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How blockchain can change the wine supply chain?

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

The drinks industry lives and breathes by the effectiveness of its supply chain and its ability to take products from producers and brand owners all over the world and distribute them directly to the businesses that need to sell them.

READ MORE Blockchain: the Future of Wine?

An irreversible chain. A disruptive force in business

The growth of global commerce has created a network of systems vulnerable to fraud, error and misinterpretation. Many products have to pass through manufacturing, legal, regulatory, financial and commercial requirements, relying on intermediaries along the way.

All of this adds time and cost and becomes the breeding ground for fraud. This is where blockchain technology comes in. Its role of eliminating vulnerabilities with transparent transactions is key.

As each transaction occurs, they are put into blocks. Each block is connected to the one before and the one after. Transactions are blocked together and the fingerprint of each block is added to the next. This creates an irreversible chain or blockchain.

Blockchain is going to have the impact on transactions that the internet did on communications. Think about how many transactions take place every day – contracts, deeds, financial, public and private records. If blockchain is implemented fully, all of these will be affected and in fact positively transformed. Blockchain will free up capital flows, speed up processes, lower transaction costs and provide security and trust.

Keep track the range of supply chains

If you are a wholesaler, importing wine from all around the world – with a demanding customer in the form of a supermarket buyer at the other end – it’s hard for you to keep track of the range of supply chains and all links in those chains, but significant legislation and a high-level compliance requires you to do so. Blockchain allows you to significantly increase your auditing capabilities, accountability and record keeping – and at speed. That’s because every participant in the supply chain is required to log their activity – and that logging of activity has to be verified by all users.

There are three key elements to blockchain technology: 1) it’s a shared form of record keeping, so no one person or organisation holds ownership of the blockchain; 2) it’s permissioned; and 3) a blockchain is secure. Everyone involved is allowed to have a copy and access to every piece of data. No transaction can be added without consensus. So it’s tamper-resistant and you can easily locate any losses or damage, or answer complex questions that a buyer might have thanks to the transparency and ease of recalling any information.

It is like having a photography of a bottle at each touchpoint along the journey, with certificates of authenticity, real-time records of every payment transaction, product details and serial numbers.

No Fraud, once that record is added it is permanent

If you’re an investor in expensive wine from around the world, a blockchain could – or should – be for you. Is that wine really what it says it is on the label? It says 1968 Lafite Rothschild, but..? Well your merchant says it’s Lafite and you trust your merchant and he’s a nice guy, but…maybe he’s going on trust as well.

This is where a blockchain comes in. Producers can create, register products and then monitor supply, all on the blockchain. Once that record is added it is permanent. This makes it highly secure and tamper-resistant. Not even a system administrator can delete the facts.

The obvious application is at this premium end. But blockchain can be used in relation to any certification of origin such as organic, biodynamic or Fairtrade.

READ MORE Leveraging AI in the wine industry

As a single use piece of technology that relies on tagging and blockchain application, the verification of provenance is something that can be brought to market now. Organizing a supply chain along blockchain lines is more complex and involves more parties agreeing to the process, but the agreements are the main obstacle in the road. Once you have people signed up, you can proceed with the build. Implementing a simple private blockchain is possible now and we can enact that without fuss and tailor a blockchain that is particular to a set of requirements.