WTF are NFTs? You might well ask, but they could be crucial in combating counterfeit wine.
It’s one thing to shell out $20 for a Gucci on Canal Street in New York City – you know what you’re getting and it ain’t Gucci, baby! – but it’s another thing entirely to spend several thousand on what you believe the real deal is from a well-regarded retailer.
All told, fake goods are expected to be worth $2.3 trillion by 2022, and while some buyers certainly know that their 98-percent-cheaper-than-retail Rolex isn’t legit, the real money gets made when the 1 percent gets bamboozled into buying fake wine, art and other gilded ephemera.
“I’ve opened so many fake 1982 Château Mouton Rothschilds, I’ve lost count,” says Melissa Smith, founder of Enotrias, which provides white-glove private sommelier services to people who can afford it. Wine-Searcher caught her in the airport between flights from collector in California, to another in New Jersey. “I never said anything, because I was in hospitality settings, and each time, the person had brought the bottle in. I was never sure if they knew or not.”
The biggest name in wine fraud, of course, is Rudy Kurniawan. The subject of the documentary Sour Grapes, Kurniawan was freed on November 6, 2020, after serving seven years in the clink for selling millions worth of fake wine between 2004 and 2012, many of which went through an auction house (two auctions alone garnered $35 million). But Kurniawan was hardly the only player in what has become a high-stakes game worth an estimated $3 billion dollars. About one-fifth of the rare and collectible wine market is widely believed to be fake.
Smith deploys a lot of tricks and tactics when combing through clients’ sellers and advising them on new acquisitions.
“I make a note of everything, from QR codes, to detailed examinations of stickers on rare bottles that are designed to burst if tampered with,” she says. “It’s also just a matter of experience. I am so familiar with collectible bottles, I know what they should like. If the labels are prematurely aged, that’s a huge red flag. I also only work with reputable retailers and auction houses that haven’t spent time in the news for dealing with fraudsters.”
Some of the best, she said, are K&L Wine Merchants (Smith worked there as head somm), Benchmark and Sotheby’s. But she is the first to admit, that her methods are far from foolproof.
“There’s been a lot of talk about building a database, and finding new ways to trace and maintain the line of provenance from the source to the buyer, but so far, I haven’t seen any real progress,” she says.
Progress comes when it wants to, when inspiration strikes and people empowered to act on it are willing to listen. It seems that a small, but significant step, toward eliminating wine fraud occurred recently in, of all places, Manchester, New Hampshire, where Yahyn is located. The privately owned company was founded by entrepreneurs and technologists, and sells high-end cult wines from producers to consumers online, with the goal of eliminating the middleman and making the entire process more lucrative for producers and 5-30 percent less expensive for buyers without those distributor/retailer markups.
“We have created the first NFT wine allocation, which absolutely guarantees the wine is authentic,” Yahyn’s founder and CEO Pierre Rogers says. “Our CFO Joshua Leavitt built a career in blockchain technology, and our whole goal as a company is to disrupt the three-tier system, which we see as broken. But our company culture is built on the idea that we all solve problems at the companies together, whether it’s tech, sales or marketing. So when our marketing director Jack Ambriz brought the idea of creating an NFT to us, it seemed like such an obvious solution to this global problem plaguing the industry, we took it and ran.”
For those not yet fluent in this form of tech-speak, an NFT is a “non-fungible token”, meaning it is utterly unique and cannot be replaced or traded. One of a kind.
NFTs are supported by blockchain technology, and can be absolutely anything digital, but currently, the market is dominated by ultra-high-end art being purchased by super-rich tech geeks. A prime (and some might say, ridiculous) example of the excitement generated by NFTs is the sale of a digital artist known as Beeple’s work for $69 million at Christie’s. Prior to that sale, the most one of his prints had sold for was $100.
“With a wine NFT, there will be a transparent, highly documented chain of evidence going from seller to buyer, and re-seller,” Rogers explains.
In a matter of weeks, the powers that be at Yahyn had approached the most “forward-thinking vineyards” about the notion, and several signed on immediately.
“We’d been discussing the possibility of creating wine NFTs for a few months,”” says Brian Bell, general manager at Geyserville’s Skipstone Ranch. “There is so much about the concept that we love. Not only is the provenance guaranteed, but it reduces the risk inherent in collecting wine. There is a direct correlation between the number of times a wine bottle is moved and its potential for damage. All you need is one minute in a really hot place, and the wine has been compromised forever, and will never be the same.”
The NFT not only ensures that the wine is what it says it is, it also means that the bottle of wine will be stored by Skipstone, in its underground cellar, until the day the buyer decides to consume it.
“Even when it’s resold, only the NFT gets moved,” he says. “The bottle of wine will stay where it is.”
Skipstone’s bottle went on sale this month on OpenSea, one of the largest NFT marketplaces. The six-liter bottle of Oliver’s Blend is etched with a QR code that links back to the NFT.
“Skipstone is our second NFT,” Rogers says, “and we have several more lined up. I see in the very near future, six months maybe, that customers will truly embrace the concept of the NFT and it will become a standard way of operating for wine collectors seeking special bottles with guaranteed provenance. There’s also a real motivation for the producers, because they can attach a certain percentage to the NFT, so that when it gets resold, they get that 5 percent.”
The most expensive bottle of wine sold at auction was a 73-year-old 1945 Romanee-Conti, for $558,000 in 2018. A 1992 Screaming Eagle Cabernet Sauvignon sold for $500,000 in 2000. Those wineries never saw a cent from the re-sales.