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Wine, which has been produced by humans for over 8,000 years, is a slow-changing beverage. However, there has recently been a lot of innovation. Low-sugar wine is a rapidly expanding category, with the manufacture of rosé Prosecco being permitted, canned wine becoming increasingly popular, and wine releases combined with NFTs on the rise.
Since that final item piqued our interest, we've substituted reviewing vintage charts for the best quality-to-price ratio with figuring out how much Ethereum is worth in USD, as many wine-NFT release pricing are expressed in cryptocurrency. However, the majority of the offerings we've seen take standard currencies, such as dollars, euros, or pounds.
Aren’t we all familiar with NFTs by now? If not, here’s a brief refresher: A “non-fungible token” is a clunky word for a digital asset that represents a real-world item, such as music, art, or film.
The term “non-fungible” refers to an item that cannot be swapped for or replaced with another of equivalent worth. Each bitcoin is worth the same amount as the previous one. While two $50 bills can be exchanged for one $100 bill, NFTs are unique. All NFT transactions are recorded on a blockchain, making them irreversible.
Wine NFTs make sense for authentication purposes, but wine firms’ earliest forays into the non-fungible domain were riddled with enough gimmicks to mask any true value. Consider an NFT drop from Graham Norton’s He-Devil, which featured annual “first release” rights to He-Devil wine (hmm, sounds like a normal wine-club allocation) as well as a physical print signed by the winery’s cofounders. Or the Invivo X brand’s NFT, which incorporated digital art reproductions of two of Sarah Jessica Parker’s wine labels. Even Château Angelus, a well-known Bordeaux winery, gave 3-D label art along with a barrel of its 2020 Angelus.
Robert Mondavi Winery switched to a hybrid paradigm, creating something distinctive in both the wine and the art: It produced a limited edition of three exceptional wines and housed them in commissioned porcelain magnums handcrafted by Bernardaud, a French porcelain house. At the time of writing, the price of one Ethereum was around $3,470.
Former NBA player Yao Ming’s Yao Family Wines is releasing 200 bottles of its 2016 “The Chop” Cabernet Sauvignon, coupled with an NFT, as part of a recent wine and NFT release. Only Ethereum may be used to purchase these bottles, and 137 have been sold so far. There’s no flashy art here; just the wine, albeit with a dash of crypto.
Penfolds issued two NFTs in November, one of which featured a barrel of its 2021 Magill Cellar 3 Cabernet Shiraz, which sold for $130,000 in 12 seconds. Again, no computerized label art, just wine. Perhaps the speed with which this item sold was due to the fact that it was provided in dollars; potential customers may be hesitant to utilize a currency they don’t fully understand or trust. In January, BlockBar, an online marketplace for wine and spirits NFTs, offered 300 bottles of Penfolds Magill Cellar 3 2018, and all 300 were sold within 10 hours.
Attaching an NFT to a bottle or barrel of wine seems like a reasonable idea, especially to combat counterfeiting, if you look past the buzzwords and art projects. “NFT tokenization of the digital identity and real-time tracking of wine bottles are achievable,” Guillaume Jourdan, a consultant for the luxury and wine industries at VitaBella Paris, told us. Counterfeiting can be eliminated by integrating these solutions into mainstream trade and commerce. An NFT transforms a bottle of wine into a ‘phygital,’ or physical with a digital identity: a unique NFT is established for each bottle to give authenticity and verification.”
NFTs also enable the winery or original issuer to continue to profit on the secondary market, which was previously impossible. In 2018, a bottle of 1945 Romanée-Conti sold for $558,000, the highest price ever paid for a bottle of wine at auction. The winery, on the other hand, did not profit from the sale, but the reseller and auction house did. If NFTs had been available 77 years ago, and the winery had affixed one to that bottle, Domaine Romanée-Conti might have gotten a cut of the profits. “With many blockchains such as Ethereum or connected chains like Polygon, the NFT can be programmed to continue to pay a percentage of each secondary-market transaction to the winery or NFT creator,” Jacob Ner-David, cofounder and CEO of Vinsent, a digital marketplace for fine wine that pioneered the tokenization of wine, explained. This is hard-coded into the NFT, and it can’t be modified.”
With a barrel, though, this isn’t always the case. If that was baked into the coding (which it wasn’t for the 2020 Angelus), Chateau Angelus or Penfolds, for example, would be allowed to participate in the profit if the barrel was later sold at auction. However, after the liquid in the cask is put into bottles, the ability to validate it vanishes, unless the winery follows Penfolds’ lead and converts the single-barrel NFT into 300 bottle NFTs at bottling in October 2022, with each vessel being assigned a barrel and bottle number.
The benefits of NFTs for wine are obvious, especially for pricey, rare bottles that are frequently counterfeited and then sold at auction. But what’s with the digital artwork connected to winery-released NFTs? It could be due to the fact that the initial generation of NFTs were associated with digital art, and wineries (rather unimaginatively) simply followed suit. Because the wine will eventually be drunk, one wine CEO pointed out that limited-edition artwork provides something of lasting value to the buyer.
Sure, but winery executives should keep in mind that the beverage itself should be viewed as a work of art if wine-based NFTs are to gain traction and value. Furthermore, most tangible art has no expiration date. It is the case with wine. A wine, unlike an oil painting, cannot be restored after it has deteriorated. Even the highest-rated vintages will eventually deteriorate in quality, making wine a risky investment. Someone needs to come up with a more enticing idea than a byte-sized piece of art if wine NFTs are to have any value beyond authentication.
