Old wine in new blockchains

Overstock subsidiary Medici Ventures tries a new solution to the scourge of substandard swill.

They say there’s truth in wine, but what if the wine isn’t true? While it may come as a shock to the Miller Lite connoisseurs in the crowd, “fake wine” is apparently a real problem. A billion dollar problem, even. And if your mind immediately raced to “put it on a blockchain!” as the solution, we’d like to welcome you back, loyal Decrypter.

VinX is an Israeli startup with a bold yet smooth mission to swirl up the wine industry with a robust blockchain flavor and direct-to-consumer notes. The company is developing a supply-chain platform using the Zen Protocol blockchain to register, tokenize, and trade “wine futures.” And the Overstock.com subsidiary Medici Ventures is already raising a glass.

Medici announced on Thursday that it has made a “strategic investment” in VinX, aligning itself with the goal of eliminating the middlemen and fraudsters within the wine biz.

Patrick Byrne, CEO and founder of Overstock.com, said in a press release that the “middlemen-heavy” wine industry has had difficulty scaling to meet global demand. “VinX’s steps in tokenizing wine futures,” he says, will allow “wine enthusiasts to know without a doubt that the bottles they purchase are filled with authentic wines” and create “frictionless trust through technology.”

For the uninitiated in need of a primer on en primeur, a wine future is how serious aficionados and investors purchase a vintage up to two years before it’s even bottled at a discounted rate. In the traditional model, these transactions are made through third-party merchants, who naturally require a percentage of the sale. What’s more, consumers must trust these merchants to keep their peepers on the product throughout the entire process so that consumers end up with a genuine Bordeaux and not just sour grapes.

VinX touts on its website that the old way of doing business is “ripe for disruption” (decent pun) and plans for its distributed marketplace of “wine futures that improve with age” (that one’s better) to bring the industry some “much needed liquidity” (oh stop it).

The VinX marketing team obviously appreciates some good word play, but the idea is simply this: By registering wine futures as Vin tokens on its blockchain, the contracts become tradeable assets on crypto exchanges. This also, theatrically, establishes a direct line between the consumer and the winery, provides the winery with the financing they would otherwise lack during harvest, and creates a transparent, immutable record of each bottle across the supply chain, preventing fraud.

Some of you may be thinking: “That all sounds very nice, and surely the world needs yet another token, but what do I care if my Mad Dog 20/20 isn’t the real deal? It’ll get me drunk just the same!” Take it easy there, Sparky (and maybe talk to someone?). This isn’t your market. But it may be just the thing that billionaires like the Koch brothers, who apparently have had it up to their crony-capitalist eyeballs with faux fine wine, have been looking for.

The global wine market currently makes up a full-bodied $300 billion and is expected to rise to a spicy $425 billion by 2023, according to Zion Market Research. And the swindlers have gotten so good at faking expensive brand labels, or simply refilling legitimate bottles with knockoff nectar, their swill siphons anywhere between 10 and 20 percent of said billions. It’s a problem, no question, but is the answer blockchain?

VinX CEO and founder Jacob Ner-David is insulted by the question, writing in a Medium post that he’s “amazed” it gets brought up at all. Despite the finger wagging, Ner-David never actually addresses the question of why VinX needs a blockchain, but that may be because the pairing is such an obvious one. Supply chains and blockchains go together like wine chains and cheese chains.

Big players like IBM have long recognized the applicability of blockchain in supply-chain management, and Medici Ventures tells Forbes that it had been searching for “a good supply chain investment in the blockchain space” for some time before landing on VinX.

Ner-David says in the same blog post that he understands most ICOs and their associated tokens these days are “simply scams,” adding that he hopes “folks trying to raise money on the basis of buzzwords will go away.” While Overstock’s Medici Ventures won’t say exactly how much it’s putting into VinX, its involvement does give the project at least the aroma of legitimacy. We may have to wait until a little vino starts flowing before we learn the veritas.

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