How Blockchain Technology Could Change the World of Wine

Photo for: How Blockchain Technology Could Change the World of Wine

Blockchain solves the issue of wine counterfeiting which prominently affects the vintage wine collectors.

26/02/2019

When most wine drinkers hear the term “blockchain,” they naturally think of Bitcoin and other cryptocurrencies, all of which are based on blockchain technology. However, when it comes to the world of wine, there is a far more important role for the blockchain: helping to prove the authenticity and provenance of fine wine.

Think of the blockchain as an immutable ledger that no counterfeiter, hacker or forger can ever change. Thus, once a bottle of wine has been proven to be authentic and its provenance certified to be correct, that information could be added to the blockchain. Any time a buyer or seller would like to authenticate a bottle of wine, all he or she has to do is check the information stored on the blockchain. Theoretically, this blockchain technology would be of immense interest to any wine industry participants – such as auction houses, private collectors, retailers, or hospitality venues – that absolutely need to be assured of the quality and authenticity of the bottle of wine they are selling.

The need for blockchain technology in the wine world has become a hot topic of conversation amongst buyers and sellers of fine wine after a series of recent counterfeiting affairs have raised the prospect that as much as twenty percent of all fine wine on the secondary market is not authentic. After the much-hyped “Rudy Affair” involving nearly $20 million in fraudulent wine sold by Rudy Kurniawan, auction houses began withdrawing wine from the market until it could be verified and authenticated. And many high-profile wine investors began to worry that they might be the proud owners of entire cellars full of fake wine.  In fact, there have been entire books written about these wine counterfeiting schemes including, most notably, “The Billionaire’s Vinegar” and “In Vino Duplicitas.”

Most recently, the Chinese wine market has been rocked by a series of high-profile scandals as government regulators seize bottles of what many wealthy Chinese investors assumed were high-end bottles of Bordeaux or Burgundy. In China, the problem of counterfeit wine is particularly acute due to a mix of different factors, including a relatively young wine culture and unfamiliarity with foreign wine labels. In the rush to purchase wildly expensive bottles of Chateau Lafite Bordeaux, many Chinese investors conduct little or no due diligence about the wine they are actually buying.

With that as a backdrop, it’s easy to see why a need for a wine bottle authentication system exists. Such a system would need to be multi-layered, immutable, timeless and transferable. In a best-case scenario, it would provide both proofs of authenticity and provenance. And it would also be independent (meaning that no national wine associations could control it), as well as consumer empowering.  In short, such a system would make it almost impossible for counterfeiters to sell fake bottles of wine. And it would also streamline the entire secondary market for wine since there would no longer be any need to call in a wine authenticator any time a bottle of wine is going to be sold.

One example of such a system is known as the Chai Wine Vault, which was introduced by Everledger in late 2016. According to The Chai Method (TCM), a bottle of wine can be virtually tracked and certified on the blockchain via a permanent digital record of provenance. This record can either be made public (as a sort of digital tag attached to the bottle), or it can be made private.

According to blockchain enthusiasts, such a system will make it much easier to buy and sell fine wine. Instead of having to trust the word of a buyer (who might turn out to be another Rudy Kurniawan), you can simply look up a bottle of wine on the blockchain. If that bottle of wine has been tracked from the time of bottling, then it will be possible to know at any given point in time where that bottle is and to whom it belongs. Moreover, it will be able to determine in a matter of seconds whether or not a bottle of wine is authentic.

That might sound like technological magic, and it is really the result of something known as the “Digital Thumbprint” of a bottle of wine. The Chai Method recognizes 90 different characteristics of a bottle. When combined together into a single profile, they constitute a unique digital thumbprint. These data points include factors like the cork, the label and the glass. A master counterfeiter might be able to forge one or more of these factors, but not all 90. This is what is meant by a system that is multi-layered. If a counterfeiter attempted to change even a single one of these characteristics (such as by creating a fake label), he or she would also need to change the blockchain. And, due to the immutable nature of the blockchain, this is currently impossible.

And, just as many wine collectors have a cellar where they keep their best wines, they will soon have a “Digital Cellar” or “Digital Vault” where they keep information about their certified bottles. If at some point in the future, they decide to sell this wine to another collector, there will not be a need to call in a wine authenticator. And there will not be a need to rely on a formal report of authenticity (which might be forged), a receipt for a past transaction (which can also be faked), or even the word of a trusted collector.

If new blockchain-based authentication systems catch on, it’s possible to imagine a future in which investors, collectors and wine lovers no longer need to worry about counterfeits and fakes. The black market for fine wines will be replaced by a much more transparent system in which buyers and sellers can transact directly, without the need for a wine middleman (such as an auction house). At any point in time, producers would be able to see where their bottles of wine are, and potential buyers would no longer need to be in direct proximity to inspect a bottle of wine. In short, blockchain technology can help to restore trust in the wine market, and that’s good news for all lovers of fine wine.

Some Related Blogs You May Like

Subscribe to Our Newsletter

Register now to get the latest updates and discount offers from Future Wine Expo