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B. G., Opalesque Geneva for New Managers: Nicolas Mandiharat, the co-founder of WineChain, wants to give the world the opportunity to buy fine wine directly from its makers.
His new platform is a wine NFT* marketplace where the world's most coveted wineries use blockchain technology to sell their wines directly to wine lovers.
To buy wine on WineChain as wiNeFTs, the buyers first need to set up their wallets. Once purchased, WineChain stores the bottles safely. Then investors can either trade the wine on the WineChain marketplace, store the wine for later, or use the platform's "white glove" shipping services to have the bottles delivered to them. That's when the NFT gets "burned".
In this interview, he explains the ins and outs of collecting wine NFTs. He will expand on the topic and more during an interactive webinar on 19th October (details below).
Opalesque: Could you explain the relationship between blockchain and wine?
Nicolas Mendiharat: A lot of people are actually confused about why we would use blockchain and are confused between two major things.
A lot of projects have emerged that sought to track and solve the authenticity problem, the storage problems, all the distribution layers problems, etc., by tracking the wines, by registering their movement on the blockchain. With blockchain, you know how the wine circulates, which player is selling to which player, who is going to be a consumer, etc.
I'm not saying the theory is wrong. I'm saying the execution of it would be too long and complicated, as you would need the participation of all the supply chain actors, many of whom don't want the tracking for various legal, costs and privacy reasons, including the end consumer. You would need to add NFC and other technologies, where there's no global worldwide standard. This is why all the projects going down that road have failed so far.
It's not what we do. People don't want the players, the professionals, or the bottles to be tracked. That has nothing to do with blockchain: blockchain does not involve microchips tracking the movement of bottles. Although this kind of technology exists.
Blockchain is a technology offering a decentralized secured ledger. Before anything else, it's a new way to organise transactions and ownership, which in our case of application, enables us to solve a lot of the market's flaws.
Opalesque: How does it work?
N. M.: The wines are provided exclusively by the winemakers who guarantee the perfect provenance and authenticity. The winemakers send the wine sold to customers directly to our logistics centre.
From the moment the wine is sold from the winery, we create a digital twin, which is called a smart contract, and has a certain number of automated rules. It is also called a token. It is registered in the ledger of the blockchain, which means it is immutable.
So you don't need a notary, a bank, a merchant or anybody who is going to act as legal proof that you own that contract, therefore the wine, while you don't need to have the physical bottles. The contract is registered on the blockchain linked to your wallet. That contract proves your ownership of the bottles and can be easily traded.
So all this enables the bottles to not move if you have a contract. Why not? Because it's unique and corresponds to specific bottles of wine that are attached to the contract.
Opalesque: Why use blockchain?
N. M.: The first thing is the memory. This is the principle of blockchain in itself. The ownership of that smart contract doesn't depend on even WineChain or other players.
WineChain provides the software and the platform so that the wineries can add the contracts. WineChain also provides the storage and the shipping. If WineChain were to disappear, you would still be the owner of that contract.
Blockchain is a decentralization tool. You are 100% in control of the proof of ownership.
The second reason is the conditions embedded in the smart contract. And more particularly the fact that you can resell the smart contract, and what happens automatically when you do so.
Opalesque: So you can resell the token?
N. M.: Right. We store the wine for you and we create a marketplace of all these smart contracts.
That's something totally new in the market. Today, all the fine wine secondary markets are among professionals who decide the price of the market. It's an offer-and-demand market, but in the end, it's not the consumers selling to each other, it's the pros defining it and the prices while taking nice margins in between.
That changes with WineChain because it is an accessible open marketplace for consumers to buy the wines among themselves through those smart contracts, very easily.
Opalesque: What happens when the token changes hands?
N. M.: When that smart contract is executed and ownership changes, that happens in real-time using cryptocurrency, and so you can do things that are really hard to do in the real world, more particularly apply royalties for the wineries for instance.
So what that means is that there is, embedded in the smart contract you buy, a percentage of the profits that goes to the winery and to the WineChain. Usually, it's 15% of the profits.
Opalesque: Why is this new way of investing so important?
N. M.: It's important because one of the major flaws in the wine market is that there are so many people involved. And therefore wineries only get a minority piece of their creations, and consumers often pay huge retail margins to get the best wines. We change that by creating a direct relationship between wineries and their collectors.
Adding to that point, fine wine prices increase over time. (It is a very good investment usually.)
Let's say for example that, in 2015, a crate was sold for $1,000 to professionals. That crate had already been sold three times by the middlemen who took their cut. In 2023, that crate is worth $6,000 because the market has been growing a lot. The margin of $5,000 has also gotten across two international transactions across all of the countries, making more than 3% each.
What we do changes the system completely. Even if we take a 15% cut, it reduces the cost of wine distribution dramatically.
Opalesque: What are the main benefits for token owners?
N. M.: It keeps the authenticity, and perfect storage and at the same time, provides better liquidity for the consumers and investors and provides a better income for winemakers and a direct relationship to their consumers. It enables much better fluidity and cost-effective transactions in the fine wine market.
Upcoming Webinar
Tech Innovation in Fine Wine is Captivating Consumers, Investors, and the World's Leading Winemakers
WineChain was founded by Xavier Garambois, former head of Amazon Europe, luxury marketing and communications expert Guillaume Jourdan, CEO of VitaBella in Paris, and serial entrepreneur Nicolas Mendiharat, CEO of the San Francisco Palate Club.
When: Thursday, October 19th, 2023 at 11am ET
Who: Nicolas Mendiharat is a repeat founder and CEO with 25 years of experience building tech-enabled start-ups. He specializes in early-stage consumer markets and marketplaces. After launching the online travel venture Skihorizon.com, which achieved $100m in revenues and 300k customers, he decided to focus on one of his passions: wine. He has since been revolutionizing the industry with two ventures: Palate Club and WineChain.
Details and free registration: https://www.opalesque.com/webinar/index.php?id=61#uw3
* NFT stands for 'non-fungible token'. Non-fungible means that something is unique and can't be replaced. By contrast, physical money and cryptocurrencies are fungible, which means they can be traded or exchanged for one another. Every NFT contains a digital signature which makes each one unique.
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