TO wine lovers, it might stand for nice fine tannins or noble French terroir. But soon, non-fungible tokens (NFTs) could be wine’s most important acronym. 

NFTs have become a hot topic in recent years. Blockchain technology allows NFTs to be traded between peers using public and immutable transactions. The best-known instances grant ownership of digital artworks, especially when they change hands for eye-popping sums, but there are also examples of NFTs being twinned with physical  counterparts – such as bottles of wine. 

For advocates, NFTs offer a way to revolutionise how wine is bought and enjoyed, and famous names such as Penfolds and Chateau Angelus have already got involved. But  many others remain sceptical of this new-fangled technology. 

Digital twinning 

Companies such as Crurated and Blockbar illustrate how NFTs can be utilised in the wine world. These platforms sell their customers bottles of wine via NFTs on a blockchain such as Ethereum. The bottles tend to be sought-after rarities or unusual formats – in the case of Chateau Angelus, there was an entire barrel of the 2020 vintage on offer, which came with additional perks such as access to a virtual tasting with the CEO and a private dinner at the estate in St-Emilion. 

Thanks to the way the blockchain works, ownership of NFTs is very secure, but linking physical wine bottles to those tokens (‘digital twinning’) is less straightforward – and this is a big question for NFTs.  

For example, how could you be sure that a given bottle is the same exact one represented by an NFT? The common answer is attaching a near-field chip or QR code onto the label. When scanned, this would verify that the bottle connects to a particular NFT. This is far from infallible, however; labels can be soaked off and reapplied to different bottles, or the wine inside can be emptied out and refilled with something inferior – such practices are widespread among wine fraudsters.

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Trust is therefore an essential part of the transaction. For the sceptics, this makes NFT-backed wine sales no different to those with a traditional merchant – in fact, they might seem riskier because blockchain users can be effectively anonymous. Even so, there are clearly plenty who are trusting enough: that barrel of Chateau Angelus 2020 sold  for the equivalent of US$110,000. 

Proven provenance 

Why should it even matter whether particular bottles are tied to particular tokens? The answer is provenance, which is another significant challenge for fine wine, and for which NFTs offer a new potential solution. 

The secondary market for fine wine is worth up to US$4.4 billion a year, according to Sam Mudie, the CEO of Savea, a wine-investment company using verified NFTs backed by physical bottles. The more expensive a wine, the more important its provenance, and the top wines are traded for decades after their release. In theory, the bottles which are traded and relocated least often will be worth the most. 

The metadata in NFTs can record an individual bottle’s entire history, logging ownership changes as well as statistics on storage location and temperature. Because this is all stored as a public and immutable ledger on the blockchain, a verified bottle should be worth more than an undocumented one. 

Traceable provenance is therefore a key attraction of NFTs for many wine professionals, especially because wine fraud and counterfeiting are serious concerns, worth billions of dollars by some estimates. 

Drinking to the future 

Trading and provenance aren’t the only motivating factors for NFTs in the wine world.  With many startups vying for attention, there’s plenty of added value on offer such as brag-worthy tastings, access to hallowed vineyards, and seats at exclusive winemaker dinners. Fostering a community helps encourage loyalty and evangelism from their early adopters, many of whom can be zealous in their devotion. 

Furthermore, the programmability of NFTs can allow a percentage of all future trades to be directed back to winemakers, which is generating understandable interest for producers. Meanwhile, as take-up of NFTs increases, metaverse platforms such as Metapolis and WiV are creating virtual cellars and vineyards allowing users to display their wine NFTs, like a next-generation version of popular apps such as Vivino. 

From niche to norm? 

For now, NFTs for wine will likely appeal only to a small crossover of dedicated drinkers and tech enthusiasts. For them, the benefits of authenticity, peer-to-peer trading and blockchain security are self-evident, and they are bullish about future potential. Yet the efficacy of wine NFTs remains unproven at scale, and most wine lovers remain cautious. 

For a product that is 8,000 years old, wine is surprisingly early to the NFT party. In that context, it’s hard to say if they will revolutionise wine. For some wine lovers NFTs represent necessary futuristic technology, but for others they remain not fully trusted.

Richard Hemming (MW) is Head of Wine, Asia, at 67 Pall Mall Singapore.