Startup Uses Blockchain to Crackdown on Wine Fraud

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Everledger, a London-based startup, has entered into a strategic partnership with IBM to develop and deploy a blockchain-based system that will be utilized to crackdown wine fraudsters.

Currently, wine manufacturers verify and authenticate fine wines with paper records and physical certificates. A few particular elements on the records or certificates including stamps and signatures are supposed to prevent wine fraud and help authenticators verify the origin of the wine.

However, unlike cryptographic signatures, conventional signatures written by hand are easy to replicate. Paper formatting and record duplication are simple tasks as well for expert fraudsters.

Over the past two years, analysts have revealed that nearly 20% of all wines distributed across the globe are considered fake, as fraudsters manufacture cheap wine and replicate the structure and design of fine wine to scam the general population.

Regional French newspaper, Sud Ouest, reported various cases of wine fraud, which happens in both direct and retail sales. While wine fraud is becoming an international trend with billions of dollars to be made, the short and relatively small consequences in comparison to the potential profit margin are motivating other fraudsters to enter the industry.

To provide the wine industry with a transparent and immutable ledger for record keeping and fine wine authentication, Everledger is deploying a blockchain network capable of embedding around 90 data points for each bottle of wine manufactured and distributed to retailers. Without hacking into the actual blockchain network, obtaining cryptographic keys and signatures, it is virtually impossible to pass the authentication process.

“We create a digital identity and chain of custody for each bottle,” said Everledger founder and chief executive  Leanne Kemp. “The capsule has a deactivation alert that can tell the system if it has been broken into.”

Leoni Runge, head of fine wine at Everledger, also emphasized that fine wine authenticators often open wine bottles to test their authenticity, but that is an inefficient method of verification as consumers prefer to have the wine bottle authenticated beforehand.

Because cases of wine fraud are increasing at rapid rate under today’s paper-based verification system and consumers avoid consulting fine wine authenticators, Runge and the rest of the Everledger development team believed a blockchain-based immutable wine authentication system was urgently needed in the wine industry.

“Collectors don’t want to open a bottle to prove it’s real, so we have to find another way. Blockchain enables us to secure the identity of an asset in a way we haven’t been able to before,” said Runge.

On a blockchain-based system, consumers can benefit from the accurate timestamps and unalterable record keeping of previous owners. Because each transactional data or information within a block carries past transactional information, consumers can track the flow of the wine bottle from the winemaker, to the distributor and ultimately, to the consumer.

Once its wine authentication system is deployed and commercialized, the Everledger team hopes to target the fine art market, to assist art authenticators and buyers to verify expensive pieces of art.

Image from Shutterstock.

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