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If Yao Family Wines auctioned off NFTs, might more Napa Valley wineries soon do the same?
Wine industry

If Yao Family Wines auctioned off NFTs, might more Napa Valley wineries soon do the same?

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Napa Valley’s Yao Family Wines made headlines after the winery announced it intended to become the first in the world to pair NFTs with bottles of its wine at auction.

NFT stands for “non-fungible token.” A fungible item is something like a $1 bill, according to Sam Goundar, editor-in-chief of the International Journal of Blockchains and Cryptocurrencies: “Your $1 is equal to someone else’s $1 in value,” he wrote in an email.

A non-fungible item, then, is something not interchangeable, according to Goundar. If you drew the Eiffel Tower, Goundar said, your sketch would not have the same inherent value as a sketch drawn by another artist, even though you’ve both drawn the same thing. The two works of art have creative differences which make them unique, therefore qualifying them as something non-fungible.

When someone owns an NFT, they own the only copy of that particular token. NFTs, which live on the blockchain, exist only digitally, so the asset in question — whether it be a piece of art, a logo, or a particular photograph — might be visible or accessible to others on the internet, Goundar said. But only one individual can claim ownership over the NFT, and if another party wanted to use its likeness, they’d likely have to approach the owner for permission and possibly pay royalties or other fees, according to Goundar.

The NFTs Yao Family Wines offered up for auction alongside bottles of its 2016 Cabernet Sauvignon were photographs of Yao Ming, the winery’s founder, with information about the vintage on the virtual flip side of the image. The winery hoped the auction would appeal to “wine collectors, sports memorabilia collectors, NFT collectors, early adopters and anyone who appreciates the value of one-of-a-kind assets,” Yao Family Wines President Jay Behmke said in a press release about the auction. Auction lots could only be purchased using Ethereum, a kind of cryptocurrency, Behmke said in an interview.

In the press release, Behmke hit the nail on the head, according to Pierre Costa, founder of Somm Digital: to most consumers, the appeal of an NFT is its innate, one-of-a-kind nature, he said. Wine fanatics often purchase rare, expensive or prestigious bottles for their collections for the same reasons, Costa said: because they love wine, because they’ve been impressed by a particular brand, but also sometimes as a status symbol.

“When you’re talking about NFTs, they’re a value add,” Costa said. Brands today often look to advertise themselves through content creation — by creating something new and interesting that piques customer interest, he said. NFTs fall into that category.

“They’re content creation,” Costa said. “In a way, it’s not adding value to the product, but adding value to the brand.”

Yao Family Wines’ auction was initially set to last 48 hours between April 12 and April 14, Behmke said in an interview Tuesday. It was ultimately extended to noon on Monday, April 19 because Ethereum, the cryptocurrency bidders needed to purchase auction lots, suffered an all-day glitch on April 13. (That an error could down a whole currency for an entire day is “an interesting feature of cryptocurrency,” Behmke joked.)

In the end, 33 bidders purchased auction lots. Some really did use Ethereum, but others, long-time customers unfamiliar with the nuances of cryptocurrency, simply contacted the winery to ask if they could purchase a lot using more traditional currencies. 

Each of the auction lots was expected to sell, and sell above the retail asking price of $450 for a bottle of the vintage, the San Francisco Chronicle reported ahead of the auction. But Behmke says the auction was done “in the spirit of experimentation,” and “without any expectations.” It was part of the winery’s continuing work to reach new customers, he added. He did not specify how much the auction had raised, but said there was not enough interest to prompt competition between bidders.

“At the moment, our general direction is the folks who (are interested in) cryptocurrency may not be high-end wine drinkers, and vice versa,” Behmke said. “But we’re doing our part to bring those two populations together.”

General interest in NFTs is, for the moment, high: Christie’s, the auction house, sold a piece of digital art, an NFT, for $69 million in March. (Again, Goundar noted: anyone can see or download the piece of art online; the individual who paid millions just has ownership over the original copy.)

One of the most popular NFT marketplaces presently is NBA Top Shot, which essentially acts as “a modern version of collecting baseball cards,” Goundar said. A 'card' showing Lebron James dunking recently went for almost $400,000. Brands and companies, seeing that potential, are beginning to eye NFTs, too, Goundar said.

Yao Family Wines is making arrangements to accept cryptocurrency for its wines moving forward, Behmke said, and is open to the idea of doing another wine/NFT auction in the future.

Might Yao Family Wines have company in other Napa Valley wineries? It’s hard to say, according to Hong Wan, director of the blockchain lab at North Carolina State University. Yao Family Wines was fairly well positioned to reach a broad base of consumers: as Behmke said, they might have been basketball fanatics, Yao Ming superfans, wine collectors or the especially technology-literate. Not all wineries have that reach.

“If you’re a small winery, it’s probably hard to attract (these kinds of) customers,” Wan said.

There might be other, more practical applications of NFTs to the wine industry: because NFTs represent a unique item and their authenticity can be easily verified, wineries selling very rare or expensive bottles of wine could pair them with NFTs to prevent forgeries, Wan said. In that case, though, the NFT might not necessarily retain its worth when or if the bottle of wine is consumed, Goundar said. The resale value of NFTs has generally yet to be determined, he added.

“If there continues to be resale value of NFTs, then more will be created, sold, and resold at higher prices,” he wrote. “The intention of most NFT owners is to sell them later and make (a) profit.”

As for the wine industry, NFTs likely won’t be a game-changer — at least as things stand now, according to Wan.

“For a winery to flourish, they still need to have good wine,” she added.

Super Bowl-winning tight end Rob Gronkowski has become the first pro athlete to launch a set of his own digital trading cards.

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You can reach Sarah Klearman at (707) 256-2213 or sklearman@napanews.com.

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Wine Industry Reporter

Wine industry reporter at the Napa Valley Register.

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