Non-Fungible Basket (NFB)
The concept of “basketing” NFTs introduces an innovative approach that allows for the grouping and bundling of various assets together. In this blog post, we will explore the potential of NFTs beyond simple pictures of dragons and apes and introduce a new type of NFT called an NFB (Non-Fungible Basket). NFBs enable NFT owners to utilize them as containers to lock up multiple other NFTs, providing similar functionalities to container ships and index funds. These NFBs can be created, traded, transported, and the locked-up NFTs within them are owned by the holder of the basket.
NFTs — A Quick Recap
Recalling the NFT craze in 2021, where people made significant profits selling unique digital assets, it’s crucial to understand the true potential and usefulness of NFTs. In essence, an NFT represents the uniqueness of a digital or physical asset. For example, consider the original painting of the Mona Lisa, which has a single original version and only one current owner. While countless replicas of the Mona Lisa exist, printing a high-resolution photo and hanging it on your wall does not grant ownership of the original artwork; it merely represents a copy.
So, what sets the original apart?
Beyond the obvious distinction between a printout and a painting, the value of the original lies in its authenticity and ownership history, often referred to as lineage. NFTs address these fundamental aspects of asset ownership in the digital domain. An NFT provides a means for anyone to verify the originality of an asset and determine not only the current owner but also the previous owners and the duration of their ownership.
NFTs Beyond Digital Art
While NFTs are well-suited for digital art, they face limitations when it comes to representing physical assets owned by everyday people. Assets like houses, cars, or rare Pokémon cards from two decades ago are firmly rooted in the physical world, not the digital realm.
To apply the benefits of NFTs, such as authenticity and ownership lineage, to real-world assets, two key challenges must be addressed:
1. Trust in the representation of the digital asset: Ensuring that the digital representation accurately represents the physical asset is crucial. While the link between the NFT and pure digital art is straightforward, verifying the authenticity of physical assets, such as a Ferrari, becomes more complex.
2. Secure storage of the physical asset: When the digital representation of a physical asset is circulating, measures must be taken to prevent the physical asset from being transferred or accessed simultaneously. This prevents potential double-selling or unauthorized possession of the physical asset.
Various proposals, such as ERC-4519, ERC-6672, ERC-6065, and ERC-6956, aim to solve these problems in a trustless manner. However, these proposals are still in the early stages and require further testing. An alternative approach is to involve a trusted party that can authenticate the digital representation, ensuring it accurately represents the physical asset. Additionally, this trusted party can safeguard the physical asset while the digital representation is in circulation, ensuring that the physical asset remains locked until the digital NFT is transferred or released from circulation.
NFT Baskets for Fine Wine Trading
Another asset class that can greatly benefit from NFTs is fine wine. Fine wine is a unique asset class that has been around for centuries and has a proven track record of delivering consistent returns. However, the fine wine market suffers from fragmentation, lack of transparency, and liquidity. This is where NFTs can make a significant impact. By tokenizing fine wine, we can bring transparency and liquidity to the market, enabling anyone to invest in fine wine and benefit from its consistent returns.
Strauss & Co has partnered with Fanfire, a web3 development company, to play the role of a trusted entity, ensuring:
1. The digital NFTs accurately represent the physical assets.
2. The physical wine bottles are securely stored in a temperature-controlled cellar.
In 2022, Strauss & Co successfully launched Africa’s first NFT auction in collaboration with South Africa’s leading fine wine producers. This auction featured five NFT collections, with a total auction value of approximately $180,000. Building upon this success, Strauss & Co is organizing another auction in 2023, featuring six truly rare world-leading fine wine collections. The anticipated auction value for these collections is expected to surpass $1.5 million. Each collection consists of approximately 250 bottles, and to facilitate trading and the transfer of ownership, Fanfire has developed the NFB to group these NFTs within a collection.
While the collections are more valuable when grouped together, the owner of a particular basket owns all the underlying wine bottles and is entitled to redeem any of them at any time. The NFB smart contract allows the basket owner to open, remove one or more tokens, and close the basket. To prevent the owner from removing items from the basket during a transfer, the contract requires the basket to be closed. When a token is removed from a basket, the corresponding NFT is transferred to the wallet of the current owner of the basket. From there, the owner can list, trade, burn, or redeem the NFT as they see fit.
Conclusion
In conclusion, the concept of NFBs (Non-Fungible Baskets) introduces a groundbreaking approach to the world of NFTs, expanding their potential beyond simple digital art. By allowing users to lock up multiple NFTs within a single container, NFBs offer new possibilities for asset grouping and bundling. Whether applied to physical assets through trusted entities or utilized in asset classes like fine wine trading, NFBs bring transparency, liquidity, and enhanced ownership control to the NFT ecosystem. While challenges such as trust in digital representation and secure storage persist, ongoing advancements and innovative solutions hold the promise of further unlocking the power of NFTs and their role in shaping the future of ownership and asset management.
