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Why Businesses Are Building On Solana | Baxus, Tzvi Wiesel

By Lightspeed

Published on 2024-05-29

Discover how Baxus is transforming the wine and spirits industry using Solana blockchain technology, offering instant settlement, proof of presence, and DeFi integration for collectors and distilleries.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

The Genesis of Baxus

Baxus, a groundbreaking platform built on the Solana blockchain, is revolutionizing the way rare wines and spirits are traded, authenticated, and valued. Founded by Tzvi Wiesel, a former professional spirits trader, Baxus emerged from the inefficiencies and price disparities Wiesel observed in the whiskey market. As a young collector, he quickly realized the potential for arbitrage between different states and countries, which led him to develop a more efficient system for price discovery and trading.

Wiesel's journey from a whiskey enthusiast to a professional trader highlights the unique characteristics of the spirits market. He explains, "Bottles, in particular of whiskey, makes one of the things that drew me to it from a collectibles perspective, was they're actually deflationary. If they only make 200 bottles of something, and then you have one, and I have one, and I have 15 other people I want, every time we open one, there's one less of that bottle in circulation, and they'll never bring it back."

This deflationary nature of rare spirits creates an inherent value proposition for collectors and investors. As bottles are consumed, the remaining inventory becomes increasingly scarce, potentially driving up prices over time. This dynamic sets the stage for a unique market that Baxus aims to optimize through blockchain technology.

Bringing Real-World Assets On-Chain

Baxus represents a fascinating case study in bringing real-world assets (RWAs) on-chain. Unlike many crypto projects that start with blockchain technology and then search for a use case, Baxus began with a clear business need and identified blockchain as the optimal solution. Wiesel emphasizes this point, stating, "We weren't going after the crypto community and saying, 'Hey, we're going to try and sell you something new.' We actually were like, 'No, no, no. The most blockchain, least crypto we could do with this at the beginning is the better.'"

This approach led Baxus to develop a system that leverages the benefits of blockchain technology while abstracting away the complexities that might deter traditional wine and spirits enthusiasts. The result is a platform that provides digital proof of ownership, instant settlement, and improved liquidity without requiring users to interact directly with cryptocurrency or manage private keys.

Why Solana?

The choice of Solana as the underlying blockchain for Baxus was driven by practical considerations. Wiesel explains, "We settled on Solana, but then all of the earliest marketplaces because originally we're like, 'Great, we'll just use some existing NFT marketplace infrastructure. We'll focus on building the vaults and the physical operations.'" However, the team quickly realized that existing NFT marketplaces, often priced in volatile cryptocurrencies, were not suitable for their use case.

Solana's low transaction fees and high throughput were crucial factors in the decision. Wiesel notes, "Our users don't know what gas is like they don't interact with it. They don't see it. And that was important to us was that like we can, you know, literally that we can have the money to afford to be able to pay the listing fees and the transfer fees and et cetera."

This focus on user experience and cost-efficiency demonstrates Baxus's commitment to making blockchain technology accessible to a broader audience, particularly those who may be skeptical of or unfamiliar with cryptocurrencies.

User Experience and Wallet Abstraction

One of the most innovative aspects of Baxus is its approach to wallet abstraction. Recognizing that many of their target users are not necessarily tech-savvy or familiar with cryptocurrency wallets, Baxus has developed a "light mode" that allows users to interact with the platform using traditional email-based login systems.

Wiesel describes the process: "You login with your email. That's the first step. So you're logging into the software, into the platform in the same way that people are very familiar with almost any of, almost any platform now online, you have to use an email to login." This email-based login system creates a wallet on the backend, allowing users to interact with the blockchain without needing to manage private keys or understand the intricacies of cryptocurrency wallets.

This approach is particularly beneficial for older users or those who are primarily interested in the spirits themselves rather than the underlying technology. Wiesel notes, "We have users on our platform who are well into their 80s, because they're whiskey enthusiasts, but they're not necessarily interested in learning about the future of the financial ecosystem and how they're going to change the world. Like they just want to buy their whiskey."

The Marketplace Experience

The Baxus marketplace is designed to replicate the familiar e-commerce experience while leveraging the benefits of blockchain technology. Users can browse listings, make purchases using credit cards or cryptocurrency, and manage their collections all within a user-friendly interface.

One of the key features of the Baxus marketplace is the detailed information provided for each bottle. Wiesel explains, "If you click into any of the individual bottles listed on the marketplace, you can do a full 360 degree turnarounds. We scan each individual bottle. So even the quote-unquote NFT is not a, 'Here's a stock image.' This is the specific exact bottle that you're buying."

This level of detail and transparency is a significant improvement over traditional liquor store websites, which often use stock images that may not accurately represent the specific bottle being purchased. Baxus's approach ensures that buyers know exactly what they're getting, including any imperfections or unique characteristics of each bottle.

Custody and Redemption

Baxus operates a custodial model, storing the physical bottles in secure vaults. This approach allows for authentication, insurance, and proper storage of the valuable spirits. When a user purchases a bottle on the platform, they have several options:

  1. Keep the bottle in the Baxus vault, where it remains securely stored and can be easily resold on the marketplace.
  2. Redeem the bottle and have it shipped to their desired location.
  3. Consume the bottle and potentially participate in the "proof of pour" system (currently in development).

The flexibility of this system allows users to treat their purchases as collectibles, investments, or consumables, depending on their preferences. Wiesel emphasizes the importance of actually enjoying the spirits, stating, "That's the goal. It's like we want people to be able to eventually drink this and find this. And some of them are, I think I have to check, but we definitely have bottles in there from reprovish and early 1900s bottles of bourbon that are still sealed. And you want people to actually drink that and try that and enjoy that and experience that. It's not just supposed to sit in a museum."

Proof of Pour and Community Engagement

Baxus is developing an innovative feature called "proof of pour," which will allow users to document when they open and consume a bottle. This feature serves multiple purposes:

  1. It helps track the reduction in supply of rare bottles, potentially impacting market dynamics.
  2. It encourages users to share tasting notes and reviews, building a community around the appreciation of fine spirits.
  3. It provides valuable data for collectors and enthusiasts about the quality and characteristics of different releases.

Wiesel describes the potential impact of this feature: "For a lot of these rare and interesting bottles, it's actually really beneficial to everyone to know that there's one less in circulation. So that's kind of the reward system is like, hey, if you're drinking this, if you're sharing tasting notes and your review and you're helping other consumers, like, so, hey, this was really worth it or this was great or, hey, this was awful."

This community-driven approach to data collection and sharing adds significant value to the Baxus ecosystem, creating a more informed and engaged user base.

DeFi Integration and Liquidity

One of the most exciting aspects of Baxus is its integration with decentralized finance (DeFi) protocols. Through a partnership with Bridge split, Baxus has enabled on-chain lending against bottles and barrels of whiskey stored in their vaults. Wiesel reveals, "There have been over $500,000 worth of loans originated against people's bottles and barrels, like actual tasks of whiskey that are being stored because you have proof of the asset is in our vault."

This DeFi integration opens up new possibilities for collectors and investors:

  1. Collectors can access liquidity without selling their prized bottles.
  2. Investors can earn yields by providing loans backed by real, valuable assets.
  3. The system creates more efficient price discovery and valuation mechanisms for rare spirits.

Wiesel notes that some lenders are actually hoping for defaults, as it would allow them to acquire valuable bottles at a significant discount. He explains, "They are literally hoping that they end up with the underlying asset because it means that they're buying their favorite bottles of whiskey at 50 cents on the dollar."

Revolutionizing Distillery Operations

Baxus's impact extends beyond the collector market and into the world of distillery operations. The company has developed a system using Helium's IoT network to track individual barrels of spirits as they age. This technology provides several benefits to distilleries:

  1. Real-time monitoring of temperature and humidity conditions for each barrel.
  2. Improved inventory management and tracking.
  3. Data-driven insights for optimizing aging processes and flavor profiles.

Wiesel describes the transformative impact of this technology: "We have seen grown men actually cry tears of joy when like they saw the technology work because they're like, like, you don't know how many hours, like man hours and like days and weeks of our lives you've just saved us with like what you're transmitting to us and like the ability for us to monitor this now on a computer screen the same way that almost every other business does."

This integration of IoT and blockchain technology is bringing centuries-old distilleries into the digital age, potentially improving the quality and consistency of spirits while reducing operational costs.

Market Size and Growth Potential

The market for rare wines and spirits is substantial and growing. Wiesel estimates the current market size for fine and rare bottles to be between $20 and $40 billion. However, he notes that this figure doesn't include the value of spirits still aging in barrels at distilleries.

The potential for growth is significant, especially as Baxus introduces new features that allow for the tokenization and trading of individual barrels. Wiesel explains, "When you start to get to the fact now that using this, like the sensors that we use, you can now track an individual barrel. So now distilleries can borrow money against their barrels. They can start trading their barrels."

This expansion into barrel trading and financing could dramatically increase the total addressable market for Baxus, potentially by orders of magnitude.

Future Developments and Roadmap

Looking ahead, Baxus has several key developments in the pipeline:

  1. Implementing a feature that allows users to place standing offers on bottles not currently listed, improving price discovery and market efficiency.
  2. Integrating Boozap, a recently acquired app that helps users track their personal collections and tasting notes.
  3. Developing gamification features to engage both experienced enthusiasts and newcomers to the world of fine spirits.

Wiesel emphasizes the importance of onboarding users into the ecosystem, even if they're not immediately looking to buy or sell. He explains, "When you download Boozap, you're just, you're, you know, you're writing down if you like the bottle that you try to devour like you're writing your own notes so that you know to buy it again later, you're adding a bottle to your wish list, you're keeping track of something that's at your house, whether it's open or closed."

This focus on user engagement and community building suggests that Baxus is looking to create a comprehensive ecosystem around fine spirits, rather than just a marketplace for transactions.

The Role of Blockchain in Traditional Industries

The success of Baxus demonstrates the potential for blockchain technology to revolutionize traditional industries. By focusing on solving real-world problems and creating tangible value for users, Baxus has managed to implement blockchain technology in a way that doesn't alienate non-crypto users.

Wiesel's approach of building "the most blockchain, least crypto" solution possible has resulted in a platform that leverages the benefits of blockchain—such as instant settlement, provable ownership, and DeFi integration—without requiring users to interact directly with cryptocurrencies or complex wallet systems.

This model could serve as a blueprint for other industries looking to adopt blockchain technology. By abstracting away the complexities and focusing on user experience, companies can tap into the benefits of blockchain while maintaining accessibility for their traditional customer base.

Challenges and Opportunities

While Baxus has made significant strides in bringing the spirits industry on-chain, there are still challenges to overcome. The recent congestion issues on the Solana network highlight the importance of scalability and reliability for blockchain-based businesses. Wiesel acknowledges these challenges but remains optimistic about Solana's ongoing improvements.

The company's decision not to build its own blockchain or "app chain" reflects a pragmatic approach to technology adoption. Wiesel explains, "Our business is wines and spirits. It's not crypto. Like there is so much else that we want to be able to build. And so in reality, what I would prefer happen over the future is like our infrastructure, somebody go and say like, okay, we're going to build out like, like we don't, we're built on Solana, but in theory, there's nothing stopping someone if they're like, Hey, I think that I can get more liquidity on these same assets on Ethereum."

This openness to interoperability and focus on core business objectives could position Baxus well for future growth and adaptation as the blockchain ecosystem evolves.

Conclusion

Baxus represents a compelling case study in the practical application of blockchain technology to solve real-world problems. By focusing on user experience, regulatory compliance, and tangible benefits for collectors, investors, and distilleries, Baxus has created a platform that bridges the gap between the traditional spirits industry and the cutting-edge world of blockchain and DeFi.

As the company continues to expand its features and user base, it has the potential to significantly impact the way rare wines and spirits are traded, valued, and enjoyed. The integration of IoT technology for distillery operations and the development of community-driven features like "proof of pour" demonstrate Baxus's commitment to innovation and value creation across the entire spirits ecosystem.

For the Solana ecosystem, Baxus serves as a prime example of how blockchain technology can be leveraged to create real-world value without sacrificing user experience or accessibility. As more traditional industries explore blockchain adoption, the Baxus model of "most blockchain, least crypto" could prove to be a valuable blueprint for success.

Facts + Figures

• Baxus is a blockchain-based platform for trading rare wines and spirits, built on Solana • The current market size for fine and rare bottles is estimated at $20-40 billion • Over $500,000 worth of loans have been originated against bottles and barrels on the Baxus platform • Baxus recently acquired Boozap, an app for tracking personal spirits collections • The platform uses Helium's IoT network to track individual barrels at distilleries • Baxus has users in their 80s who are whiskey enthusiasts but not crypto-savvy • The company is developing a "proof of pour" feature to track consumption of rare bottles • Baxus scans and provides 360-degree views of each individual bottle listed • The platform allows for instant settlement of trades using USDC • Some lenders on the platform hope for loan defaults to acquire bottles at a discount • Baxus is expanding to allow trading of individual barrels, not just bottled spirits • The company has developed patents for tracking technology used in distilleries • Baxus chose Solana for its low transaction fees and high throughput • The platform abstracts away crypto complexities, allowing login via email • Baxus is opening a second vault due to rapid growth in supply • The company is planning to implement standing offers for unlisted bottles • Baxus is developing gamification features to engage users • The platform provides real-time pricing data previously unavailable in the industry • Distilleries have had emotional reactions to the efficiency gains from Baxus technology • The company deliberately avoids crypto jargon to appeal to traditional spirits enthusiasts

Questions Answered

What is Baxus?

Baxus is a blockchain-based platform for trading, authenticating, and valuing rare wines and spirits. Built on the Solana blockchain, Baxus provides a marketplace where collectors and enthusiasts can buy, sell, and store valuable bottles with the benefits of instant settlement, provable ownership, and integration with DeFi protocols.

Why did Baxus choose to build on Solana?

Baxus chose Solana primarily for its low transaction fees and high throughput. The platform needed a blockchain that could handle frequent transactions without incurring high gas costs, which would be prohibitive for their business model. Solana's speed and cost-efficiency made it the ideal choice for Baxus to build their marketplace and infrastructure.

How does Baxus make blockchain technology accessible to non-crypto users?

Baxus has implemented a "light mode" that allows users to interact with the platform using traditional email-based logins. This approach abstracts away the complexities of crypto wallets and private key management, making it easy for anyone, including older or less tech-savvy users, to participate in the marketplace without needing to understand blockchain technology.

What is the "proof of pour" feature Baxus is developing?

The "proof of pour" feature is an upcoming functionality that will allow users to document when they open and consume a bottle purchased through Baxus. This serves multiple purposes: it helps track the reduction in supply of rare bottles, encourages users to share tasting notes and reviews, and provides valuable data for collectors and enthusiasts about the quality and characteristics of different releases.

How is Baxus integrating with DeFi protocols?

Baxus has partnered with Bridge split to enable on-chain lending against bottles and barrels of whiskey stored in their vaults. This integration allows collectors to access liquidity without selling their prized bottles, while investors can earn yields by providing loans backed by real, valuable assets. Over $500,000 worth of loans have already been originated through this system.

How is Baxus revolutionizing distillery operations?

Baxus has developed a system using Helium's IoT network to track individual barrels of spirits as they age in distilleries. This technology provides real-time monitoring of temperature and humidity conditions for each barrel, improves inventory management and tracking, and offers data-driven insights for optimizing aging processes and flavor profiles. This is bringing centuries-old distilleries into the digital age, potentially improving quality and reducing operational costs.

What is the current market size for fine and rare spirits?

According to Baxus founder Tzvi Wiesel, the current market size for fine and rare bottles is estimated to be between $20 and $40 billion. However, this figure doesn't include the value of spirits still aging in barrels at distilleries, which could significantly increase the total addressable market as Baxus expands into barrel trading and financing.

How does Baxus ensure the authenticity of the bottles traded on its platform?

Baxus operates a custodial model, storing the physical bottles in secure vaults. This allows for authentication, insurance, and proper storage of the valuable spirits. Additionally, Baxus scans each individual bottle and provides 360-degree views on the marketplace, ensuring that buyers can see the exact condition of the bottle they're purchasing, including any imperfections or unique characteristics.

What are some of the key features Baxus is planning to implement in the near future?

Baxus is working on several key developments, including: implementing a feature that allows users to place standing offers on bottles not currently listed, integrating Boozap (a recently acquired app for tracking personal collections and tasting notes), and developing gamification features to engage both experienced enthusiasts and newcomers to the world of fine spirits. These features aim to increase user engagement and improve market efficiency.

How does Baxus's approach to blockchain implementation differ from other crypto projects?

Unlike many crypto projects that start with blockchain technology and then search for a use case, Baxus began with a clear business need in the spirits industry and identified blockchain as the optimal solution. The company focuses on solving real-world problems and creating tangible value for users, implementing blockchain in a way that doesn't alienate non-crypto users. This "most blockchain, least crypto" approach allows Baxus to leverage the benefits of blockchain technology while maintaining accessibility for traditional spirits enthusiasts.

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