Thanks for your response, I’m particularly intrigued by wine and beverages related projects cause I’m a wine fanatic.
As opposed to popular belief about french wine being the absolute best, Italy still has the biggest winery and wine industry in the world, south Africa follows suit also.
Now, how does your project cut across different demographics and emerging markets, seeing the global figures of champagne consumption in Lagos Nigeria and the booming wine industry in South Africa
How does Wine Vault manage supply and demand to ensure liquidity? Can you explain the process in more detail? Also, what LPs does Wine Vault use to hold its liquid assets?
You have great questions @manfred_jr - will add some of them to our FAQ
I could talk about our investment strategy for hours since it’s the core of our business but here’s what we are going with for now:
Market: Focus on the mature market with highest market demand (France, Italy, Spain). We have left out producer markets like USA and other great (already established but smaller) ones like Australia, NZ, Latin America and Africa. The main reason for this is focus. We can’t be experts of all markets and for our ideal investment the top markets just make most sense.
Ideal investment: Since trading comes with fees we want to invest in the top producers. Storing and insurance costs as well so our ideal price point is +$100/bottle. We want the wine to peak after +10 years of storage and be drinkable +30 years from release. This narrows down the market a lot and hence it’s best for us to mainly focus on Bordeaux, Burgundy, Champagne, Tuscany and Piedmont. Obviously we are open to any region but the bulk will come from these.
How do we choose what to buy? We are very data driven, we look at past price trend but also analyze clout online (what brands are growing following and becoming trendier) in order to get in early on new brands growing in popularity. Asia is one of the fastest growing consumer markets for fine wines which requires us to follow that market extra carefully.
Focus on return: The business would be very simple if we were a SP500 type of instrument (just buy the top wines and balance your portfolio based on market price) but we feel like there’s a good opportunity to beat the performance of such portfolios through a better investment strategy.
There’s 3 key price/value drivers that we are focusing on: 1. shrinking supply (climate change is making it harder to produce big quantities of the iconic brands (which will always be in demand) , 2. growing market for fine wines - it’s not just Asia who is buying more fine wines, people around the world are willing to pay more for better wines. 3. When you combine 1 & 2 and add inflation on top of it you have a great foundation for some serious growth in the coming decades. One of the main reasons we focus on long lifetime wines is that the longer you can hold on to bottle the better the yield. Trading fees are much larger than storage and insurance.
Regarding liquidity: In short, when ever there is price pressure for our token (up or down) Wine Vault can either buy tokens or sell tokens it holds (and then use the money to add to cellar). Wine Vault functions like a market maker for itself. We will have pools on BSC and TRON to start with the DEX partner has not been decided yet - liquidity will be balanced between these pools based on what chain holders are in. If you are familiar with e.g. PAX Gold - our strategy has been benchmarked from theirs.
Thanks for taking out time to give a detailed breakdown of the process, now for clarity and since it’s a “think long term” kind of project, what storage practices would be employed to keep the various wines safe overtime?
And, what’s the minimal investment in your project?
@manfred_jr Our primary wine storage facility is located in the UK, housing over 2 million bottles used by numerous domestic and international merchants.
Wine Vault operates on a fund structure basis, making it accessible for anyone as there is no minimum investment requirement (1 CORK will be introduced at $1 or £1). Investors have the flexibility to purchase fractional tokens.
In contrast, traditional alternatives to Wine Vault usually require an initial deposit ranging from $1000 to $5000, along with a monthly minimum deposit of $200 to $500. Our aim with Wine Vault’s model is to break down these barriers, making wine investment accessible to a broader audience.
I understand what you mean but Wine Vault is really fundamentally a product to solve some major problems the fine wines industry has. It needs marketing for sure so people know about it but hype often creates winners and losers. We only want to create winners.
The ability to buy out wines physically is really a secondary function of the project.
There are restrictions for shipping liquids with e.g. Fedex & UPS, making small shipments very expensive but still possible! Local regulation must obviously be followed.
We are currently seeking clarity on legal restrictions but have not encountered any issues thus far, because:
Fine wines are classified as commodities rather than securities.
We are not conducting an ICO – a cellar already exists with plans for growth, eliminating the “risk of business failure” that ICO regulations aim to protect investors from.
While we will not market directly to US individuals, we cannot prevent them from purchasing CORK tokens, especially if they are traded on decentralized exchanges (DEXs).
In a worst-case scenario, a US investor purchases CORK, sells it later at a profit, and the IRS must determine whether the profit falls under regular crypto tax or capital gains on collectibles (e.g., Pokémon cards or artwork). Since crypto tax rates are higher, it is more likely they would pursue that option.
Even though CORK is a token backed by alcohol, it does not require additional age verification beyond what is mandated for other crypto trading in your country.
@manfred_jrBy fund structure we mean that there is one pool of wines that and each token in circulation is backed by a % of the whole pool. Let’s say Wine Vault has $1000 worth of wines and 1000 tokens in circulation. Now all 1000 tokens have a 1/1000 share of the pool, not specific bottles, but a 1/1000th of the pool. Now let’s say the value of the wines goes up by 10% during the following 6 months, there’s a big shortage on Dom Perignon and 50% of the pool happens to be made up of DP’s. Now the market value of the pool has increased to $1100, hence all tokens are backed by wines worth more than the coin. In a perfect market, someone immediately buys more tokens, decreasing their price, and now either a exisiting token holder just sold their tokens → made a profit, or Wine Vault issued new tokens, got money and bought more wine. Amount of tokens in circulation goes up, but so does the value of pool of wines.
The benefits of our model:
By investing in a pool vs. choosing a bottle yourself diversifies your risk a lot plus our professional traders have been doing this for decades and it’s hard to beat their returns.
There is no minimum investment since you don’t have to buy full cases (fine wines are always bought and sold in cases, which raises your minimum investment requirement). A case of Dom Perignon goes for £1000 at the moment.
One of the key things a fund model offers is selling your holdings. Let’s say you instead bought a case of wine for your private cellar (not home but managed by a company) if you wish to sell the manager typically charges a trade fee of 10-20% which many times would eat your whole profit. Offloading a case here or there typically won’t take too long but let’s say your own cellar is worth $200K. There’s a big risk you will have to drop your ask if you don’t want to wait for 6-12 months.
There are a ton of benefits but the last one I want to mention here is the access to spectacular wines. Many top wines (typically the ones that will perform best price-wise) are super hard to get. If you are a small time investor you can forget about the top 50 wines, especially at release. Most premium wines have a sort of allocation system. Since their production volumes are almost always the same they offer their wines first to people who already bought from them the previous year. Getting an allocation is hard but if you are a big enough player, it’s easier. The less calls a producer has to make in order to sell their production, the better.
Bottomline - there’s a reason that majority of (private) stock investors buy an index fund instead of buying individual stocks and that’s what Wine Vault wants to do for fine wines investing.
Welcome to the hackathon! This is an interesting project. The image on the landing page looks suave.
This idea in general has been explored by some other people in web3 as well.
I want to know if your organization would be taking care of the storage and logistics - also the delivery of wine in case someone chooses to sell their token for the bottle. And in that case, how will those costs be managed? Would it be factored-in in the price of tokens.
I also wanted to know - in terms of user behaviour - if people really choose to sell the tokens for the bottle itself. Wine investment has always been like the classic case of ’ want to have the cake but eat it too’
We use partners for storage, insurance and shipping. If someone wants to sell their NFT for the actual wine, yes we would manage the delivery (customs and tax work) through our partner.
All our wines are ‘in bond’ → have not had the duty and VAT – also known as sales tax – paid on them. This is the industry standard in fine wines as it doesn’t make sense to pay tax before the wine gets consumed. The good news is that you only pay tax on the sum the wine was originally bought for and not it’s current market worth. None of the shipping nor tax costs are factored in the NFTs price - it’s simply the in-bond price of the wine.
I think buying out bottles will be limited but we want to offer it. We have already many 6 or 9L bottles of red wine and champagne that still need 5-10 years to mature which could be cool to serve at a birthday party.
The other benefit we offer is splitting cases. Normally when you buy out wine from a cellar program you need to buy out the whole case. Our NFT marketplace is designed in a way where you can reserve e.g. 1 bottle from a case of 6 and once 5 others have joined the case gets split up and shipped.
If you treat fine wines purely as investment you should never touch the bottles. The second you break a case or start storing it in your own cooler/cellar you loose at lot of value.
It will be released at approximately the same price (per case) than 2014. The champagne has not been scored yet but if it receives a +96 points score it’s a great value purchase. Cristal is an iconic champagne and it will always have demand so even if it scores 95 we would still buy it for the long term but maybe in somewhat smaller quantity.
The value of the token"cork" can go up as a result of the value of the wine going up for the value of the token to go up it has to be backed by fiat currency how do you manage that problem @ajtree
How does Wine Vault ensure transparency and accuracy in valuing the pool of wines and in calculating the percentage of each token’s share in the pool? Also, can investors view the breakdown of the pool’s wines or are they only aware of the overall value?
Hi @Emma1 As with any financial asset, the value increases when the market perceives it to be more valuable - demand dictates the price. If the value of the wines (which serve as collateral for the token) rises, most traders would likely assign a higher value to the token.
I didn’t really understand your comment regarding fiat?
But let’s use a simplified example: Assume the entire vault contains 100 cases of Cristal 2014, valued at $250,000, with 250,000 tokens in circulation. If the fine wines market now values a case of Cristal at $3,000 per case, the collateral value becomes $300,000. In this situation, it would make sense for me to pay up to $1.2 per token, as if Wine Vault were to close down, it would sell all its wines ($300K) and distribute the proceeds to token holders at a rate of $1.20 each (assuming Wine Vault obtains a fair market price for its wines, which is typically the case if the sale isn’t hurried).
In this example, I didn’t account for Wine Vault retaining 15% of its assets in USDT to maintain liquidity, but I hope it helps illustrate how the process works.
@manfred_jr For valuation we use Liv-ex. They are an independent market data aggregator for the fine wines industry - a bit like Bloomberg.
The cellar contents (per wine) will always be available on our website together with the valuation data and since we are running this on blockchain, you can always check number of tokens in circulation from the chain.
A lot of great questions we are getting I bet it would be so much easier to just launch the Crazy Pepe Coin where people don’t even bother to read the website
@manfred_jr Here’s a sneak peak into the cellar holdings list we are building. It’s currently 7 pages long and will include values for each wines. We want to use the Liv-ex prices and don’t have that API yet (it costs almost $10K/year).
I bet it would be so much easier to just launch the Crazy Pepe Coin where people don’t even bother to read the website 
