NFTs and wine: How did we get here?
The first NFT (we’ll get to what that term means in a moment) was created in 2014 by digital artist Kevin McCoy in partnership with Anil Dash, then a consultant to auction houses.
It was a short video clip McCoy had made with his wife and Dash paid $4 to buy it as part of a live demo on how to monetise graphics at the New Museum of Contemporary Art in New York.
The core principle was to give artists more control over their digital art, but neither McCoy nor Dash foresaw what a gold rush it would become.
In the art world it steadily became a source of both empowerment and revenue. At the start of 2021, musicians, all of whom had their main source of income (i.e. touring) cut off due to the Covid-19 pandemic, jumped onboard, with acts like Grimes, 3LAU, Steve Aoki, The Weeknd, Kings Of Leon and more all offering them. Suddenly NFTs were everywhere.
NFTs are 2021’s hottest trend in tech: but what are they exactly?
NFT stands for ‘non-fungible token’, an admittedly ugly and clumsy phrase. But that takes us no closer to what it actually means.
A ‘fungible’ item is a commodity that is identical to others and is therefore interchangeable. The frequently cited examples tend to be currency – one £1 coin is, effectively, identical to another £1 coin – or buying common stocks in a company.
So the ‘non-fungible’ part here means something that is unique while the ‘token’ part can be any digital (or even real-world) item. That digital item could be a song, an image or a video. It could even be an experience.
NFTs can have a cultural value (like an exclusive or limited-edition piece of art), but they also have a commercial value; as such, they can be re-sold if the market determines their value has increased.
These sales primarily happen on the Ethereum blockchain, a decentralised network for trading with Ether. In cryptocurrency terms, Ethereum is a bit like Pepsi to Bitcoin’s Coca-Cola.
NFTs come with certificates of ownership and authenticity which, because they exist on the blockchain, cannot be hacked or cloned – in theory, at least.
While digital items can be endlessly replicated and copied, the certificates of ownership and authenticity cannot. These are what give NFTs their true value.
NFTs and wine: a great pairing?
Selling digital art or stakes in music copyrights might grab the headlines, but that has not precluded the wine business from entering the NFT steeplechase this year.
Online wine service Yahyn launched what it termed ‘the world’s first NFT wine allocation’ in April, in part to offer a sense of security to customers.
The same month, Yao Family Wines paired its premium wine The Chop with an NFT digital collectible, limited to 200 lots, with bottle #11 (in homage to the number worn by Yao Ming in his NBA career) having its own special auction.
In May, the Telegraph newspaper reported that Flavien Darius Pommier’s vineyard in Bordeaux was selling digital images of wine bottles for £300 and upwards, with plans to offer NFTs linked to each vintage.
Again in April, BitWine created pixel art based around a wide range of celebrated, rare and iconic wines. A thousand have been created and they will be sold on a rolling basis in drops of 50.
In July this year, Chateau Angélus sold an NFT guaranteeing ownership of a barrel of Angélus 2020 alongside original 3D digital artwork of the bells used on its labels and packaging.
This NFT sale is significant as it goes beyond artwork and wine provenance to include an experience, where the purchaser of the NFT can visit the vineyard to track the wine’s progress from grape picking to tasting.
‘Offering our wines via an NFT is an opportunity for us to be connected with the new players in the market and explore new habits of consumption,’ said Stéphanie de Boüard-Rivoal, co-owner and CEO of Château Angélus.
What is the point of a wine-centric NFT?
Naturally with any tech trend, there is a race to capitalise on the hype and a concurrent race to the bottom in terms of the qualitative (and commercial) worth of the NFT for sale.
Pedlars of digital snake oil are inevitable. But once the opportunists exit as quickly as they entered, there is a lot that NFTs can bring to the business.
The biggest boon is that they can help combat, or at least cauterise, some of the fraud in the selling of wines.
Back in 2016, a report from the European Union Intellectual Property Office estimated that the production of fake spirits and wine was costing EU businesses €1.3bn a year.
As NFTs are linked to the blockchain, they are safe from tampering, or as close as it is possible to be. With the sale of an NFT (linked to a real-world product as much as a virtual one) there is a stamp of authenticity and a guarantee of provenance that is not possible in ‘normal’ transactions.
The NFT could operate as a type of kite mark, proving that something is what it claims to be.
Outside of counterfeiting, there are a wide range of other possibilities here.
Selling artwork, or variations of artwork, is already happening, but this could be extended to selling shares in trademarks linked to celebrated wines and wineries, giving buyers bragging rights around these intangible items that are part of the world and culture of wine.
This could extend to buying a share in a winery or even a stake in a certain year’s harvest.
‘We have added into the package plenty of services and tailor-made experiences around Angélus, its specific environment and, of course, some experiences in exclusive cooperation with our chef, Alexandre Baumard,’ explained de Boüard-Rivoal of the Château Angélus NFT.
A large amount of the NFT trade is for fans – of an artist, a musician or even a winery – to get hold of something exclusive. That could be a digital item but it could also be an experience – like helping to come up with a new blend or having input in the naming and visual designing of a new brand.
These are all ways to monetise wine beyond what is actually contained in the bottle.
And like the collectors of fine wines, there can be an investment strategy. NFTs can be bought from new brands to help them get off the ground – a new form of crowd funding – but also as a speculation on their future potential.
‘It is important to embrace new technologies and to be proactive when it is a question of preparing ourselves and the property for the future,’ said de Boüard-Rivoal of the opportunities here.
‘The pandemic certainly accelerated this process of digitalisation in general – digitalisation of the offers to consumers, in our current communications et cetera. It is a question of adaptation, as always.’