Are you curious about how blockchain technology will transform how you buy and collect wine? How do non-fungible tokens, or NFTs, play a role? How can blockchain technology help to prevent counterfeit wines?
In this episode of the Unreserved Wine Talk podcast, I’m interviewing David Garrett, the co-founder of a global non-fungible token (NFT) wine club, Club dVIN.
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- Why did David make the move from tech to wine?
- How did meeting Santiago Achával transform David’s understanding of wine?
- What was it like building a vineyard on virgin land in the Uco Valley in Argentina?
- Which big lessons did David learn in the 10 years it took to start producing wine at his vineyard?
- How did David bring a data-oriented approach to winemaking?
- How did the unique private vineyard estate program at the Vines of Mendoza operate?
- Where does the biggest problem with counterfeit wine lie?
- How does blockchain technology help to disincentivize counterfeit wines?
- What is a blockchain and how does it help to clarify provenance?
- What’s the relationship between cryptocurrency and a blockchain?
- What are non-fungible tokens (NFTs)?
- How do you create an NFT for a bottle of wine?
- What are the benefits of NFTs for wine?
- David had such a clear and concrete way of explaining how blockchain technology will transform how you buy and collect wine?
- I also liked his comparisons to buying land or a house with non-fungible tokens, or NFTs.
- I was glad to hear that blockchain technology may help prevent counterfeit wines.
Start The Conversation: Click Below to Share These Wine Tips
The time from our first dollar of investment to the first dollar of wine that we sold from the property was about 10 years. - David Garrett Click to tweet
The worst problems with wine counterfeiting aren’t the big fancy bottles. - David Garrett Click to tweet
Around 20% of the wines in the collectible and investment-grade category are likely counterfeit. - David Garrett Click to tweet
About David Garrett
Since graduating from Michigan State University with a bachelor’s degree in political science, David Garrett has spent more than 25 years in the fields of tech, wine, and finance. In 1994, he co-founded IntraACTIVE, a software company that built the original Intranet for the US Navy. After he sold his company in 2004, he co-founded The Vines of Mendoza, developing more than 1,500 acres of vineyard land in Argentina as well as a five-star resort and restaurant. In 2013, he led a group of investors to buy the largest vineyard in Priorat, Spain. Today, he’s the co-founder of Club dVIN, a global non-fungible token (NFT) wine club.
- Connect with David Garrett & Club dVIN
- The Vines of Mendoza
- Sour Grapes Documentary
- Unreserved Wine Talk | Episode 29: Wine Scandals, Fakes and Forgery with Maureen Downey
- Diary of a Book Launch: An Insider Peek from Idea to Publication
- My Books:
- My new class The 5 Wine & Food Pairing Mistakes That Can Ruin Your Dinner And How To Fix Them Forever
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Thirsty for more?
- Sign up for my free online wine video class where I’ll walk you through The 5 Wine & Food Pairing Mistakes That Can Ruin Your Dinner (and how to fix them forever!)
- You’ll find my books here, including Unquenchable: A Tipsy Quest for the World’s Best Bargain Wines and Red, White and Drunk All Over: A Wine-Soaked Journey from Grape to Glass.
- The new audio edition of Red, White and Drunk All Over: A Wine-Soaked Journey from Grape to Glass is now available on Amazon.ca, Amazon.com and other country-specific Amazon sites; iTunes.ca, iTunes.com and other country-specific iTunes sites; Audible.ca and Audible.com.
David Garrett 0:00
The digital cork is an NFT or a non fungible token that is a digital twin for a bottle of wine. It serves as a deed of ownership and we’re going to register your ownership on the blockchain as a certificate of authenticity. It says this bottle came from the winery. It provides a chain of custody for that bottle. If you bought that bottle from Chateau Palmer, and then you sold it to me, and then I sold it to my friend, on that chain of custody it would show all of those transactions that provide transparency to the industry. Just as importantly, it discourages counterfeiting or fraud. Because if the person that I sold it to opens up the bottle and there’s fruit juice inside, well there’s only a couple of people to go and see about that, right. So it’s a big disincentive against fraud and counterfeiting.
Natalie MacLean 1:05
Do you have a thirst to learn about wine? Do you love stories about wonderfully obsessive people, hauntingly beautiful places, and amusingly awkward social situations? That’s the blend here on the Unreserved Wine Talk podcast. I’m your host, Natalie Maclean. And each week, I share with you unfiltered conversations with celebrities in the wine world, as well as confessions from my own tipsy journey as I write my third book on this subject. I’m so glad you’re here. Now pass me that bottle please. And let’s get started. Welcome to Episode 207. Are you curious about how blockchain technology will transform how you buy and collect wine? How do non fungible tokens or NFTs play a role? And how can blockchain technology prevent counterfeit wines? You’ll hear those tips and stories in my chat with David Garrett, who is co founder of a global non fungible token NFT wine club. Now a quick update on my upcoming memoir Wine Witch on Fire: Rising from the Ashes of Divorce, Defamation, and Drinking too Much. Last week, I mentioned that dialogue is action in memoir for a number of reasons. The only risk with dialogue is when it becomes stilted or expository, stilted dialogue sounds unnatural as though it’s being spoken by robots. There are some tells, such as not using contractions the way we do in everyday speech. So for example, I am not opposed to the idea however, I would like to have more information first. Compare that to I’m not opposed to the idea. However, I’d like to have more information first. So I’ve replaced with I am and I would very robotic with I’m and I’d because that’s how we talk. The best way to improve dialogue is to eavesdrop on conversations whenever you can, at a coffee shop, waiting in line in the grocery store, or the liquor shop wherever. Next week, I’ll dive into another dialogue danger exposition. In the meantime, here’s a new review from Carolyn Hinton, a beta reader in Auburn, Alabama. “This was one of my favourite Memoirs of all time. I had heard of Natalie before reading her book, but had never put it together that she is not only a wine critic, but also a super taster. A super taster as someone who has more tastebuds than most people and can pick up on subtle nuances and flavour that most people can’t. And Natalie’s case, she’s gifted in articulating those nuances of flavour in a unique and original way. The author was happily married for years until things fell apart and she ended up divorced. The way she often felt with her husband resonated with me. Miraculously, she met a wonderful man pretty soon after her divorce. She subsequently threw herself even more into her job as a critic and taster. Not being familiar with how the wine industry works, I learned a lot about vineyards, wine companies, and those who run them as well as the wine rating industry. As her story unfolds, the author shares how being a female in a male dominated wine industry can be intimidating: situations ranging from sexual innuendos, put downs, and online bullying are in her story. What I love most about this book was her style of writing. She’s incredibly funny and articulate. Her tone is not whiny or victim like. She wove her story in a thoughtful and matter of fact way telling exactly what happened and her feelings about it at the time. Overall, it’s balanced and fair. I applaud her for exposing the profound sexism in the wine industry and for calling out those who took aim at her and what they said, facing her male colleagues and standing up to them was not unlike the women who stood up to Harvey Weinstein, in exposing the dominating influence he had in the movie industry. Not only did she stand up to them, but ultimately she didn’t let them stop her from doing the thing she does so well. Ironically, she is now even more influential in wine circles instead of less so. She’s been a writer for wine columns, and as a regular guest on TV shows. She teaches online wine and food pairing classes, and her blog is thriving. Overall Natalie’s upbeat personality and humorous reflections while recalling an emotionally trying time in her life make you feel like she is someone you’d want to be friends with. I’m proud of her for using her voice and her platform to speak out against sexism. I believe she’ll lead the way in changing things for the better with this book she already has”. Well, Carolyn, thank you. I do want to be your friend. Thank you very much. I posted a link to my blog post called Diary of a Book Launch in the show notes at NatalieMaclean.com/207. This is where I share more behind the scenes stories about the journey of taking this memoir from idea to publication. If you want a more intimate insider seat beside me on this journey, please let me know you’d like to become a beta reader and get a sneak peek at the manuscript. Email me at [email protected] Okay, on with the show.
Unknown Speaker 6:34
Before I introduce our guests, let me just say that one of you is going to win a copy of his gorgeous book The Wine Masters of Paso Robles. And this is a spectacular region California. And all you have to do is email me. We will include a link and the book cover in the show notes. It is a gorgeous book looks like it would sit well on any coffee table but also should be actually read. So all you have to do is email me at [email protected] and tell me you want to win a copy.
Natalie MacLean 7:04
All right back to our guest. Since graduating from Michigan State University with a Bachelor’s degree in political science, Dave Garrett has spent more than 25 years in the fields of tech, wine, and finance. In 1994, he co-founded INTERactive, a software company that built the original Internet for the US Army among other projects. After he sold his company in 2004. he co-founded The Vines of Mendoza, developing more than 1500 acres of vineyard land in Argentina, as well as a five star resort and restaurant. In 2013, he led a group of investors to buy the largest vineyard in Priorat, Spain. And today he is the co-founder of Club dVIN, a global non fungible token NFT wine club, which we’re going to hear more about. Welcome, David, so great to have you with us.
David Garrett 7:54
Well, thank you very much. I really appreciate you taking the time today. So it’s great to be here.
Natalie MacLean 7:58
I’m super curious about all of this new fangled technology. So before we dive into NFTs, Dave, tell us why you actually left the tech world which sounded pretty exciting. You were successful, and you went into the wine world.
David Garrett 8:13
Well, it’s a long story. So my first company that I started, when I was 22, was called INTERactive. As you mentioned, we built the first Internet for the US Navy. And it was really fun and interesting. We sold that company in 1998, probably a little soon. If we would have waited a little bit longer, we probably would have made a lot more money. But we sold it and the bankers that sold that sent me actually to Los Angeles to advise some of their clients on the Internet. And I was advising television studios and movie studios and on kind of what streaming was going to be like and how the Internet was going to affect their business. This was in 1998, so way before Spotify or Netflix. And I don’t know if you remember but in March of 2000 the bottom fell out of the internet market and the stock market crashed. And everyone said the Internet died. And basically all of those studios and television executives said wow well I’m glad that we don’t have to worry about the Internet anymore. So that’s done, you can go and do something else. And we’re gonna go back to business as usual. And so I thought that was pretty funny. And basically, the idea was that I was just gonna go travel for a year and wait for the Internet to sort itself out. And I ended up in Mendoza, Argentina about a year later with some friends. And it was just after the currency devaluation in Argentina and kind of the whole country was on sale. Everything was very, very inexpensive if you had US dollars, and so we bought a bunch of raw vineyard land for, you know, kind of 10 cents on the dollar. And it was a really great investment and changed really the trajectory of my life and my career.
Natalie MacLean 9:55
And so you just happen to be in one country and said let’s buy land. It’s Cheap. Like, let’s get into the wine industry. Is that kind of what sort of drew you to it?
David Garrett 10:06
I was travelling through South America and I was in Cusco, Peru, and I met a girl and she danced tango, and she wanted to go to Buenos Aires. So and we went to Buenos Aires and she left but I stayed because I really loved Argentina. I love the people. And I just started trading real estate. I was buying apartments at the time, buying apartments in Buenos Aires and selling them. I knew some Spanish and I knew how the real estate market worked. And so the story goes, an old friend came to visit. And we went to Mendoza for the weekend. I stayed for 10 years. He has stayed for the rest of his life. He’s been there ever since. And I don’t think he plans on leaving anytime soon. It is a beautiful, beautiful, wonderful place.
Natalie MacLean 10:49
It is. I’ve had the privilege of visiting and Buenos Aires and went to some dance clubs. I love that mix of culture, the food, the wine, the asado, the tango, everything. And it’s beautiful. They call it Paris of South America. I think Buenos Aires is a beautiful city. And of course the wine region Mendoza is spectacular as well.
David Garrett 11:07
It really is beautiful. Unfortunately, I have two left feet. So I didn’t really get to dance tango, but I met my wife in Buenos Aires and I have two Argentine daughters. We don’t live in Argentina anymore. But both my daughters were born there.
Natalie MacLean 11:20
Wow. And was there a wine that sort of turned your head? Like that really spoke to you and thought oh, I need to find out more about this.
David Garrett 11:29
So I really loved the wine. And you know, when I was in Argentina, like I said everything was on sale, you could get a steak dinner and a bottle of the best wine you’ve ever had for $10. And we drank a lot of really, really great wine at the time. But I would say less an individual wine and more a winemaker. I was very fortunate to meet Santiago Achaval who became our consulting winemaker at The Vines of Mendoza and, and is still to this day one of my heroes. He taught me more about wine than anyone. I was kind of fresh faced and 28 years old. I think didn’t really know much about anything. And he really took us under his wing. And I learned just so much from him about terroir and about winemaking. And he’s. Obviously, Santiago is probably the highest rated winemaker in Argentine history and also comes from a really interesting background. He was the CFO of a cement company. Oh, so the hard sciences. Came from a very data and analytics background. And when he started making wine, I could really relate to that coming from also being an entrepreneur. And from the business side, I found his approach really interesting. And the mix of you know science and art, I would say he inspired me. And that started you know a really long trail of people in the wine industry that inspired me even more than the wine itself.
Natalie MacLean 12:57
Oh wow. That’s great. drawn to the people. And so then you were planting this vineyard. It took a long time. Tell us why it took so long to actually plant the vineyards that you bought?
David Garrett 13:09
So we purchased some property in Uco Valley, and we purchased land literally across the street from Clos de los Siete. So a lot of the reasons that we knew that we were in a good region and that we were getting a pretty good deal was the Clos de los Siete property in the Uco Valley was started four years earlier. And that project, as you may or may not know was really launched by Michel Roland.
Natalie MacLean 13:32
Right, the famous flying winemaker from Bordeaux.
David Garrett 13:34
That’s right. And you know, he makes wine all over the world. He signs bottles I want to say in more than a dozen countries. But there’s only one place in the world where he owns vineyard land. And that’s in the Uco Valley in Mendoza. And as soon as we heard that story and talked a little bit to Michel and his people, we got to understand that there was really a great opportunity. The problem was is that the land that we bought was virgin land. And right at the base of the Andes, so it was this alluvial soil that had been you know kind of falling down the highest peaks of the Andes for 10,000 years. So when the surveyor went out and drew the first lines in order to create the deed for the property, he had to do it on horseback. It was so uneven. It was so uneven and so rough. And for the first two years, we can only approach to land on horseback. The first thing we did, you mentioned Argentine asado, the very first thing we did and we learned this it was really fun to build a new project in Argentina, because what we learned is, everything’s done by hand. You need a lot of workers to create a vineyard, especially on virgin land in Argentina. So the first thing that we built was a giant grill, a patio, in the middle of the property, looking at the Andes and that was because in order to get the workers to come. They need to know there’s a place for them to cook lunch. And so it’s really interesting how that process works. But the very first thing that we built was this giant, giant parrilla that was big enough to serve you know 100 people. For 100 people.
Natalie MacLean 15:15
Yeah, my goodness and asado being the outdoor barbecues, I forgot to mention for those who might not be familiar with that term. But yeah, it’s a beautiful communal kind of feeling when you’re cooking outside all around this giant grill, I’m sure.
David Garrett 15:27
Yeah, it was great. And you know we did that every day for years. So the first year was really just doing a proper survey and figuring out where to put the wells and drilling the wells. The second year was levelling the property. That took some heavy machinery, but also you know we needed to move some big rocks. We needed to remove some trees. There were some things that we needed to do in order to make it work. And that took a long time was very, very uneven land. And then the third year, we put in the post. So it really takes a pretty significant amount of time just to get started with a vineyard in the Uco Valley or at least that’s true. It was true for us with virgin land.
Natalie MacLean 16:09
A little bit different from creating software.
David Garrett 16:12
Very, very different. I mean I think the time from our first dollar of investment to our first dollar of revenue from wine that we sold for the property was about 10 years. That’s pretty different in the software business. You know if you don’t have your first revenue in three to six months, then you should be looking at a different business. So it was a really eye opening and interesting experience. It taught a lot about patience. I think winemaking teaches you a lot about being careful. And it teaches you about high stakes you know the stakes of winemaking. What we say all the time as if you’re a chef and you make a meal and you make a mistake, you just throw it away and make another one. It’s true. But if you’re a winemaker, you’ll only get about 30 bites at the apple if you have a fantastic career. You probably only get about 30 bites at the apple. That’s true, meaning like if you screw up one of those years you know you’re dumping the line and waiting for the next year. And that’s not great. That’s a whole year. Yeah. So we really learned a lot.
Natalie MacLean 17:15
Wow. And did that tie into you data oriented approach? Like how did you approach wine? It seems you approach it very methodically, all this sort of mapping out the vineyard and so on. But in what other ways did you approach winemaking from a sort of data oriented approach that you perhaps imported from the software world?
David Garrett 17:33
The property was pretty large about 1500 acres. And from the lowest elevation to the highest elevation, I think it was 850 metres above sea level to 11,150 metres above sea level. So about 300 metres. So 1000 feet. So a 10 story building. Quite a range. Yeah. And it was all very flat and very nice. But we had a big range and so we really wanted to figure out how to make great wine on that property. And we knew that we had time. We had a few years and the people in Argentina are very open and warm and inviting. And one of the first things that we did is we hired a team of sommeliers. There’s a very famous Sommelier school in Mendoza. So we found a great team to start teaching us about wine. And one of the first things that we did is literally went out and found all of the best wines that were made in the region and created as many data points as we could for those wines. Everything from what’s the elevation of the vineyard? How far the vines apart? How far are the rows apart? What’s the height of the training wire? Obviously, what kind of irrigation is if they use any at all? And everyone kind of needs to use irrigation in the Uco Valley. What kind of clone they were using? What kind of root stock they were using? And we just compiled all the data. And we went out and talked to them. We had a bunch of data that we collected in the vineyard itself, where we would go and look and take readings for, if we take a measuring stick, and measure the distance between the posts and measure the distance between the plants. We’d look and see what kind of cover crop they had, and probably for about 300 different lines. We collected all of that data, and then as much data as we could about the winemaking process. And then we compare that data to success in the market. What kind of price points they were getting? What kind of scores they were getting? And based on that, it allows us to say all right well at 950 metre, you know, at this place in our vineyard, you know, we’re going to recommend that we’re going to plant at this angle to the sun, this many feet between rows, this many feet between plants. Here’s the density. Here’s the irrigation system. Here’s the height of the training wire. Trying to basically you know follow best practices. So we basically wrote the book on best practices using data.
Natalie MacLean 19:59
That’s so meticulous that sounds like a software programme in and of itself, not just a book.
David Garrett 20:05
It was we had lots and lots of data. It was great. It was really interesting. A lot of people told us we were crazy. A lot of people still tell us we’re crazy. I mean at The Vines of Mendoza I think in any given year they’re doing 300 unique fermentations or more. So it’s an insane project. But it’s a fantastic project.
Natalie MacLean 20:23
And you said you also create like 300 labels. Are you kind of a crush facility for others who don’t want to have their own facility? Are you making wines for other people as well?
David Garrett 20:34
So just to be clear I’m not part of The Vines of Mendoza anymore. I’m competitive project in the Priorat. But at The Vines, what we did which was very interesting and a little bit different from like Harland Estate or other projects like that is we created a private vineyard estate programme, where you could go down you could purchase a vineyard inside of our property, and we would plant it to spec and wine make to spec for you. So we have everyone from Omaha Steaks to Wolfgang Puck and a bunch of other brand names that make wine on our property that own vineyards within The Vines of Mendoza and make wine. There to a lot of little restaurants. Some of the best restaurants in the US and in Europe make their house wine at The Vines of Mendoza. So it’s a really unique project. It was a unique business model that we created way back in the day. And it was really fun and it was a great project.
Natalie MacLean 21:31
Sounds great. So I would love to keep talking about that. But since our core interest here is the NFTs, you mentioned in a previous interview that 10 to 15% of wines on the market are fake or could be fake, which is astounding. So before we dive into NFTs, they help prevent wine fraud that’s why we’re talking about them, among other things, maybe you could share a couple of famous bottles, fake bottles that have been on the market previously that people may have heard of.
David Garrett 22:01
Sure. Well I mean the most famous is from the movie Sour Grapes if anyone has seen that. It’s a Jefferson Bottles that I think Charles Koch bought and ended up being fake and there was a, you know. Rudy Kurniawan I think sold those bottles. It was a nightmare at the time.
Natalie MacLean 22:18
It was Thomas Jefferson, the former president of the United States.
David Garrett 22:21
And that’s really interesting. There are a lot of these famous cases you know from the movies and we work a lot with Maureen Downey. She was the certification expert in that film, and she’s one of our founding members.
Natalie MacLean 22:34
And she’s been a guest on this podcast previously.
David Garrett 22:36
She’s a really, really great, wonderful, colourful person. We actually have a really fun project that we’re doing with her that that I can tell you about later. But the interesting thing is you know all those big bottles they get the headlines, but the truth is the worst problems with wine counterfeiting are not the big fancy bottles. There’s a facility in China that is creating Penfolds by the pallet, creating counterfeit Penfolds by the pallet. Actually the worst case of counterfeit happened just earlier this year. A winemaker in Bordeaux was arrested for counterfeiting his own wine, basically importing grapes and importing their own wine. So it’s a problem. You know Maureen will tell you that somewhere around 20% of the wines in that collectible and investment grade category are likely fake or counterfeit. We think that you know our solution does a lot to disincentivize counterfeit and fraud. And also, more importantly, incentivize more clear provenance for those kinds of investment grade and collectible wines.
Natalie MacLean 23:46
The history of the wines, okay, but some of those just for those listening, like, I don’t know how much the Jefferson bottle sold for. Was like tens of thousands or more. I think it was $175,000. Hundreds of thousands yeah because it’s supposed to be the original. All right so before again we dive into NFTs, I’d like to clarify some terms. I tried to figure it out, but you’re the expert. So the underlying technology, the foundational layer, you’re gonna tell me is blockchain. Is it correct that it’s a digital ledger or a database of transactions that sort of distributed across a network of computers and no one computer organization holds or stores all those records?
David Garrett 24:26
Well, yes. But actually it’s a little different than that. Okay tell us. Computers store all of the records. That’s the idea behind consensus, right? So tens of thousands of computers have the exact same database. And any change, you need to have consensus among all of those computers in order to change that database. And the change is also really important. A lot of times the best analogy that I can give people for the blockchain is similar to like the land records at your local real estate office. You now when you by a house, the way the land record is updated it’s not like they erase the old owner and then put your name in. What they do is they create a ledger and they create a new entry in that ledger for a new owner and they say, okay, this house has changed ownership from you to the next person or from the old owner to you. And that’s really what the blockchain is right. It’s not a database where information is ever overwritten. It’s never overwritten, it’s always appended to, right. So anytime a transaction is made, there’s a new entry in the database. And all of those computers have to agree that yes that new entry is valid. And that’s what makes it very, very difficult, if not, most people say that it is impossible to hack, right. Which is why there are now trillions of dollars of value that are stored on the blockchain.
Natalie MacLean 25:51
That really helps me to understand it and I’m sure our listeners as well. And so sitting on top of this sort of distributed digital ledger is cryptocurrency like Bitcoin, is that right? Or how does that work? What’s the difference between blockchain and Bitcoin?
David Garrett 26:09
Sure. So Bitcoin is an asset that sits on the blockchain, right. In the same way that your house is an asset that sits on the real estate ledger, right. Like your house only has value to you because your local real estate office says that you own it, right. Right. Otherwise, there would be no value. Actually, really interestingly true, in a lot of countries around the world that don’t have good land records, the house is kind of the person that’s living in it. And that makes it impossible to get a loan from it. It makes it impossible to sell it. Like it’s not a very valuable asset unless you can claim and know who is the owner of that asset. And so that’s really what blockchain does. So if you think about it like one bitcoin is like a 50,000 acre piece of land in Nebraska. But if you were to buy half a Bitcoin, then the updated the ledger would say, Okay, we’re gonna cut that piece of land in half and we’re gonna give half to you, and the other half stays with the person that owned it before. And then if someone decides that they want to buy a quarter or half of your Bitcoin, so now a quarter, it will get split up again. So that ledger is kept in that same way, in the same way as like a land registry where you can make divisions anytime you want, you can cut a Bitcoin to as little as point 00001 Bitcoin or even smaller than that I think, and all of that information is kept on the blockchain forever. And the only way that it’s updated is if all of those computers agree. And so Bitcoin is a currency that sits on the Bitcoin blockchain, which is a specific blockchain that is created just for Bitcoin.
Natalie MacLean 27:58
Right. Okay. Then we get into non fungible tokens, your business. Sure, fungible of course is anything that can be exchanged, like one $10 bill can be exchanged for another but non fungible means the opposite. It’s unique, it’s one of a kind, it can’t be exchanged because there’s nothing like it. So tell us what non fungible tokens are in relation to blockchain and maybe even Bitcoins so we understand kind of the differences.
David Garrett 28:25
Sure. So Bitcoin is like you said it is a fungible token. You can exchange one Bitcoin for any other Bitcoin or you can exchange a half a Bitcoin for any other half a Bitcoin, right. Like it is a currency. And it’s a store of value. A non fungible token is a you would say two different items that are not exchangeable for one another. So again, let’s look at the real estate analogy right. So if there are two houses in the same neighbourhood, and maybe they have the same amount of land, and they were built at the same time, and they were built by the same architect, and they have the exact same layout, just like lots of neighbourhoods around the world, those are still unique homes, right. They’re unique assets. So they are non fungible. You can’t just go home and decide to walk into your neighbour’s house, right. Like your house is your house and your neighbour’s house is your neighbour’s house. And that’s really what a non fungible token is. So it is when you again use that same analogy, it’s a deed of ownership for a single asset, a single asset that can’t be traded with any other assets right. It is a single, unique asset.
Natalie MacLean 29:33
Okay. Like an individual bottle of wine.
David Garrett 29:37
Yeah like a bottle of wine. And that unique asset and it sits on the blockchain, right. It’s the same thing. And so it’s a deed of ownership just like the deed to your house or the deed to your car, but it’s a deed too, in a lot of cases. Probably the most common usage for NFTs right now or that you would hear about is for pieces of art, pieces of digital art. When people talk about NFTs, they’ll say I have a NFT have of this you know Bourdain, let’s say that’s obviously the most famous of them. Well the NFT is actually the deed of ownership over that image. It’s not the image itself. It’s the deed of ownership. And it says you are the owner of that image. And that deed is what is logged on the blockchain. And so ownership is actually the most important thing.
Natalie MacLean 30:25
That really clarifies. And I really like your real estate analogy that really makes it concrete, because sometimes these things can be so abstract, especially when they’re online. All right so now we get to wine. You create how do you create an NFT, a non fungible token, for one bottle of wine? What’s the process?
David Garrett 30:45
So an NFT as we said it’s a deed of ownership. But we work on the Ethereum blockchain, or we actually work on the Polygon blockchain, which is part of the Ethereum blockchain. And Ethereum does something a little bit interesting. So it not only provides the ability to have a deed of ownership, but it also provides a smart contract. So it’s a piece of software that tells you or that provides instructions for how transactions work. And I know we’re starting to get pretty esoteric here and I apologize. Think about it like this. We developed a piece of technology called the digital cork and the digital cork is an NFT, or a non fungible token. That is a digital twin for a bottle of wine. So that digital twin it serves a bunch of different functions. The first function that it serves is as a deed of ownership that says okay you own this bottle of wine. It identifies that bottle and says you are the owner of that bottle, and we’re going to register your ownership on the blockchain. The second thing it does is certificate of authenticity. It says this bottle came from the winery. There are other examples and I can talk you about that later but it tells you this bottle came directly from this wine maker. So it says that this bottle is authentic. The other thing that it does is it provides a chain of custody for that bottle. So that’s kind of interesting, again, in the collectible and investment grade space. So for example, if you bought that bottle from you know Chateau Palmer, where you bought a 2001 Alter Ego from Chateau Palmer, and then you sold it to me and then I sold it to my friend. On that chain of custody, it would show all of those different transactions. It would say OK you bought it from Chateau Palmer and then I bought it from you and then someone bought it for me. It would show the date of the transaction and the price of the transaction. So that chain of custody does some interesting things. It provides a lot of transparency to the industry which is really nice. Chateau Palmer gets to see how their wines are being traded. But just as importantly, it discourages any kind of counterfeiting or fraud. Because if the person that I sold it to opens up the bottle and there’s fruit juice inside well there’s only a couple of people to go and see about that, right They can look at the chain of custody and say OK well it’s either Dave or it’s Natalie or it’s you know somewhere in between. So like they can kind of figure it out. So it’s a big disincentive against fraud and counterfeiting.
But more importantly, we think it’s a big incentive for clean provenance. And think about it this way. The history of the wine, provenance. So that 2001 Chateau Palmer Alter Ego, if you were to go on wine searcher today and look for it you’d probably find a few dozen bottles in different places around the world, but they would all be about the same price. Now, if you could see the chain of custody and say okay one of those bottles sat in a bonded warehouse in Bordeaux for 21 years, and the other one had an owner in Hong Kong, and then had an owner in Dubai, and then was shipped to San Antonio, and then Chicago and finally now it’s up for auction in New York, well you’re gonna have a different price you know. The wine that sat in the bonded warehouse, you’re gonna pay a lot more for than the bottle that’s had five different owners. That’s true. That price differential I think is what’s going to create huge incentives for people to have more clean provenance for their wines. Does that make sense?
Natalie MacLean 34:33
Yes, it does. Because trading owners five times you don’t know how the bottle was treated, and shipment, how it was stored. Whereas if you can lock it down to one place one time and you know the conditions of storage in that bonded warehouse, then you’re more assured that when you open it, it’s not going to have a problem like be off or tainted or whatever.
David Garrett 34:52
That’s 100% right.
Natalie MacLean 34:59
Well, there you have it. I hope you enjoyed my chat with David. Hear my takeaways. Number one, David had such a clear and concrete way of explaining how blockchain technology works, and how it will transform the way we buy and collect wine. Two, I liked his comparisons to buying land and a house with non fungible tokens or NFTs. It really for the first time made it clear in my mind what these things were. And three, I was glad to hear that blockchain technology may help prevent counterfeit wines in the future. In the show notes, you’ll find my email contact, the full transcript of my conversation with David, links to his website ,and where you can find the live stream video version of these conversations on Facebook and YouTube Live every Wednesday at 7pm. You’ll also find the link to my free Ultimate Guide to Wine and Food pairing. And that’s all in the show notes at Natalie Maclean.com/207. Email me if you have a tip, sip, question, or want to be a beta reader of my new memoir at [email protected] You won’t want to miss next week when we continue our chat with David. In the meantime, if you missed episode 29 go back and take a listen. I talked about wine scandals, fakes and forgeries with Maureen Downey. I’ll share a short clip with you now to whet your appetite.
Maureen Downey 36:18
I’ve worked in auctions for many years, and I’ve been managing private wine collections. And it’s not just the crusty old 1960 bottle that we need to worry about. Because the current wine fraud that we’re seeing is recent vintages, recent releases. So if you think that you don’t buy $1,000 bottles and therefore wine fraud doesn’t affect you, you’re wrong. There’s been a lot of Mirror Ball Rosé that’s counterfeit. There’s more and more Brunello di Montalcino in the $40 range that is coming out as counterfeit. So this really does hit all aspects of the industry. And that is because we have seen such low punishments for those who get caught doing this, that organized crime has gotten into the game. Because if you get caught human trafficking or trafficking drugs, you’re going away forever. You get caught counterfeiting wine or selling counterfeit wine, you maybe get a slap on the wrist if that literally.
Natalie MacLean 37:12
If you liked this episode, please email or tell one friend about it this week, especially someone you know who’d be interested in the tips, wines and stories we shared. Thank you for taking the time to join me here. I hope something great is in your class this week. Perhaps a wine with non fungible authenticity.
Natalie MacLean 37:37
You don’t want to miss one juicy episode of this podcast, especially the secret full body bonus episodes that I don’t announce on social media. So subscribe for free now at NatalieMaclean.com/subscribe. Meet me here next week. Cheers.