The NFT craze has reached the fine wine trade. But is this is a digital fad or a potentially groundbreaking development? Chloe Ashton reports.
The wine industry is comfortable with physical assets. Whether buying for purely financial gain or as an investment in one’s future drinking happiness through eventual consumption of a delicious (and oftentimes rare) bottle, most collectors also enjoy the tangible nature of bottle, case, and collection possession, even if the wine is stored miles away from home.
When I first began to read about the NFT craze bleeding into the wine world, I admit I was utterly bewildered. How could a virtual asset possibly replace the pleasure of sharing a special bottle of wine?
But with more and more châteaux buying into the offer of digital ownership at various levels, I sought to understand what use NFTs could have in relation to fine wine.
After an evening at Sotheby’s auction house, courtesy of the London Technology Club and its panel of NFT experts, the craze is starting to make sense.
What are NFTs?
First, the basics: NFT stands for non-fungible token—a digital asset that is entirely unique, and not fungible, which means that it can never be interchanged with another token.
The asset can be purely digital—a video clip or an image—or it can be a certificate of ownership for something physical or experiential (to use the vinous world as an example, a bottle of wine or a winery visit, respectively).
NFTs are pieces of code, or “smart contracts” recorded on a blockchain, which makes them impossible to forge. In the case of a link to a physical asset, such as a bottle or barrel of wine, once the wine is consumed or released from storage, the NFT is expunged.
Could NFTs prove the authenticity of wine?
As a digital outsider attempting to learn about the intricacies of NFT investment, authenticity appears a potential benefit of owning an NFT linked to a physical product.
In the art world, such a token can provide a transparent, traceable certificate of ownership and, at the same time, identify an original piece of art from copies without hesitation—a win/win situation for the collector and artist alike, surely?
The same principle can be applied to bottles of wine, but hopeful investors take note: Anyone can create (or “mint”) an NFT, which in reality means the physical bottle behind one could still be fake.
The only foolproof way to mitigate this risk is therefore to buy bottles sourced directly from their makers with ex-château provenance. This is the sole true guarantee that an NFT certificate of ownership also doubles as a reliable certificate of authenticity.
Wine NFTs as unique objects
A further benefit of purchasing wine through an NFT is its inextricable link with one specific product.
Bottles or cases of wine, particularly old ones, are indisputably non-fungible. However, commercial storage of wine does not often treat bottles as such—a rotation number, or unique storage code, usually sits against a shipment of the same wine, producer, and vintage, though this could be across multiple cases, all with different ownership.
Speaking at the London Technology Club’s NFT seminar, Sam Falic, co-founder of wine and spirits NFT trading site BlockBar, explains, “If a bottle has been owned for 30 years, it’s not going to taste the same way as another.
“Even if all wines from the same producer and vintage start their journey tasting the same, as soon as the bottle begins to move, there’s a possibility for this to change.”
The NFT authenticates and stamps one specific bottle or case, which has gone through its own unique journey. From a provenance point of view, this could prove beneficial in years to come—blockchain and any associated cryptocurrency wallets are public, so prior ownership of a bottle through an NFT would therefore be entirely transparent.
Who is creating wine NFTs?
Several examples of NFTs linked to fine wine now exist. Château Angélus sold an NFT connected to one barrel of its grand vin 2020 (equating to around 300 bottles) alongside a digital artwork of the property’s famous golden bell in collaboration with leading UK investment merchant Cult Wines last year.
Details of the transaction, its value, and even the owner’s trading username, can be found on OpenSea (the primary NFT online trading platform)—a concept rather alien to the traditionally covert world of wine trades and allocations on release.
Penfolds’ NFT collaborations with BlockBar might feel a little more comfortable to traditional fine-wine collectors—its own chosen NFTs link to a barrel of Magill Cellar 3 from the 2021 and 2018 vintages respectively, and traders have the option to buy using regular currency by credit card if they wish, rather than being forced to open a crypto-wallet.
Some entities are taking the marriage of digital and physical assets in wine a step further.
Tristan Le Lous, co-owner of Château Cantenac Brown, commissioned an artist to create a video NFT, promoting Cantenac Brown’s new cellar.
The Finnish artist in question, David Popa, works with raw earth, sculpting ephemeral pieces of art outdoors, which disappear naturally as time passes and Mother Nature washes them away.
Popa’s link to Le Lous and Cantenac Brown’s new cellar is the base material—both the artwork and the new cellar will be created on the foundation of the same raw earth.
Popa’s piece of art will be captured as a video clip and sold as an NFT to raise money for the Conservatoire du Littoral, a French natural conservation organization that helps fund the protection of coastal areas from urbanization.
Le Lous notes that his hope for the initiative (outside of its fundraising potential) is in provoking interest in wine from a new, perhaps younger set of customers who are tech- and sustainability-minded, as it bridges the gap between several disciplines that are both artistic and scientific (raw material art, architecture, and winemaking).
Exclusive access through wine tokens
Another extension of possibility with NFTs in wine focuses on the experiential. At the London Technology Club’s recent seminar I met David Garrett, co-founder of Club dVin—a digital wine community offering membership to access exclusive wine experiences and rare collectible bottles, both purchasable via NFT (in both crypto- or mainstream currency).
Garrett tells me, “I’m not really a crypto person—the idea [of Club dVin] is much more about using blockchain technology to solve problems we perceive in the wine industry.”
The major challenge he sets out to solve is bridging the gap between producers and their end consumers, actively incentivizing direct connections to discuss and appreciate the world’s great wines.
This is achieved through tasting tokens, which can be minted to offer wine-tasting experiences, or come into being as a direct result of opening a bottle purchased on the app.
Bottles can be tracked through Club dVin’s Digital Cork technology, which, Garrett notes, “seeks to elevate collectors’ wine game.”
He explains, “We want to incentivize people to own wine collections that are well looked after. The technology we’re applying offers an immutable custody chain ledger.”
Two further benefits exist for producers: a creative outlet, since they can create storytelling videos or images accompanying their bottles as part of the NFT package; and a commission on all their relevant NFT trades. The Club dVin app is accessible through a friends-and-family referral program for now.
Do wine NFTs have a future?
Who knows where the NFT craze might go next in the fine-wine space. Falic suggests that progress thus far is simply the beginning: “Record numbers of transactions through NFT are occurring today, but the actual number of people trading on OpenSea, for example, is just 200,000 users, so if you go home today and buy an NFT, you’ll be one of the first million people to own one.”
The benefits of digital certificates of ownership—not dissimilar to property deeds—could prove interesting in the buying and selling of actual wine estates (or rows of vines).
The authenticity advantage is thought-provoking, if not entirely foolproof when related to much older vintages.
Above all, perhaps facilitating NFT trades of such a traditional product will serve to modernize the wine world’s outlook and bring younger collectors, born in the digital age, into the space.
While today’s collectors enjoy the physical aspect of ownership (even if it means looking at a wine collection on a screen rather than in a physical cellar at home), the “being” generation—Generation Z and alike—may more often seek experiences for happiness and fulfillment.
With this in mind, security through digital ownership and the ability to share wine experiences on a universal digital platform might well come up trumps in providing the wine industry with new customers.