Blockchain and IoT in the Wine Industry (Part 53)

Welcome to the 53rd part of the 100-part series on Blockchain.

Wine counterfeiting is one of the major challenges the wine industry faces; the fake wine market amounts to 15 billion USD worldwide.

How is fake wine introduced into the market?

There are various ways by which fake wine is introduced into the market, some of which are as follows:

(i) Relabeling wine bottles is one of the most common ways through which fake wine is introduced into the market. In some cases, cheaper wines are labeled as expensive wines, while in others, wines are mislabelled with a famous origin because of the premium it commands. For instance, French Wine label on a wine bottle indicates that the wine would be from France, but actually, the origin of that wine is a different country, say Spain, and this is a real scenario that came to light in 2018, where millions of Spanish wine bottles were being sold as French Wine.

(ii) Further, in some cases, original wine is adulterated with some cheap substitutes to increase the profit margins. For instance, wines have been found to contain hazardous components like diethylene glycol to increase their sweetness. Some chemicals may also be used to mask faults and the unpleasant aroma of the wine.

(iii) One of the other prominent ways of wine fraud is through the blending of the original Wine. One variety of wine that is touted to be 100% pure is blended with various other cheaper wines. For example, a wine with a dark color is often assumed to be of higher quality, so blending a darker color variety with a cheap lighter wine could enhance the market value of the cheaper wine.

To put a check on the wine fraud, there needs to be a mechanism that can assure a customer that the wine he is buying is authentic and not some cheap counterfeit. Unfortunately, till now, there is no foolproof method to establish this fact, as there are many loopholes in the current wine tracking system.

· The first one being the inefficiency in validating the authenticity of the source information. Since the wine supply chain is quite complex, involves a large number of stakeholders, and the wine changes multiple hands before it reaches the retailers, it is quite feasible to reproduce or forge the information at any point of time.

· Additionally, there is no efficient method to identify counterfeit wine bottles since these bottles are always accompanied by fake provenance histories.

Enter Blockchain

Blockchain technology has the potential to mitigate these issues of the wine industry and ensure the authenticity and provenance of each wine bottle produced. So let’s understand how blockchain will work for the wine industry.

All the stakeholders involved in the wine supply chain will be required to register themselves on the Blockchain network and, subsequently, will be required to add relevant information on the Blockchain.

(i) As wine is produced from grapes, let’s start with grape growers, as they are one of the key stakeholders in the wine supply chain. Grape growers take care of the grapevines and monitor the parameters such as temperature, soil moisture, fertilizers, etc. Once these grapes are ripe, they deliver them to the winery. In a Blockchain-based system, the grape growers will be required to upload information about each plot of the grapevine, location details, the altitude at which the plants are grown, type of the vines, fertilizer requirements, irrigation requirements, and origin of water used for the irrigation. Further, the grape growers will also record information about the dispatch date of these grapes to the next link in the chain, that is, to the manufacturing companies. This information will be stored in the genesis block, i.e., the block from where Blockchain originates.

(ii) Next comes the wine manufacturers, who manufacture wine from these grapes. The information that they will be required to add on the Blockchain includes receiving date of grapes, the variety of grapes, the record of chemical contents, and internal procedures, for example, decantation, fermentation, etc., performed to transform grapes into wine. The winery is responsible for identifying each production run with a batch number. Thus the applicable batch numbers, additives used, transportation, and storage conditions will also be recorded on the shared ledger. After this stage, the wine is sent to bulk distributors, which will also be recorded on the blockchain along with the dispatch information.

(iii) A Bulk Distributor is responsible for receiving, storing, processing, sampling, analyzing, and dispatching the bulk wine. When the wine arrives, the bulk distributor verifies the supplier information, records all the information, including the amount of wine received, and then takes samples for tasting and analysis.

Irrespective of whether the wine passes or fails the analysis, the results of the wine analysis will be stored on the Blockchain. If the wine is rejected, the wine is returned to the source. For the wine that has passed the analysis, two distinct processes are performed:

· Bulk wine is stored and dispatched without any blending or any other processing. The batch number, in this case, remains the same.

· Or wine blending is performed that involves the blending of different wines and then dispatching the newly blended bulk wine. The complete information about these processes will be recorded on the Blockchain. Finally, a new batch number is allocated, which is different from any other batch number used in the blending process.

(iv) Next comes a filler or a packer who receives the wine from the bulk distributor or transit cellar and fills it into different containers such as bottles, bags, or kegs.

Since the identification and labeling of each wine is done at this stage, therefore it is essential to ensure the consistency of the labeled information with the records stored on the Blockchain for that particular batch of wine. During this step, a unique ID code will be allocated to each wine bottle. The next step is the packaging of these wine bottles into cartons and pallets and then dispatching them to the finished goods distributor.

(v) A finished goods distributor will record the details about receiving, storing, dispatching, and inventory of the finished goods. At this stage, if any re-packing or re-labeling is required, then these details will also be stored on the Blockchain. From the distributor, the finished goods are then dispatched to the retailers.

(vi) After receiving finished goods from distributors, retailers sell these to the end consumers. The retailer will be required to record the received items, inventory details, and sales information on the ledger. When a bottle or a carton is sold, the information will be recorded on the Blockchain so that it is not possible to use the same label again.

(vii) The consumer is the final link in the wine supply chain that consumes this wine. Therefore, he should have full rights to know about the complete journey of the wine he is buying. With the implementation of Blockchain, he will be able to see all the information that was recorded on the digital ledger throughout its journey. Since every bottle is assigned a unique ID, the consumer can easily traceback the complete journey of the wine by scanning the code through his smartphone or by entering the unique ID on the brand’s website. After receiving the product ID, the system first identifies the batch of wine and then traces back all information recorded by different stakeholders for that corresponding batch.

Furthermore, since the details of a sold wine are also recorded on the Blockchain, it is impossible to sell another wine bottle with the same ID. Thus, the proposed system makes wine counterfeiting almost impossible. This is how blockchain ensures transparency and security in the wine supply chain.

IoT and Blockchain in validating shipping temperature

The wine manufacturer takes special care in maintaining controlled conditions to protect the manufactured wine. Similarly, at the other end of the supply chain, a consumer takes special care of the product by storing it under predefined controlled conditions. Because unwanted change in the environmental conditions can change the perceivable characteristics of the wine. For instance, optimal temperature for storing white wine is between 13–15°C, and for red wine is between 10–20°C. But if the temperature rises above the desired range, it can deteriorate the wine quality and change its color. Unfortunately, in the current scenario, there is no effective method to ensure that the wine remained in its desired conditions during its transportation. Blockchain and IoT can offer a solution to this issue. IoT sensors can be attached to wine bottles and cartons, which can then capture the temperature of the wine during its transportation and upload it on the Blockchain. Consequently, any change in the temperature will also be recorded on the Blockchain. Thus, through Blockchain, each and every stakeholder can ensure that the wine stayed at its correct temperature during its transportation.

IoT and Blockchain in validating aging conditions of wine

Fine wines have traditionally been bought based on the trust for a particular manufacturer or a brand. Although the buyer shells out a fair sum of money to buy a fine wine but he himself has no means to validate if the wine has aged properly under the desired conditions. During the aging process, a wine undergoes a series of different chemical reactions to improve its taste and quality. These reactions can easily be affected by physical and chemical changes taking place in the environment. For instance,

(i) The storage conditions should be appropriate for wine maturation, including the desired humidity, temperature, and darkness.

(ii) During the wine maturation, a wine should be kept under dark conditions because the UV light can damage wine by degrading stable organic compounds present in it. Just as direct sunlight can negatively affect your skin, it can also damage fine wines.

(iii) Another very critical factor in the aging of wine is temperature. The recommended temperature range for aging wines lies between 13–15°C. Although if the temperature is increased, the maturation process speeds up, it causes undesirable changes in the wine as well. Therefore it is crucial to maintain the recommended temperature range for the perfect maturing of the wine.

(iv) The next important factor is humidity. 60–70% humidity is essential to ensure that a wine ages gracefully. When humidity levels are too low, the wine bottle cork will dry out and will become brittle. Because of this, air will leak into the bottle and oxidize the wine, thus spoiling its taste. And if the humidity levels are too high, it also has undesirable effects on its aging.

But the question here is — how can a customer know and validate all of this information?

IoT, along with Blockchain, has the solution to this issue. IoT sensors can be installed to sense all of these conditions under which wine ages, and these IoT sensors will then record these details on the Blockchain. Subsequently, a consumer can see all this information regarding the wine aging by scanning the unique ID present on a wine bottle.

Scalability concerns

(i) Blockchain used will be permissioned Blockchain. The stakeholders involved will be assigned specific functions on the smart contracts. Storing the entire data about the supply chain, stakeholders, data collected by stakeholders and IoT sensors, etc., on Blockchain is very challenging as it is very costly and will significantly slow down the processing on Blockchain. Thus, distributed file storage IPFS can provide low-cost off-chain storage to store data. A unique hash is generated for every uploaded file on the IPFS server, which is then stored on the Blockchain and accessed through the smart contract. IPFS has been explained in detail in Part 18.

(ii) To make the Blockchain scalable for its use in the supply chain of wine or any other industry, layer 1 (discussed in Part 15) and layer 2 (discussed in Part 16) scaling solutions will be required to be implemented.

If you liked this article and want to know more about Blockchain, NFTs, Metaverse, and their applications, click the below link.

Happy learning!

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