Unlike other physical assets such as a car, house or land there isn’t a whole administration process to prove ownership.

Rare Whisky as an alternative investment is a non traditional concept which is also what the Blockchain technology is.

For a company looking to build on the Blockchain Alternative Investment Funds model then Whisky might be a good way to start off with.

Digitising a physical object for the Blockchain is also becoming relatively easy. I can think of two startups Chronicled and Provenance who are building IoT devices to link a physical item to the digital world.

Not as strange as you think

There actually exists a rare whisky fund out there. Back in 2014 The Platinum Whisky Investment Fund was launched in Hong Kong.

The fund attracted 37 investors with a buy in at USD $250k. That’s a decent chunk of USD $10 million right there. Not exactly child’s play money.

Over a period of 18 months the collection also increased in value by approximately 26%!

Value Proposition

  • Using a technology such as Blockchain allows for niche alternative investment funds to be set up with lower ongoing operational costs.
  • The fund isn’t restricted to a specific geographical region. You can open it up to anyone regardless of borders. There are no associated costs for international money transfers , forex or delays in payment.
  • Liquidity for backers to withdraw and enter into the fund easily by the transfer of ownership of their Whisky tokens.
  • Investors can pledge any amount since the costs to bring someone onboard is the same regardless of their contribution size.
  • No regulatory reporting requirements when dealing with cryptocurrency in most jurisdictions.
  • Whisky enthusiasts can enjoy the ownership of a large scale rare whisky collection.

How It Can Work

Here is a simple high level diagram showing how the parts can come together.

Basically:

  • Set up a whisky fund with a public address to receive cryptocurrency
  • Issue back coins/tokens to all who pledge
  • Cryptocurrency is used to purchase rare whisky. Conversion to fiat currency is required.
  • Whisky inventory is tagged and tracked on the blockchain
  • Somewhere to store the Inventory
  • Some kind of UI to showcase the collection

Regulation

There is a bit of a grey area when it comes to Blockchain cryptocurrencies. Perhaps all these terms of “Investors” and “Funds” shouldn’t even be used here. You can be a little creative in the words you use. Maybe I should have used other terms instead such as “Backer”, “Pledge”, “Pool”, “Inventory”. The regulators have some work to do to get ahead of how fast the Blockchain startup industry is developing. Here’s a way to nudge them along even further.

In the meantime cheers to Whisky!

Whisky is just the beginning…

Exploring Use Cases for the mass adoption of Blockchain technology. Co Founder of Whalefolio.com