Starting right about now, we’re all going to be hearing the term “RWA” a lot when it comes to crypto
and NFTs.
And here at the beginning of that trend, few web3 companies exemplify what’s taking shape more so
than BAXUS.
Chances are you’ve probably not heard of BAXUS unless you attended Solana Breakpoint in Amsterdam
last fall, and sat in on their talk. But it was at Breakpoint where I met up and sat down with Tzvi Wiesel, founder of BAXUS – a business focused on RWA, or real-world assets.
In this case, those assets are bottles, cases, and barrels of rare and common whiskey, wine, and various
spirits.
BAXUS recently launched a website where buyers and sellers—as well as borrowers and lenders—meet up to trade, borrow, and lend against rare, exclusive, even relatively common whiskeys and other spirits,
including wine, tequila, mezcal, run, bourbon, rye, and others.
In short, BAXUS is brining whiskey and wine on-chain—onto Solana, to be exact. “One of the biggest things that has historically been a part of the whiskey industry is the myths and legends,” Tzvi told me.
“But so little information has been actually recorded. It’s all just passed down via stories. But by working with producers, manufacturers, collectors, traders, and distillers, we can preserve those stories in the metadata so that 150 years from now, someone can open a bottle and know who made it, what went into it, the logic behind it, and they can see how it has aged or matured.”
To be clear, though, BAXUS isn’t about becoming storytellers to the Jack Daniels of the world. There’s a compelling investment story here for those of us in the crypto space.
Already, BAXUS has 100,000 users, some of whom are 70 and 80 years old, which tells you that even though the backend is built on blockchain, the UI doesn’t scream “CRYPTO!”
The company is serving four user bases:
- Novices: Folks new to whiskey, and who want to learn about the beverage without the
intimidation of wandering into a liquor store and not really knowing what to ask or what to look
for. - Drinkers: Those who already know what they like, but want to explore the wider world of
whiskeys from various regions and sub-regions. - Collectors/Traders: These are the specialists, seeking out investment-grade opportunities in
spirits, whether that’s focusing on Irish pot-still whiskey or first-issue bottles from new
distilleries. - Institutions: In some instances there are financial management-firms providing against
collections of whiskey, or they’re retailers putting up collections as collateral for working capital
provided by those financial-management firms.
It’s that fourth base of users where opportunity lies for crypto-investors.
The lending side is based on NFTs—tokenized bottles and barrels of whiskey—and is open to anyone
with as little as $100 to start. BAXUS runs the borrowing and lending side through Bridgesplit, a
specialty-asset lending platform. Think of Sharkyfi, the NFT borrowing-and-lending site, only that
borrowers put up their whiskey as collateral.
That collateral—the bottles and barrels—is first delivered to bonded warehouses, where they remain
while those assets are in the program.
There, bottles are authenticated using vision-based AI trained to know what’s real and what’s fake.
BAXUS has tens of thousands of images of what labels are supposed to look like and what the color of
the liquid inside should look like. With that knowledge, AI can easily pick out the fakes. With collectible
wine, Baxus is working with an Australian company that shoots lasers through bottles of wine to read
the chemical components inside, thus instantly flagging fake from authentic.
Bottles are then tokenized as an NFT, and those NFTs are available for the borrower to use as collateral
on Bridgesplit.
Borrower and lender negotiate terms. Maybe a borrower wants a $6,000 loan on a $10,000 collection of
Scottish Speyside whiskies and is willing to pay 12% for a three-month loan. A lender might respond with
an offer of $5,000 at 13% for the same three months. The negotiations include repayment frequency
(often monthly) and a grace period (typically one week).
If the borrower defaults, the NFT immediately reverts to the lender’s wallet.
At that point, lenders have three options:
- Take physical delivery of the bottle.
- Keep the NFT in their personal portfolio of whiskey on the BAXUS site, where you can track the value (a Magic Eden for whiskey and wine).
- Instantly put the NFT up for sale at the market price to recoup the loan and any profit.
Across more than $1 million in lending volume to date, not a single default has occurred.
“Walking away from an NFT isn’t very hard, but you’re not likely going to walk away from the barrel of whiskey you’re borrowing against. Too much value there,” Mary Gooneratne told me. She’s co- founder and COO at New York-based Bridgesplit.
Increasingly, mom-and-pop liquor shops are getting into the game. They might own several rare bottles
worth several hundred or a few thousands each that don’t move quickly. By tokenizing those bottles, a
liquor-store owner can borrow against the asset to restock other products, while also keeping the bottle
for sale on their website. If a buyer comes along, they can sell the bottle, collect the proceeds, pay off
the loan on BAXUS, and have the warehouse ship the bottle to the buyer.
The big question: How do I know the prices are real for the whiskey I’m buying or lending against?
The BAXUS site addresses that through price transparency across thousands of transactions. For
instance, the 2021 Hibiki Blossom Harmony, a sought-after Japanese whiskey, is listed at $275 on the
Baxus Marketplace.
Across 30 transactions dating to last October, that same whiskey has sold for between $170 and $400 per bottle. So the current price for a collector, investor, or drinker seems fair.
And loaning, say, $150 on that bottle—or, maybe, $1,800 on a case of 12—seems fair as well. In a default, you know you’re very likely to recoup your original loan, plus a potentially sizable profit. BAXUS is great example of web3 technology bridging across to web2 to bring physical assets on-chain; to authenticate them as the real deal; and to tokenize the material world in a way that allows collectors and investors to monetize assets that, until now, were not easy to value.
I can drink to that (sorry for the bad pun at the end).