How NFTs and Blockchain Can End Wine Fraud

Counterfeit wine is estimated to make up almost 20% of wine sold globally, meaning that one in five wine consumers drink falsely labeled or fake wine.

Over the past 10 years, the wine industry has seen an increase in adulterated wine, which has cost the global industry USD 3.18 billion in direct sales. However, the impact goes beyond economic damage; it affects jobs and livelihoods in an industry that is already precarious, dependent on the delicacies of the climate. In fact, wine fraud results in an estimated loss of 7,000 jobs in the alcohol and spirits industry each year.

Fake wine can also be harmful and dangerous for consumption by customers. The most common type of wine fraud is the replacement of wine with liquids or substances that are not usually grapes. If the label says “wine,” that means it’s supposed to be made with fermented grape juice. What people in the counterfeit wine market do is use cheaper and lower quality substances and pass it off as wine. These substances are sometimes harmful toxins and chemicals, such as methanol.

Another way the counterfeit wine industry works is to deliberately mislabel a cheaper wine as a more expensive vintage, and sell it as a much more premium product than it actually is. This not only cheats buyers, but also damages consumer confidence in the long term.

Earlier this year, we saw one of the biggest wine fraud scandals in recent history, in Bordeaux, France – a region that has been producing wine since Roman times. The Bordeaux scam resulted in the police breaking up a highly organized gang who had bottled low quality wines from Spain and sold them off as expensive French products. This event is not unique to Bordeaux. In 2010, 12 French wine counterfeiters were arrested and convicted of distributing millions of bottles of fake Pinot Noir to the United States.

The wine industry has been looking for ways to tackle these crimes for decades, but only in recent years has there been a concerted effort to accelerate innovation in this area, which has developed in parallel with the increased use of non-fungible token technology .

New technology for an old world

NFT technology has had a complicated start in the wine world. Due to the long history of the wine industry, it is a universe of traditions, secrets and deep knowledge, and it is not always open to change. But over the past year, major brands have latched onto the NFT hype to market wine to a younger and affluent audience.

Eye-catching collaborations from alcohol companies with names like Bored Ape Yacht Club, which included free and unique NFT artwork with the purchase of a bottle, are just some of the new opportunities that have excited and intrigued. But beyond the NFT hype, winemakers are also starting to realize the potential of NFT and blockchain as a technology for wine authentication and traceability.

By using an NFC (near-field technology) tag, which is like the chip in your contactless bank card, a physical product can be easily connected to an NFT (non-fungible token), anchored in the blockchain, securing its unique identity description such as .ex. as owner, production date and the wine’s producer. This information cannot be replicated or destroyed. This “phygital” label can be attached to the neck of the wine so that as soon as it is opened it is recorded on the blockchain, meaning that if the bottle is refilled it is easy to know.

This phygital technology with low power consumption can not only be used to fight the counterfeiting industry, but can also be used as a communication tool, enabling producers to connect with the consumer through an app, providing personalized and educational information about the wine at the touch of a button on the bottle.

A toast to the future

Most counterfeiting in the wine world is for the high end of the market. The more desirable and desirable a product is, the more likely customers will be tricked into buying it at a lower price than its perceived market value.

Chateaux looking at NFT technology are generally “grand crus” and rare vintages. For the everyday wines you see in the supermarket, QR codes and holographic labels have become widespread. Although these are easy to copy, their mass market adoption illustrates a general demand from all levels of the market to improve the packaging of the wine, something that has not changed in decades, to add a means of authentication, validation of the brand and information beyond the written label.

NFT Connections is also a way for consumers of all levels of wine knowledge to learn about its origins, grapes and production, as well as the people who made it, to expand their knowledge, enhance their tasting experience and spark conversations between friends. Winegrowers are using this technology as a way to tell the story behind each bottle, overcoming the snobbery associated with wine appreciation.

Widespread adoption of a technology always starts at the top, so as more major wineries embrace NFT authentication, it will inevitably become more mainstream and available to new wineries and the secondary market as a way to ensure traceability of the bottle’s production and ownership.

As blockchain technology is introduced and takes hold in the industry, wine counterfeiters will be less successful, restoring trust between consumers and producers.