Spotlight on Blockchain: wine NFTs to help guarantee provenance

This year has seen rising activity in the field of blockchain technology and ‘non-fungible tokens’ (NFTs) linked to fine wine, but there is debate about what this means for the future of collecting and trading.

Wokenwine, a new online marketplace dedicated to fine wine NFTs, announced recently that Burgundy’s Domaine du Comte Liger-Belair would sell its 2020-vintage production via the platform (wokenwine.com). It also announced partnerships with several other wineries. It’s one example of a growing number of wine world initiatives linked to NFTs and blockchain technology, which are separate but related concepts. These are very early days, however.

NFTs are stored on a blockchain, sometimes described as a distributed digital ledger, which is capable of logging new data and transactions chronologically – with a decentralised structure that is considered very difficult to hack.

Blockchain technology has underpinned the rise of cryptocurrencies, beginning with Bitcoin. The security architecture may vary, however, between different types of blockchain, according to Dr Thomas Zhang, programme director for the MSc in Blockchain in Business and Society at Queen Mary University of London.

Some top wineries, including Penfolds (via the BlockBar platform) and Robert Mondavi Winery, have launched NFTs tied to limited-edition wines and which can be redeemed for the physical bottles.

On Wokenwine, buyers will be able to purchase and store NFTs via a crypto-wallet but don’t need to own cryptocurrency, CEO Valéry Lux told Decanter. A credit card transaction will convert regular currency into the right amount of cryptocurrency to purchase the wine via an NFT, he explained. ‘The transaction process is very similar to any purchase in a foreign currency through a credit card.’

Recent reports of a downturn in the wider NFT market and volatility in cryptocurrencies are less of an issue for Lux, because most of the value is in the wine itself, he said: ‘NFTs backed with real-life assets are not likely to suffer the same type of speculation that we saw on other NFTs in the past.’

Blockchain’s potential to help guarantee a fine wine’s provenance, and so guard against counterfeits, has been highlighted by Lux and others as a major plus-point. UK-based Cult Wines said its new CultX platform would employ blockchain technology. Wines must still be physically authenticated by the team first. ‘We would then create the digital record of that on the blockchain and we would attach the NFT to the bottle to say, we’ve received this wine, we’ve checked it, here’s all the photos, here’s all the information,’ said Tom Gearing, Cult Wines CEO.

‘What we’re trying to do is to allow trading and ownership of wine to be quicker, more efficient and verifiable.’ Gearing added that blockchain technology could become much more widely adopted in the wine trade. ‘But we’re in the really early stages,’ he said. ‘It’ll be an iterative process’.

Matthew O’Connell, CEO of the LiveTrade fine wine exchange platform at Bordeaux Index, said the merchant was monitoring blockchain developments and possible applications, but remained cautious.

On wine provenance, he said efforts to use blockchain to add transparency to the supply chain are a good idea, but also that ‘we’re nowhere near an industry-wide model’. O’Connell questioned whether a strong enough ‘use case’ would emerge to foster wider adoption of the technology.

NFTs and wine: What could they mean for collectors?

Monitor: latest sales activity – top sellers and DRC

Several top wines rose strongly in price in the first six months of 2022, according to trading data from Bordeaux Index’s LiveTrade platform (chart, above). The merchant said that LiveTrade’s 10 most actively traded wines in first half 2022 were: Cristal 2014, Cristal 2008, Dom Pérignon 2008, Dom Pérignon 2012, Haut-Brion 2016, Sassicaia 2016, Cristal 2013, Lafite Rothschild 2009, Lafite 2000 and Sassicaia 2019. This shows high buyer demand for top brands, said Matthew O’Connell, LiveTrade’s CEO, adding that blue-chip Burgundy also performed strongly.

At auction, a Beaune-based Sotheby’s sale offered Domaine de la Romanée-Conti (DRC) wines from a private collection, which had been ‘purchased on release, directly at the domaine’. A six-litre methuselah of DRC, Echézeaux 1999 fetched €75,000 (£63,700, pre-sale high estimate: €40,000). A three-litre jeroboam of DRC, Romanée-St-Vivant 2004 fetched €35,000 (high e: €16,000), and six bottles of its Romanée-Conti 1990 fetched €200,000 (high e: €180,000).

A Sotheby’s online auction in Hong Kong also saw three bottles of DRC, Romanée-Conti 2009 fetch HK$562,500 (£60,000, high e: HK$600,000) and six bottles of DRC, La Tâche 2009 sell for HK$525,000 (high e: HK$350,000).

Tasted and rated for Decanter Premium

Domaine de la Janasse, Vieilles Vignes, Châteauneuf du-Pape 2010

Decanter Rhône expert Matt Walls reaffirmed this wine’s greatness in a recently published vertical tasting of Domaine de la Janasse, Vieilles Vignes from 2000 to 2011 vintages inclusive. ‘This is a great Châteauneuf in the making, but there is much to be gained by waiting,’ said Walls, scoring the 2010 vintage 98 points yet noting it needs more cellaring to open up fully. The wine’s alcohol level is 15.5%, yet Walls praised its ‘exceptionally fine texture’ with ‘great purity and balance’. Available at about £1,500 per 12x75cl in bond (Bordeaux Index), its price is above several more recent vintages.

The Bordeaux Index View

Fine wine & spirits specialist Bordeaux Index kindly sponsors this section of Decanter, and provides its view on the market here every issue. It can be found at bordeauxindex.com

Technology is as important in wine as in any sector and indeed at Bordeaux Index we are particularly aware of this, having created LiveTrade, the most active online trading platform in the space.

Blockchain and NFTs have three key potential roles to play in the space: proving provenance; driving potential for more sophisticated storage and less need to move cases between warehouses; and distribution to a wider range of collectors and investors via NFTs.

For the most part, we believe that the solutions we have so far seen promoted in the space tend to solve only part of the related ‘problem’ rather than acting as comprehensive solutions. This is not surprising, for widespread change in behaviour or activities from multiple parts of the supply chain is likely to be required for such comprehensive solutions; nevertheless it does mean that this technology is currently marginal in its relevance for the wine space.

We expect to see the most progress over the near to medium term in the area of improving distribution to collectors and investors via NFTs, with progress in provenance and warehousing to be longer term.

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Chris Mercer is a Bristol-based freelance editor and journalist who spent nearly four years as digital editor of Decanter.com, having previously been Decanter’s news editor across online and print.

He has written about, and reported on, the wine and food sectors for more than 10 years for both consumer and trade media.

Chris first became interested in the wine world while living in Languedoc-Roussillon after completing a journalism Masters in the UK. These days, his love of wine commonly tests his budgeting skills.

Beyond wine, Chris also has an MSc in food policy and has a particular interest in sustainability issues. He has also been a food judge at the UK’s Great Taste Awards.