The Wolf Of All Streets - Wine On Chain: Tokenizing The Trillion Dollar Wine Market | David Garrett

Starting point is 00:00:00 This episode of the Wolf of All Streets podcast was recorded in person in Singapore at Token 2049 and is proudly brought to you by the Aptos Foundation. And you found an industry that is arguably the most decentralized industry on the planet already. But yeah, really it needs to start at the winery. I didn't know all these NBA guys. Because they love wine and I'm a wine guy.

Starting point is 00:00:20 They don't have any idea who's drinking their wine. When you open a $50 bottle of wine, it was made 10 years ago by somebody 10,000 miles away. You got a million dollar wine collection, you can't insure it. Take a loan against it, pay a low interest rate, you know, and never sell. Let's go. I found out about Devin from my friend Raul Pal.

Starting point is 00:00:53 Yeah, yeah, yeah. And he obviously is a huge wine enthusiast, and every time you see him on camera, he's having it. Incredible idea that you're building. I mean, better than me giving the pitch and sort of the background. Maybe you could just give us the quick TLDR on what you're building and why. Sure. So we're building the universal protocol to put wine on chain.

Starting point is 00:01:19 With the idea being it's a giant asset class. Trillion dollars, right? It's about a trillion dollars worth of wine in the world at any given time. And about six, seven hundred billion of that is luxury, investment grade, collectible, rare wine. So it's a big asset class, but it doesn't really enjoy any of the benefits of any other asset, right? Like there's no price transparency. You can't really insure it. You can't borrow against it.

Starting point is 00:01:51 There's no real easy access to trade it or to buy it. The liquidity is very dispersed. And we think by tokenizing, creating a protocol to tokenize the whole industry, it brings unified liquidity into this trillion dollar asset class. Let's not take for granted that the people listening don't really know what it means to tokenize this industry. They're thinking, how do I take something I'm drinking and turn it into technology? So maybe explain more what that actual meat actually means because this is tokenization of real world assets. It's decentralized physical infrastructure.

Starting point is 00:02:31 You've got all the big things that are being built sort of in one project. Well, so look, it's really simple. We've developed a series of smart contracts and mechanisms to put an individual bottle of wine on chain as an asset, which essentially kind of turns a bottle of wine from a possession, meaning like I have a bottle of wine, I give it to you, now it's your bottle of wine, into an asset where there's a ledger that says who owns that bottle. And by having that ledger and having that chain of ownership or having a deed of ownership over a bottle, now that bottle becomes an asset

Starting point is 00:03:14 and you can do kind of interesting things with it. So there's a bunch of different elements to this. One of them, if anybody's seen like the movie Soured Grapes about like the guy that was forging or counterfeiting, you know, millions and millions of dollars for the wine. So anti-counterfeit and anti-fraud authenticity, that's a really important piece of it. Like if you have a registry of ownership, then you know who owns every bottle and you're not going to buy a fake bottle, right? You're not because you can, you know, who owns it. So that's like an important element. But then there's also chain of custody. There's provenance. There's consumption. There's data like supply chain data, super important to the wine

Starting point is 00:03:57 industry, even loyalty. You know, one of the biggest problems in the wine industry is the cost to acquire a new customer, the cap is incredibly high. It costs in Napa about $450 to acquire a new customer in the luxury wine industry. And that's because they're not allowed to advertise, right? Like nobody listening to this has ever seen an advertisement for luxury one. It's true. They don't advertise on television. They're not allowed to advertise on social media. So like imagine having a business where you're not allowed to advertise. You don't know who your customers are. Your customers are usually consuming your product 10 years after it leaves you, after you produce it. And you don't have any

Starting point is 00:04:47 idea like how to manage your product development, product mix, marketing, messaging, packaging, your supply chain. Like how do I make my supply chain more efficient? How do I get feedback from my customers? You have none of that. So a trillion dollar asset class, a hundred billion dollars a year in turnover just for the luxury industry. And they're doing it with no data, no information. To fight counterfeiting and to understand the provenance, doesn't this have to start at the actual winery? Seems like a huge challenge for you because you just can't 10 years later slap a tag on the bottle and say this is real well so yeah so we definitely start at the winery um and we work with

Starting point is 00:05:32 we've already done pilot project programs over the course of the last couple of years with about 70 wineries from around the world so we've got a pretty good relationship with uh with a with a lot of kind of high-end luxury wineries. But yeah, really it needs to start at the winery. But there's kind of a little bit of a cheat code, right? So most of the time, in most of the world, if you buy a bottle of investment grade or luxury wine, you typically don't have it delivered to your house, right? It goes into a bonded warehouse. It goes directly from the winery to a bonded warehouse. And there's, you know, at least a hundred, $200 billion worth of wine that has never left a, what we call the, a trusted custodian. Right. So, so the owner changes,

Starting point is 00:06:18 but it doesn't physically change hands in any manner. Exactly right. So it's really, it's fairly easy for us to go in and not just tokenize wines from the winemaker, although that's really the biggest hurdle for us, but that's where we're going. But we can also go to all of these bonded warehouses. We can go to Sotheby's. We can go to lots of places where they're a trusted custodian. They have wines that came directly from the winemaker and we can tokenize those wines. It's so interesting when you start to think about collateralizing these assets, right? Because listen, that's the billionaire playbook, right? Is to gather things, take a loan against it, pay a low interest rate, you know, and never sell. And when you think about that, like there's a lot of people out there

Starting point is 00:07:05 with half a million dollar wine sellers, million dollar wine sellers, and they can't do any of that. They can't, not only can they not collateralize it, they can't insure it. Right. They can't get insurance. You got a million dollar wine collection,

Starting point is 00:07:17 you can't insure it. Like once you tokenize it, there's a, there just becomes, there's a lot of interesting things that you could do. But that's at the consumer level. Like there's a lot of interesting things that you could do. But that's at the consumer level. There's actually a really interesting play that we've been talking to a bunch of credit, like on-chain credit providers.

Starting point is 00:07:44 So, for example, winemakers in Barolo in Italy, they're required by local regulations to age their wine in barrel for four years and in bottle for four years before they can sell it. So every one of those winemakers has eight years worth of inventory that they're holding on to that they're not allowed to sell. Well, if you go and look at their books. How do you have that runway? That's a liability because they can't sell it, but they're paying for storage. If you tokenize it, it becomes an asset. You can borrow against

Starting point is 00:08:08 it. You can sell futures. You can hedge against it. Like there's a lot of things that you can do and a lot of really interesting opportunities for winemakers. And like, that's just Barolo. When you think about that asset class, you're looking at, you know, hundreds of billions of dollars worth of wine. You basically answered it. It was going to be my next question and how this actually works for the winemakers. I mean, effectively this can be fundraising throughout the process. So we've done that for a couple of winemakers. So we work with, we did a really interesting project with Carmelo Anthony when he launched his new seventh estate. It's a tiny, tiny little winery in Chateauneuf-du-Pape. But we also did something with Tony Parker,

Starting point is 00:08:50 which was really interesting. A bunch of NBA players obviously really love wine. So Tony Parker has a little winery in Avignon. And we did a really interesting project with him called, it was called an allocation token. So he makes a very very small amount of very high-end um red wine and instead of like making the wine and then trying to sell it in the market what we've sold was an allocation token which is a really simple token that gives

Starting point is 00:09:19 people the right to buy up to 12 bottles a year So he was able to fundraise to take to basically sell that token, sell the future distribution of that wine, create the winery, put a bunch of improvements into the winery, build the brand. And now he's got a couple thousand people that are buying 12 bottles a year, sells out every year. He knows exactly who's going to get his wine every year. And we're doing actually an event in, I think it's October 22nd, where he's doing the first pickup party at his house in Texas. So like if you have the allocation token, you can go to Tony Parker's house, pick up your wine.

Starting point is 00:09:59 He does a barbecue. It's really fun. I didn't know all these NBA guys. Because they love wine and I'm a wine guy, right? So like, and I also did know all these MBA guys. Because they love wine and I'm a wine guy, right? So like, and I also did a bunch of television projects. I do subject matter expert for wine TV, wine documentaries. I've done some pretty interesting stuff there. Are there regulatory challenges to doing this? Are you limited to what you can do in different jurisdictions versus others? So wine is one of the most heavily regulated products in the world.

Starting point is 00:10:29 But luckily, what we're doing, I mean, they've been doing it for years, right? So Berry Brothers and Rudd, which is a bonded warehouse in London, they've been taking wine directly from the winemaker, storing it for customers, trading it between customers. It's not a token but it's a contract and they've been basically doing the same thing for a long time. This is really the same thing so I don't think we're gonna face a lot of regulatory challenges but you

Starting point is 00:10:59 know probably the same as anybody else. With regards to like shipping wine and moving wine around the world, we never take possession of any wine. So that's not really what we do. We work with a bunch of different logistics providers. I think sooner or later, what you're going to see is every bottle is tokenized. And every time that bottle changes custody, that's updated on chain, which is actually kind of a really interesting problem that we're solving uh another interesting problem that we're solving is that your own chain no so we're built on solana right um but actually one of the things that we're going

Starting point is 00:11:35 to announce this uh this week is we just took a strategic investment from the inventors of rfid so rfid was invented about 25 years ago by a couple of PhD researchers at Cambridge University. And they formed a company. They've made their first strategic investment in us with the idea of building a D-pin that'll track wine all around the world. So an RFID sticker on the bottle. Every time the bottle goes from winemaker to importer to distributor to retailer, an RFID interrogator that's paid for with Vincoin can track that bottle all the way through the supply chain. So when you get the bottle at the end of the supply chain, you can look and be like, oh yeah, I know that that bottle was properly stored,

Starting point is 00:12:29 properly transported with the right temperature and humidity conditions. So this bottle is going to be good. You know, one in 10 bottles that you open that's a luxury bottle is spoiled in some way. Either it's corked, maybe it was stored incorrectly and you're pouring it out. In a hundred billion dollar a year industry, that's a $10 billion a year problem that we can solve with a pretty simple deep end. Okay, so you talked about the token. Oh yeah. Obviously that has to be a huge aspect of what you're building here.

Starting point is 00:12:56 So Vincoin that we're launching on Saturday, it's pretty exciting at Breakpoint. So Vincoin is really a way to create incentives for adoption inside the wine industry. And how it works in the beginning is really simple. It's like air miles, right? The winemaker attaches Vincoin to the bottle. The bottle makes its way through the supply chain. And when the consumer opens the bottle they get Vincoin, they get status with the winemaker, they get rewards like maybe a winemaker dinner and they get Vincoin. It's kind of like air miles and they can use that to buy more wine or to pay for wine experiences but it's a great way for the winemaker to incentivize the consumer. But also what

Starting point is 00:13:42 the winemaker gets in exchange for the Vincoin is data. The most important thing to know about the wine industry is that they don't have any idea who's drinking their wine. When you open a $50 bottle of wine, it was made 10 years ago by somebody 10,000 miles away. They don't know who you are. They don't have any connection with you at all. And what that means is that they don't have any way to effectively make decisions. There's no business intelligence for whether it's product development, product mix, marketing, messaging, packaging. Sell you another bottle. Right. Literally, you can't sell you another bottle.

Starting point is 00:14:25 It's so archaic. So that little transaction that happens, when you open the bottle, you get your Vincoin and they get to know where and when that bottle was opened, which gives them great information, great business intelligence.

Starting point is 00:14:37 But also, if you opt in, they get to know who you are and they can sell you another bottle. They can offer you a like a like a cool experience we did this really great project with um uh uh with grams port which is one of the oldest wine companies in the world they re-released their 1970 port a thousand dollar bottle of wine it's amazing right 50 year old bottle of port so when you So if you want that bottle, when you open the bottle and you share it with friends, up to five people that you share it with, everybody gets what's called a tasting token,

Starting point is 00:15:12 which is this authentic proof of experience I've tasted from that bottle. Well, anybody that has one of those tokens can take the token, can go to Graham's Port. They get a tour of the winery. They get to have lunch at their Michelin star restaurant. And they get to taste from a barrel of their birth year. Right? Like, that's an experience that you just, you can't pay for. Right?

Starting point is 00:15:36 Like, you just can't. It would cost 500 euros if you wanted to pay for it. That's, but it's for Graham's. It's a really great way for them to identify the next super fan i mean it's a super fan it's a it's the customer who's going to join the club and and come back and visit uh every few years with their friends when they have an anniversary exactly for anyone you know that i've been to napa so many times in sonoma and it's always because somebody's going back to the one winery

Starting point is 00:16:05 that they love for their 40th birthday or their 50th birthday or something like that. And to your point, that could be a hundred times bigger with this level of data. Yeah. Imagine, imagine how that would work. Like right now the average customer acquisition cost in Napa Valley is $450. Crazy. I mean that's a crazy number. By putting Vincoin on a bottle, 10 bucks.

Starting point is 00:16:28 Yeah. 15 bucks maybe. So how do you know the five people that tasted it? Does everybody physically scan it from a wallet? You can scan it, you can tap it. Like we, there's a bunch of different ways. You can do it with a QR code. You can do it with NFC and tap.

Starting point is 00:16:40 Like we do it with NFC. So you tap the bottle, you get your token it's like takes two seconds it's really easy we've designed the um the interface to look a lot like you know your delta sky mile right and a lot less like uh liquid staking it right like it's a super simple like we grandma can use it the old that meme and and when you think about the wine industry, right? Luxury industry, that's 3 billion bottles a year. So what we're doing with Devin and with Vincoin is bringing, you know, millions or hundreds of millions of people around the world that are wine collectors, wine enthusiasts, you know, wine investors and bringing them onto the blockchain without them even knowing. You keep talking about the luxury wine market. Yeah.

Starting point is 00:17:28 When did we see this on, you know, Trader Joe's three buck chuck? You know, no, maybe, maybe someday. I really think that people are going to be much more inclined to use the software on wines that they consider to be, you know, rare, interesting, wines that are like a special occasion. And I don't care who you are. You open a $50 bottle of wine, it's a special occasion, right?

Starting point is 00:17:52 And like, that's still, it's a, you know, a hundred billion dollars a year. I don't know, maybe it'll make it to two buck Chuck. So what would you consider this operating at scale? Like where the whole industry, you mentioned you've talked to 70 wineries. How many wineries are there in the world? So there's about 30,000 wineries in the world, which is actually one of the reasons that it's so interesting, right?

Starting point is 00:18:14 Like there's six companies in the world that control the whole food supply, right? And like five or six that control banking and five or six that control retail. Wine is still completely atomized. 30,000 independent winemakers around the world, 10 million independent middlemen. When you're buying a $50 bottle of wine, you're not buying it from Walmart. You're buying it from like the little guy in the corner that probably keeps his inventory on like a clipboard. Yeah, literally writes it down. And that's why there's no data going back and forth between like that little retailer or that little restaurant and the winemaker.

Starting point is 00:18:50 So what we're doing is we're using the blockchain to take this decentralized industry and get them the data that they need, the customer acquisition that they need, the business intelligence that they need to really compete in the world. It's incredible because crypto natives always talk about a decentralized future. And you found an industry that is arguably the most decentralized industry on the planet already. And, you know, as so, you know, when I started building this, I'm a wine guy, right? I've been in the wine industry for 20 years. I've been focused on data from the beginning because my origins were in tech. But in kind of looking at this, I always wanted to kind of solve the data problem. That was always

Starting point is 00:19:32 the big problem that I wanted to solve. But the more we get into it, the more I learn about smart contracts, the more I learn about digital currencies and digital transactions, we started really looking at the supply chain. And so if you look at most international transactions in the world, are one Fortune 500 company buying $5 million with the raw materials from another Fortune 500 company, right? Like that's your typical international transaction. In the wine industry, the typical international transaction is a little tiny winemaker in France selling five cases of wine to a little tiny importer in Norway, right? It's a $2,000 transaction. But that $2,000 transaction is incredibly inefficient, right? It's a little tiny players. So there's counterparty risk. How do I know you're going to send me the wine? How do

Starting point is 00:20:24 I know you're going to send me the money? How do I know you're gonna send me the money? It's like textbook case for a smart contract. Right. But then also when you look at that transaction, the international wire fees that the importer's paying for a $2,000 transaction, hugely inefficient. Shipping. The winemaker, like they're paying,

Starting point is 00:20:44 they're suffering what five-day international transfer delays right settlement delays they're paying the worst fx rate so like that little transaction we just studied with deloitte uh last year and on a $50 bottle of wine six dollars and ten cents is paying for bank fees and counterparty risk. That's a learning talent packaging, the employee that's, how do these guys make money? It's crazy. So like you open the bottle,

Starting point is 00:21:14 the first glass that you pour is going to your banker. Right? Like that's horrible. That's not the way to run a business. So we think that there's actually a really interesting opportunity to take the entire industry and move it on chain so that those transactions are happening on chain instead of through the traditional bank. Do you have to go to every single winery and pitch them on this?

Starting point is 00:21:34 Like, that's what I'm saying. How do you get to the scale where it's... So we work really closely with Deloitte. I don't think that we're going to, like, go to wineries and get them to, like, sign up for a phantom wallet. Right. That's not going to like go to wineries and get them to like sign up for a phantom wallet right like that's not going to happen right but if we can work with deloitte winery solutions they work with about 30 of the industry and they're already doing the professional services for them right they're installing the erp systems the accounting systems the crm the direct consumer platform so you just become a part of that? So you just get plugged directly into that, right?

Starting point is 00:22:06 Like it's an API so that when the winery is generating an invoice, instead of making like a PDF that they email, they're creating a smart card. And the importer, instead of like connecting their bank account with Plaid, they're just using either something from Amazon managed blockchain or something from Deloitte, and they're just on ramping to a digital currency.

Starting point is 00:22:30 That transaction is happening instantly, and the winemaker is off ramping. And like, nobody even knows that they're using crypto, right? They're making, but they're making a digital transaction. It's more efficient. It's safer. It's better. And the token, I assume, will trade itself in the free market. Exactly. Yeah, yeah, yeah.

Starting point is 00:22:47 Yeah, so we're launching on Jupyter. We're really excited to be partnering with Jupyter. Really excited to be working with Solana. Anyone that comes to Breakpoint is getting, I don't know if you heard about this, but we're doing the biggest liquid airdrop in history. So we brought 4,000 bottles of champagne. It's like literally a liquid airdrop in history. So we brought 4,000 bottles of champagne. It's like a literally a liquid airdrop.

Starting point is 00:23:09 Literally a liquid airdrop. So we're doing this super cool project with Mad Lads. Every Mad Lad, we're airdropping a bottle of champagne with their unique lad as the front label. Wow. Super cool. And then with that bottle shipping everywhere in the world for free. So we're really kind of showing,

Starting point is 00:23:30 not telling like exactly how Vincoin works. It's really happening. We've had every cycle, it's these ideas deep in RWA. We talked about the beginning, right? These are catchphrases. And you wonder if we're always too early and when it's going to come to fruition

Starting point is 00:23:46 but this is happening it's going to be a very long process yeah but this is really happening for you we've so we've charted out a 25 year course right in the wine industry we think about things generationally right of course right when i plant vines i'm planting them because so my for wine that my kids are going to drink right like it usually takes 25 years or so for when you plant vines for that vine to be making the very best one the growing the best grapes that are making the best wine and then that wine typically has to be stored you know aged for 10 or 15 years so like the the vines that i'm planting today they're for my kids. And when I think about what we're doing with Vincoin

Starting point is 00:24:28 and with the Devin protocol, like that's really for, you know, the real benefits are gonna be for the next generation. That's okay. Like we've got a long-term plan. We're gonna bring thousands and thousands of wineries onto the platform and millions and millions of wine lovers

Starting point is 00:24:45 from around the world. I think that makes you a bit of a unicorn. Yeah. 20 year plus plan in crypto. Yeah, yeah, well, yeah, probably a little bit, a little bit. That's okay, that's okay. Like in the wine industry, that's how we think about things, right?

Starting point is 00:24:58 Like you think about things generationally and you have to. Yeah, so what's the, sort of answered it, but what's the grandest vision, full level of mainstream adoption, you're on every collectible investable bottle of wine in the world. Do you expand beyond wine? Look, maybe my kids do, right? Right. But look, I think that's 3 billion bottles a year.

Starting point is 00:25:21 And like most of those bottles are going to have an be aged for an average of four years so 12 billion bottles of wine um that exist in the world that are tokenized that's a big business uh and i'm really excited about that and i i think that wine is pretty unique a lot of people ask us about whiskey people ask us about watches they ask us about tokenizing exactly stuff i think that's interesting and i think there are lots of companies that are specialized in doing those People ask us about watches. They ask us about tokenizing stuff. I think that's interesting. And I think there are lots of companies that are specialized in doing those products. I think wine is, it's really unique.

Starting point is 00:25:53 It's one of the very few industries where there's this gap between purchase and consumption that doesn't exist anywhere else, right? Like if you buy a t-shirt, you wear it the next day. If you buy a car, you drive it home off the lot. If you buy a great bottle of wine, that's like five, 10 years before you consume it and so that gap, it's you, it's really unique. There's no other industry that has that. We're

Starting point is 00:26:16 gonna work really hard to solve that, to get the best data to the winemakers, to create the best experiences and safer experience for consumers. And I think we're going to build something really great inside the wine industry. I mean, speaking to the audience on the street, right, which is one of the largest TradFi media platforms in the world, 30 million boomers with million dollar plus portfolios. This may be the single most obvious use case of crypto that they would understand. Yeah, for sure.

Starting point is 00:26:49 I mean, just think about being able to prove, like, all these guys that, like, drink a lot of great wine, think about if you were able to prove this is the wine that I drink and being able to go to, like, Chateau Patrus or Chateau Palmyra and be like, hey, I'm one of your best customers. You didn't know that because I'm so disconnected for you. But I'm a great customer. Like, I want to come and do a barrel tasting.

Starting point is 00:27:10 I want to come and do a winemaker dinner. I want to come and like hang out for a harvest experience. Like, that's the kind of thing that you can start to do. Now that you've tokenized the wine, you can actually have an authentic proof of experience or authentic proof of ownership. Well, it's incredible. Congratulations on all the success so far. And I can't wait to see in 25 years when you've tokenized every bottle of wine in the world. I appreciate it. Thank you.

The Wolf Of All Streets - Wine On Chain: Tokenizing The Trillion Dollar Wine Market | David Garrett

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