Technology

A Counterfeit Expert’s Solution for Eliminating Fake Wines

How Maureen Downey is using blockchain technology to prevent fraud in the wine industry

Photo by Courtney Perry.

Maureen Downey, an expert in counterfeit wine and the founder of Chai Consulting in San Francisco, built her career on detecting fake wines from collections and putting notorious counterfeiters, such as Rudy Kurniawan, in jail. She’s now looking to stop counterfeiting altogether through blockchain technology.

The rise of Bitcoin brought blockchain technology into the spotlight, but multiple industries beyond finance are finding use for the platform. A blockchain is essentially a database of encrypted entries. Each entry, or token, in the database tracks any transaction that takes place, thus creating a common record of the transaction. A key feature of the blockchain is that there’s no central entity that controls it; instead, all transactions are conducted through a peer-to-peer network. For the network to agree on a particular transaction, certain specific conditions must be fulfilled.

Think of a blockchain as a Google doc that thousands of people have access to. When one change is made, everyone sees the edit in the doc. But unlike the Google doc, no one entity owns the blockchain; it’s essentially a public ledger. The complete transparency and lack of central command make it, in theory, hackproof—and appealing to a range of businesses. These aspects of the technology are what sparked Downey’s attention and got her thinking about a blockchain ledger that could focus on wine bottle authenticity and provenance.

It’s difficult, of course, to assess the amount of fake wine circulating in the world market, but Downey says it’s been estimated at around 20 percent of the global trade. Antifraud techniques implemented by wineries, such as micro-etchings of serial numbers on the bottle or capsule, holograms, and invisible ink, help producers authenticate their own bottles, but the general trade isn’t privy to the information conveyed by a particular serial number or hologram and doesn’t necessarily know to look for one, which ultimately renders such antifraud measures useless to most of the industry.

Old counterfeit detection methods.

Visual assurances such as QR codes or Prooftag labels are meant to provide peace of mind for customers but do little to deter counterfeiters or protect against them. The sophistication of counterfeiting continues to evolve. For instance, says Downey, some counterfeiters figured out how to reverse-engineer a Coravin so they can both empty and refill a bottle with the tool, thus leaving a seal virtually intact. Detecting fraud nowadays is “far more forensic,” Downey says. “I’m all about the science of glue and printing and glass and paper.”

When Downey began thinking about a solution to wine fraud, there were certain criteria she wanted met. “I needed something indelible,” she says. “I needed something that could not be copied. I wanted something that would be effective at the time of ownership transfer, and I needed it to be timeless.” Moreover, she did not want to own the solution nor did she want another single company to control it. When companies break up or merge, she explains, databases are often split up and the information they contain disappears.

Downey explored the blockchain concept for about a decade, and then she met Leanne Kemp, the founder of Everledger, a technology company based in London that’s focused on reducing fraud for banks, employers, and open marketplaces. Kemp applied blockchain technology to the diamond industry to rid the global market of conflict stones. Says Downey, “I was like, well, if she can do this for diamonds, we can do this for wine.” That’s when Downey’s idea for Chai Vault—her wine bottle authenticity and provenance blockchain ledger—was realized.

She and Kemp took Kemp’s platform and integrated Downey’s authentication method, known as the Chai Method, to create the Chai Vault. “There are 60 different data points,” says Downey, “which include a number of images [that document] serial numbers … any kind of writing on the glass, [and] if there’s any current antifraud [indicators].” Each of these points is noted in a wine’s encrypted entry, and the wine is then added to the Chai Vault blockchain.

Downey thought carefully about how to mark Chai Vault wines unobtrusively. “I couldn’t do anything that would be detrimental to the design and packaging of a bottle,” she says. “I also couldn’t affect where [the producers] were going to get any of their materials for their packaging. If you look at Domaine de la Romanée-Conti, they’ve been using the same printer for over 100 years. Nobody’s going to walk in and tell them that they need to use a new capsule supplier or they need to change their label. I’m working with whatever it is they’re doing and adding a layer on top.” The solution that Downey eventually landed on was to mark the wines with a chip that contains the data that goes into a plastic casing and covers the cork. It gets crimped on and can only be removed by completely opening the bottle.

The Chai Vault project is just starting to take off. On the heels of her first U.S.-based Chai Method authenticator training, which took place in San Francisco in February, Downey is now promoting Chai Vault technology to retailers and collectors. As the company and the concept gain traction, she’ll begin targeting producers as well. Ultimately, she aims to sell the technology to producers so wines can be entered into the Vault at the source. “My whole thing is provenance,” she says. “It’s just as important as authenticity. You can’t prove one without caring about the other—one is meaningless without the other.” At the retail level, Downey sells chips for $3 each to authenticators, who charge additionally for their services. For producers, Downey plans to sell the chips for $2 each.

Downey will set up any retailers and collectors interested in joining Chai Vault with an authenticator trained in the Chai Method who will assess their inventory or collection, add a Vault capsule to verified bottles, and enter the wines in the blockchain ledger, thus verifying their authenticity. (Fees for this process are determined by the individual authenticators.) For producers, only chips are needed for entry into the Vault.

While some believe that counterfeiting is a problem only for super-premium bottles, that’s not the case. Miraval Rosé, for example, is one of the most highly counterfeited wines, according to Downey. For fraudsters, higher volume of a lower-priced wine can be just as profitable as the collectibles. Also, people are less apt to be on the lookout for counterfeit versions of these current releases. If blockchain technology is implemented at the producer level, buyers can be assured they’re selling their customers authentic wines.

Downey is hopeful that the Chai Vault will stop fraud, not just through the technology but by changing people’s attitudes—particularly in the U.S.—toward counterfeit wines. “In Europe and Asia, people care a lot more about their wines being authentic,” she says. “In Asia they have such a culture of counterfeits, the [people who] can afford it want to make sure they are buying the real thing.” Americans, as yet, are less focused on the authenticity of their wines. For them, ignorance is bliss, suggests Downey, and as long as they aren’t educated about counterfeits, they can’t really be faulted for unwittingly buying or selling fraudulent wine. However, by establishing the provenance of wines and vetting collections with blockchain technology, Downey hopes to educate more people—and eventually eliminate fake bottles altogether.

Shana Clarke is a freelance wine writer based in New York City and a PR/Marketing consultant for the wine and restaurant industries. You can often find her drinking BYOB Champagne at dim sum brunch. Follow her on Instagram or visit www.shanaspeakswine.com.

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