Stamping Out Fake Wine with the Blockchain

China’s wine market is in a rapid phase of expansion. Tied to a middle-class lifestyle, imported top-end wine is soaring in popularity, to where China now has the distinction of being one of the largest wine consuming countries worldwide.

But with every market trend, there is a downside. This high demand for branded wine has led to legions of fake wine. While hard to gauge the amount of wine being counterfeited, recent estimates suggest that 70 percent or more of the wine in China is fake.

According to Maureen Downey, a fake wine expert, counterfeit wine is worth of billions of dollars, approximately $3 billion per year. One wine fraudster, Indonesian Rudy Kurniawan, has been imprisoned for bootlegging $500 million worth of fake wine.

To resolve this issue, Shanghai-based blockchain company BitSE has teamed up with Direct Imported Goods (DIG), China’s largest importer of fine wines, to establish a proprietary blockchain to address wine counterfeiting. Fueled off of an Ethereum-based model, DIG is currently listing over one million bottles of wine on BitSE’s VeChain portal.

BitSE has established a growing reputation around its anti-counterfeiting blockchain applications. The sale of fake goods is a big business globally, especially in Asia. So VeChain, which had already been successfully deployed to track and verify luxury apparel and handbags, was a natural fit for curbing the fake wine epidemic.

Here’s how it works. The VeChain app, or the VeChain-enabled DIG app, provides information about the winemaker, including a wine’s history, the manufacture date, shipment, and logistics information, and any certifications provided by DIG or other organizations. VeChain creates a record and digital trace of each bottle of wine through a unique ID, paired with either a NFC chip or a QR code. That allows the digital identity of each wine bottle to be tracked in the real world.

VeChain delivers several types of chips to DIG, which are utilized contingent upon the wine’s value. Environmental parameters, like vibration and temperature, can be retrieved through the use of this system. Moreover, each ID has a public and private key pair. The bottle’s authenticity will be able to be verified via the VeChain’s app, showing the product’s profile and then identifying the public key on VeChain servers.

Says DIG Vice President Cici Li in a video by PwC China, which helped foster this collaborative initiative: “We are able to significantly enhance the efficiency of the supply chain management system by integrating it with blockchain technology.” Li went on to note that the full-traceability from wineries overseas and among informal stakeholders involved in the wine’s life cycle was a big step in mitigating the counterfeiting issue.

DJ Qian, the founder of VeChain, has said that while Blockchains such as Ethereum and Bitcoin were uniquely created to store transaction information, such data cannot be stored with this existing format because of the sheer volume of data, with some companies possessing over one petaflop stored in their centralized database. He says that the solution is to store data on a commercial blockchain, some on the Ethereum and Bitcoin Blockchain, while utilizing other traditional databases and blockchain hash technology.

Says Qian: “For high end wine and high end spirits, we have one chip as thick as a sheet of paper you can put on top of the bottle. When the bottle is open, the chip’s antenna is destroyed. This protects the wine bottle from being refilled with a different wine and counterfeited.”