Overstock.com’s Medici Ventures invests in VinX blockchain wine market and supply chain
Medici Ventures, a subsidiary of Overstock.com Inc., today announced a strategic investment in VinX, an Israel-based wine futures market and supply chain security company developing distributed ledger blockchain technology to reduce fraud and increase efficiency for wineries.
The VinX platform would create a token-based system using blockchain technology using the Bordeaux futures model — a way to pay for wine while it’s still in the barrel and then receive it when it ships about two years later. The idea is to allow vintners to sell wine futures to customers directly, providing a source of income for wineries during the winemaking process.
The blockchain platform would also track wine creation from cask to bottling and thus allow the tracking of provenance for any bottle of wine. That would help reduce wine counterfeiting while also providing trust to customers.
“Like any economy, the wine industry has difficulty scaling its middlemen-heavy systems in parallel with the growing demands of an increasingly global market,” said Patrick M. Byrne, founder and chief executive of Overstock.com. “VinX’s steps in tokenizing wine futures while allowing wine enthusiasts to know without a doubt that the bottles they purchase are filled with authentic wines will position the entire industry as a model of a new global economy that replaces old boys’ networks with frictionless trust through technology.”
For winemakers, the current distribution model can be extremely burdensome. According to VinX, imported wine can sell for more than three times what a winery receives. Almost two-thirds of the value of wine at retail goes to the distribution chain and wineries need to finance two to three years of winemaking before bottling.
Those challenges make a futures market for wine a potentially powerful way to connect wine consumers. With the ability to sell wine at wholesale prices just after harvest, wineries no longer suffer the financial burden of the wait between harvest to bottle. The blockchain system, which can track the ownership of future expected production, also provides a view of how well the wine will sell and who’s buying.
This is the first supply chain blockchain system Medici Ventures has invested in. The company, which invests in blockchain startups, has funded platforms for financial services, secure voting, identity management and cryptocurrency exchange.
“We think that supply chain is an industry ripe for revolutionizing with blockchain technology and we believe VinX is a nice example of blockchain meets supply chain,” Jonathan Johnson, president of Medici Ventures, told SiliconANGLE in an interview. “Its owners and management have industry experience owning and running wineries and running startups in the tech space. So, this is really tech meets vintners.”
Johnson said the wine industry would be a fertile industry for blockchain supply chain management.
“Wine is a very discrete industry,” Johnson said. “There’s a number of players — wineries, futures buyers, importers and distributors and then there’s the consumers — so there’s not a large number of people in that supply chain and we can revolutionize that.”
The benefit of a blockchain platform is that it can both track future sales as well as the life cycle of the wine itself. Importantly, it does so in an automated, tamper-resistant ledger that tracks historical transactions in a way that can be easily audited. This means that not only can a collector or consumer buy a particular future bottle of wine, but the winery can also provide proof that this is the wine that was shipped.
“By working hand in hand with the wineries, we can verify the wine future has actually been issued by the winery. Once the wine is being bottled we will register each bottle in a series,” Jacob Ner-David, chief executive and co-founder of VinX, told SiliconANGLE.
Each bottle will be printed with a unique quick-response or QR code that can be validated by the owner with a mobile app and in the future could include solutions such as a supply chain tracking chip from IBM Corp. “As we will already be responsible for the wine futures, it will be an easy transition to being the blockchain partner for the finished product,” Ner-David said.
According to statistics collected by VinX, experts estimate that almost 20 percent of all wine in the world may have counterfeit labels. Even seasoned collectors of wine might find it difficult to identify fakes and thus trust in distribution will be valuable.
For his part, Ner-David is not just a technology executive building a blockchain startup. He’s also the co-founder and chairman of the Jezreel Valley Winery, a boutique vintner of original Israeli wine. When asked what his favorite wine is, Ner-David naturally said, “Jezreel Argaman — that’s from my own winery.”
VinX plans to launch a pilot beta program of its blockchain with first-adopter vintners and distributors in the first quarter of 2019.
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