Tokenization of Wine - Enabling an Extended Consumer Experience

While tokenization of assets such as wine is still in an early stage of its development, it is already of increasing economic importance. Michael Paul Kramer, Jochen Heussner and Prof. Dr. Jon H. Hanf of Geisenheim University report.

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Blockchain Technologie (Photo: fotomek/AdobeStock)
Blockchain Technologie (Photo: fotomek/AdobeStock)

 

  • No industry can risk being left behind in the current transition to the token economy.
  • Tokenization of digital and physical assets can solve some of the challenges in the wine industry.
  • As new and compelling use cases are emerging at an increasing rate, tokenization can provide for an extended consumer interaction with the wine product.

 

 

Proofing Authenticity and Ownership

The proof that a bottle of wine really contains the product according to its attributes stipulated on the label, such as origin, vintage, or varietal, can typically be obtained through chemical or sensory analysis. However, applying these methodologies at the point-of-sale or during auctions is awkward, time consuming and hence, not appropriate. In addition, proving the ownership of rare wines, including information about its origin, its lifecycle, and storing conditions, can impact its value. For example, single-owner collections could achieve better results during an auction. Nowadays, consumers demand information about origin, production method, and journey of the food item they are about to consume. This demand is a result of the past food safety scandals and the steady increase in food recalls since 2011.
 

Token – A New Asset Class

Transparent proof of authenticity as well as proof of ownership can be provided by non-fungible tokens (NFT), a newly created asset class. The assets that are represented by NFTs are unique, not inter-changeable and cannot be replaced by other tokens. NFTs are typically connected to digital art, consumer products, media, and since recently also to wine. Globally traded NFTs  experienced an increase in trading volume from $100m in 2020 to $23bn in the subsequent year.
 

Digital Certificates

During the past months, the global wine industry noted the emergence of several novel use cases based on NFTs as well as on fungible tokens (FT), which were operating on various blockchains. Previous analysis has shown that NFTs are used to tokenize wine when it is treated as an investment and collectible product. In the wine supply chain, NFTs can further serve to provide trusted provenance data, track- and traceability, as well as authenticity. Swiss start-up vinID has launched digital certificates of authenticity for high-quality wines based on NFTs. At the time of bottling and each time the owner changes, the respective transaction is written to the blockchain and immutably stored. Through a smartphone consumers can then trace the complete transaction history of the wine bottle and verify its authenticity. The application can further be used to retrieve additional information about the wine, such as its origin and the production process. Another example of authentication through blockchain technology can be found in the Clare Valley in Australia: twelve producers cooperated in the VinoTrust project in 2020. Initially approached with the primary goal of verifying authenticity and origin, additional benefits emerged, particularly in terms of data management and compliance with reporting requirements.
 

The First German Wine Token: WeinCoin

Further innovations based on fungible tokens are also surfacing. The German winery Sanders & Sanders from the Mosel valley currently offers the first German wine token, which is backed by a limited edition of 250 bottles representing the 2022 vintage. The ICO (Initial Coin Offering) period for the so-called WeinCoin has been set for 19 April - 1 June and the token has been scheduled to be minted in June 2022. During the ICO period, investors will be able to purchase a certain amount of WineCoin tokens through the winery's online web store, using fiat or digital currency for settlement. The token provides a secure and immutable proof about the purchase of the first German WeinCoin.
 

Extending the Timespan of Product Interaction

Both fungible and non-fungible tokens can solve current challenges in the wine industry related to proof of origin and authenticity, fraud prevention, wine collection and investment, while at the same time enabling an extended consumer interaction with the product.

 

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