Fine wine trading has been slower to move online than many other markets, held back because of an understandable reliance on detailed processes that prove provenance. It may be that the Covid-19 outbreak is going to change the situation, but potential market participants might want to investigate blockchain-enhanced alternatives that offer faster trading and tamper-resistant provenance.
The cancellation of Germany’s ProWein 2020, one of the highest profile events in the wine sector’s calendar, suggests that this could be a challenging year, particularly for smaller producers who rely on events to meet with buyers around the world.
The fast-changing international conditions are having several unexpected consequences, however. Among them, Vino Joy News recently reported that the spread of Covid-19 through China and into Hong Kong has led to a surge in interest in online wine trading, presumably as people under quarantine that are lucky enough to only suffer mild symptoms take the time to try something new and invest in a box set of investment level wine.
According to the article, online auctions made up around 15% of the major auction houses’ revenue in 2019, but could potentially make a significantly larger contribution to the bottom line in 2020, not least as a result of measures being taken to protect the public and reduce the spread of the disease.
Among the many points that the article makes, it suggests that in the past, interest in online wine auctions have sometimes been held back because there is a perception that inspection regimes are less comprehensive. It is felt that there is a greater risk of a bottle or case of wine not being as described when they are sold online, and in the world of fine wine, provenance is fundamental to the value of an investment.
Protecting provenance online
By coincidence, a couple of weeks ago, WiV Technology, a blockchain-based trading platform for unique assets, came to an agreement with OpenSea, a global online marketplace for crypto-collectibles. As a result of the agreement, WiV’s products, which at this point are focused on investment-grade wine such as Chateau Lafite Rothschild, Chateau Cheval Blanc and Carmes de Rieussec, are now being traded on OpenSea’s platform.
We discussed the agreement and the opportunities it creates in this article, but the long and short of it is that WiV’s blockchain-based platform makes trading transparent and provenance tamper resistant. This means that buyers and sellers can be confident that their investment is protected for the long-term and always as described. The service also includes secure, fully insured and managed storage of the bottles and cases of wine, meaning that value is maintained even as ownership changes.
Each bottle or case of wine on the WiV platform is associated with a unique WiV Token. This means that it can be traded quickly and transparently, reducing the need for brokers and their associated fees. This creates the conditions necessary for the growth of a far more liquid market than has been the case in the past.
Markets change as situations evolve
The wines on the WiV platform are an investment and should be treated as such. What the WiV platform delivers is an opportunity to trade ownership of these assets at a far faster and at a lower price than has been possible in the traditional market.
The arrangement with OpenSea, which has been relatively simple to achieve from a technical perspective because both platforms work with ERC721, a free, open standard that describes how to build unique, non-fungible tokens on the Ethereum blockchain, has already yielded positive results. It’s still early days, but business has been healthy so far and the team behind WiV is using the data that is being generated to refine the offering.
It is not just investors that benefit from the fine wine investment opportunity. By tokenising their vintages and trading through a blockchain enabled platform, wine producers also enjoy a relatively simple, low-cost route to market that gives them an opportunity to enhance their understanding of demand patterns, reduce reliance on high-cost wine merchants and also promote their products to new audiences.
The creation of a platform that offers secure, transparent online sales opportunities that protect provenance could help producers manage the impact of rapidly changing economic conditions, particularly given that ProWein seems unlikely to be the only event that will be cancelled.
At this point we do not know how the Covid-19 outbreak is going to evolve and whether, or even if, it is going to create a permanent change in our way of life. What does appear to be becoming clearer is that the next few months have the potential to be challenging and that self-isolation or even mass region quarantines could well become an unwelcome fact of our lives. Our thoughts are with those that are suffering as a result of challenges created by the Covid-19 situation.