Blockchain: the Future of Wine?

David BECK Academic - Economics, Society and Political science - Environment and Technologies (AI, blockchain)

Imagine if the wine business could digitally eliminate fraud. Or if winemakers could geolocate precisely when and where their wines are being enjoyed, or whether bottles were tainted or tampered with during shipment? These are some of the transformative possibilities of technologies like blockchain, says Jeffrey Grosset, founder/owner of Grosset Wines in Clare Valley, Australia.

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Public and Private Blockchains

Blockchain is the innovative database technology that’s at the heart of nearly all cryptocurrencies. By distributing identical copies of a database across an entire network, blockchain makes it very difficult to hack or cheat the system. While cryptocurrency is the most popular use for blockchain presently, the technology offers the potential to serve a very wide range of applications.

At its core, blockchain is a distributed digital ledger that stores data of any kind. While any conventional database can store this sort of information, blockchain is unique in that it’s totally decentralized. Rather than being maintained in one location, by a centralized administrator – think of an Excel spreadsheet or a bank database – many identical copies of a blockchain database are held on multiple computers spread out across a network. These individual computers are referred to as nodes.

How Is Blockchain Used?

Blockchain technology is used for many different purposes, from providing financial services to administering voting systems.

  • Cryptocurrencies – The most common use of blockchain today is as the backbone of cryptocurrencies, like Bitcoin or Ethereum. When people buy, exchange or spend cryptocurrency, the transactions are recorded on a blockchain.
  • Assets Transfers – Blockchain can also be used to record and transfer the ownership of different assets. This is currently very popular with digital assets like NFTs (Non-fungible token i.e. unique and can’t be replaced with something else), a representation of ownership of digital art and videos. However, blockchain could also be used to process the ownership of real-life assets, like the deed to real estate and vehicles.
  • Smart Contracts – Simple programs stored on a blockchain that run when predetermined conditions are met. They are generally used to automate the execution of an agreement so that all parties can be immediately certain of the outcome, without the need for any intermediary involvement. For instance, a payment for a good might be released instantly once the buyer and seller have met all specified parameters for a deal.
  • Supply Chain Monitoring – Supply chains involve massive amounts of information, especially as goods go from one part of the world to the other. With traditional data storage methods, it can be hard to trace the source of problems, like which vendor poor-quality goods came from. Storing this information on blockchain would make it easier to go back and monitor the supply chain, such as with IBM’s Food Trust, which uses blockchain technology to track food from its harvest to its consumption

Blockchain technology could help producers prevent fraud. According to a recent IBM study, 71% of consumers indicate traceability is important and are willing to pay a premium for brands that provide it.

The blockchain, an anti-Counterfeit system for wine

Grosset says wine fraud is a massive issue. “Some say 20% of premium wine in some markets is fake,” he says. “Others say 50%. The numbers matter less than the fact that reputations can be damaged.” Blockchain companies in this space include Hijro, Provenance and SkuChain. Heavyweights IBM and Maersk recently joined forces to develop and launch a blockchain global supply chain platform. 

Software company eProvenance launched VinAssure, a network designed to resolve wine supply chain issues using IBM blockchain technology and Hyperledger Fabric. Producers can share a wealth of information with their consumers. They could provide notes on the vintage or harvest, as well as details on the wine’s progress through distribution channels. The technology can detail who handles the wine during transport and storage, and what temperature conditions that the bottle encountered. Registering wine in the blockchain enhances a producer’s anti-counterfeit systems.

For bigger producers and luxury brands, counterfeit prevention and quality control are key benefits of blockchain. They help build consumer trust. Robin Grumman-Vogt, CEO of eProvenance, believes consumers expect transparency.

Wine Traceability thanks to Blockchain

A U.S. wine company that uses VinAssure is Chateau Ste. Michelle. Peter Click, the winery’s vice president of international sales, says it adopted the technology to get wines to consumers in optimal condition.

“We currently use blockchain to measure temperature over time in our export shipments around the world,” says Click. “This technology provides us an accurate picture of temperature inside our containers, from the moment they depart our warehouses until they are opened at the final destination.”

Not everyone is on board. Smaller wineries, which often have smaller budgets, staffs and more limited distribution, must prioritize other concerns, says Rick Rainey of Forge Cellars in the Finger Lakes.

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“While the wine world has historically been opaque due to a complex supply chain, consumers are increasingly looking for verifiable provenance and assurance that the wines they purchase meet their expectations,” says Grumman-Vogt. “From concerns about counterfeit bottles to organic certification to proper handling during transport, consumers are looking for information they can trust.”

Wine Transparency through Blockchain

TATTOO Wine marketplace  is a Singapore-based Blockchain Wine company for consumers across the Asia Pacific region. Supported by the EY OpsChain blockchain platform, consumers can buy premium wines using a secure, blockchain-based platform with digital tokens that trace the provenance, quality and authenticity of new and vintage wines while eliminating layers of intermediaries and enabling cost efficiencies.

The TATTOO Wine marketplace currently offers selections from wineries in France, Italy, Spain, Australia, New Zealand and the Americas, and plans to help wineries of all sizes worldwide expand to the Asia Pacific market with blockchain and e-commerce technology. TATTOO stands for traceability, authenticity, transparency, trade, origin and opinion.

Consumers can also benefit. Shoppers could ensure that producers are exactly who they say they are when it comes to biodynamic practices, sustainable farming and sulphur use. They could also pinpoint the exact vineyard plot from which the wine in their hands originated. Collectors could verify that the bottles in their cellar aren’t counterfeit.

A wine blockchain platform up and running was launched by Italian Veneto-based startup EZLab in partnership with EY. Their Ethereum-based blockchain tracks and offers consumer information for Italian wine. Importers, wholesalers, distributors and consumers, by scanning a QR code on the bottle with their smartphone, can track harvest date, fermentation tank, lot production, bottling date, and water consumption as well as all vineyard interventions and winemaking processes. With blockchain, this is all recorded automatically, securely and out in the open without the sign-off of any middleman from the moment the grape is picked.

More wines like this are expected to hit the market in the coming years. In China, Shanghai’s Waigaoqiao Direct Imported Goods (DIG) partnered with Price Waterhouse Cooper (PwC) and BitSE to deploy an Ethereum-based platform called VeChain for imported wine distribution in China, where wine fraud, quality and safety concerns loom large.

Perhaps the most prominent wine blockchain application is that adopted by Chai Vault, led by Maureen Downey, global wine-fraud expert and founder of Chai Consulting authentication. Made famous by helping to fight wine forgery, Maureen saw the need for immutable records of wine provenance at the bottle level and saw that blockchain technology would be a perfect fit. Chai Vault combines proprietary anti-tampering hardware with an online Ethereum blockchain-secured system that permanently records fine-wine information

Smart Contracts for wine Professionals

Current blockchain platforms seek to tackle supply chain inefficiencies, quality and certification issues, and counterfeiting. Producers could track wine shipments across every step through brokers/négociants, importers, wholesalers, distributors, retailers and auction houses via a transparent, decentralised and permanent record to verify authenticity and reduce time, costs, labour and waste across the supply chain. Each transaction can be trusted as a smart contract without the oversight of a middleman.

Bulk wine producers and shippers, for example, could trust the contents of their containers and use sensors to track alcohol, pH, sulphur, temperature and location in real-time public records.

Despite its promise, blockchain remains something of a niche technology. Hurdles remain, especially with the transaction limits and energy costs, but for investors who see the potential of the technology, blockchain-based investments may be a bet worth taking.