How can wine merchants check authenticity through blockchain technology?

December 17, 2024 (Investorideas.com Newswire) Countries like France and Italy have provided the world with great wine products for decades, but as demand has decreased recently, the wine industry has experienced a series of hardships. Shifting consumer preferences, the inflation economic squeeze, and climate change have all had a massive impact on the success of alcoholic beverages.

Still, the most prominent issue in the industry is ensuring the wine's authenticity. Counterfeiting wine is widespread, as fraudsters use coloring agents or various flavorings to copy expensive or collectible wines. Wine fraud also includes fake labeling, wine blending, and the use of hazardous materials.

The complexity of seizing these frauds is considerable. Therefore, more people are unsure of trustworthy companies or labels affecting the industry since trust is questionable. So, wineries need a new approach to check authenticity and ensure the product's qualities, such as blockchain technology. For example, Ethereum could be a useful solution as it's a high-tech network solution. Its tools, like smart contracts and decentralized app programming languages, propelled the ETH coin price, making the coin the second-largest cryptocurrency before Bitcoin.

So, as the asset proves to be reliable as a blockchain, here's how this technology could help the wine industry.

Blockchain traceability

Blockchain traceability holds all transactions on the ledger as verifiable and traceable, including orders, payments, and production. The data available to everyone on the network includes details like history, location, and movement so that the blockchain can capture any product during the manufacturing and distribution process.

Depending on how high-tech the solution is, stakeholders and users can check information like storage conditions and modes of transit of the wine, ensuring more responsibility and enhanced product authenticity.

Adding data about wine products on the blockchain can never be tampered with, meaning there are no ways for fraudsters to intervene. The blockchain is secured through cryptography and checked by worldwide nodes, offering customers the reassurance they need to purchase certain products.

Blockchain and NFT authenticity

NFTs (non-fungible tokens) live on the blockchain and are unique identifiers of any asset tokenized. Every NFT is special and cannot be copied, so ownership is secured and can be proven. So, can wine be transformed into an NFT?

The answer is yes, as any tangible object can become intangible. The process is called real-world asset tokenization, and it implies digitalizing the object so the ownership rights are easier to trace. In this case, the token used as a digital certificate is the NFT.

The technology could also prevent counterfeit products from entering the market, as it's easy to check their date and place of production by looking into the blockchain data. Therefore, high-value and rare wines can be protected from being copied.

Blockchain and smart contracts

Smart contract technology automatically seals a contract when the parties involved assess the pre-determined conditions, which is a massive upgrade for the supply chain. Considering that the wine supply chain includes producers, distributors, and retailers, it can sometimes be hindered by transportation issues, sudden spikes in demand, and natural disasters, leading to disruptions.

Smart contracts can solve the wine supply chain disruption by offering more transparency and traceability to products and their life cycle. Tracking and verifying wine can be done automatically, reducing the risk of human errors.

In addition, smart contracts are a great solution for concluding agreements between supply chain parties, which could save time and resources on acquiring products.

How can wineries adopt blockchain?

Most companies still find adopting blockchain technology challenging as it requires certain technical knowledge and adequate infrastructure to be functional. However, it's not impossible to introduce it into the world of business, especially in countries that support technology.

Successful wineries should define their objectives depending on the biggest problem with their product's authenticity. Whether it's about identifying the key chemical compounds in the product or handling supply chain inefficiencies, identifying the main issue is a good start.

It is also important to work with collaborators who share the vision. Producers, distilleries, and distributors can help make adopting blockchain easier and mitigate supply chain interruptions. Data distribution will be seamless if you use the same blockchain platform, like Ethereum or Solana.

Other aspects you must consider include the following:

• Data structure design;
• Smart contracts between suppliers and producers;
• Data entry points, such as IoT devices;
• Access and verification through QR codes and identifiers;

Will this technological implementation solve the demand situation?

Wineries, distributors, and suppliers have noticed a significant decrease in demand for the product recently. According to Statista, global wine consumption started declining around 2019, and production volume couldn't adjust, leading to market saturation.

It seems like the generational shift has taken the industry aback, as youngsters choose drinks like beer and spirits instead of wine. The diversity of these drinks makes them more appealing to younger generations, but the cost of wine also makes them choose these alternatives, as qualitative wine is pricey.

Moreover, making wine has been linked with unsustainable practices, something the younger generations care about. Vineyard pests are handled through synthetic fertilizers and pesticides, releasing considerable amounts of nitrous oxide.

Packaging and distribution are also problematic, as the manufacturing of glass bottles and the production of cork lead to waste. That's why some companies are selling wine in cartons or bags instead of glasses. Of course, transportation is a challenging topic regarding the product, but since glasses of wine increase the weight of the load, emissions also spike, especially when wine is not transported in bulk.

What do you think about blockchain in the wine industry?

The wine industry is one of the world's oldest and most respectable, but it has recently been affected by several factors, including the decreasing demand and supply chain challenges. Plus, the lack of transparency in the authenticity of the wine hinders its potential for more customers. One of the more advanced solutions to this problem would be blockchain, the distributed ledger that can prove authenticity at any step of the distribution process. By adding transparency and automatization, the wine industry can put a stop to counterfeiting and regain its dominance in the beverage market.

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