Welcome to the OpenVino purple paper!

This document explains everything about OpenVino and OpenVinoDAO governance.

TL/DR summary

This “purple paper” covers the following topics:

• What is OpenVino?

• What problems does OpenVino solve, and who are our users?

• What is the OpenVino business model?

• How does the OpenVinoDAO governance model work?

• How will we scale OpenVino into a global service for 1M users and beyond?

• How we validate OpenVino?

• The devil is in the details: answers to all of your questions.

What is OpenVino

OpenVino is a Web3 platform that provides Tokenization, Transparency, and Traceability services for the wine industry. A highly atomized industry, 70,000+ wine producers operate worldwide, representing $400B in annual revenue. OpenVino solves existing real-world problems that affect wine producers, the wine supply-chain, and consumers.

OpenVino focuses on wine, but OpenVino Tokenization, Transparency, and Traceability tools are exportable to spirits, olive oil, and other verticals.

OpenVino generates economic value from direct fee revenue, OpenVinoDAO token inflation, and composable data aggregation.

Tokenization

OpenVino enables wineries to mint fungible tokens backed by bottles of wine.

For each vintage (label), a winery can issue ERC-20 tokens on the blockchain, equivalent to the number of bottles produced.

A percentage of these tokens, issued and held by the winery, are initially sold through a Vintage Coin Offering (VCO) on OpenVino.exchange at a fixed price, determined by the winery.

At the end of the VCO, the winery funds a liquidity pool on the OpenVino.exchange decentralized exchange (DEX), permitting wine consumers, importers, distributors, retailers and speculators to both buy and sell tokens.

The price of the token on the exchange adjusts dynamically in real-time, according to supply and demand: the token price increases as more people buy tokens, and decreases as people sell their tokens.

When the wine is ready for consumption, token holders can redeem their tokens for bottles. During the redeem process, the buyer pays the shipping costs and their tokens are “burned”.

Transparency

Wineries can self-certify their wine production using OpenVino’s “BioDigital Certification”. Certifications can include multiple attestations:

• Organic

• Biodynamic

• Provenance

• Sustainability

• Ethical

BioDigital Certification enables wineries to self-certify, through a three-step process:

1. Define, in simple terms, the certification requirements.

2. Map these requirements to immutable, self-attestation data on-chain:

   1. Documents

   2. IoT sensors

   3. Images

   4. Accounting data

3. Provide a challenge mechanism

   1. Wineries deposit funds into a bounty for 30 days.

   2. Any challengers who believe that the certification is fraudulent, can deposit funds into the bounty and upload their evidence of fraud.

   3. The Kleros decentralized court determines if the certification is valid, and returns the full bounty to the winery, or to the challenger.

Traceability

OpenVino connects wineries with their customers.

Wine drinkers are invited to scan a serialized QR code on the back label of the bottle. Every QR code is different. The QR code takes the wine drinker to a webapp, where they are invited to provide:

• Basic contact information

• Take a selfie or picture

• Answer five questions about their drinking experience

In exchange for this information, wine drinkers are rewarded a free NFT of their drinking experience with the picture they took, and one OpenVinoDAO token.

This is called, “You Drink It, You Own It.”, because wine drinkers receive fractional ownership of OpenVinoDAO.

The winery receives the customer’s personal information and wine valuation.

Why wine?

Wine is the IDEAL product for decentralized tokenization, transparency, and traceability. While many Real World Assets (RWA’s) are being tokenized today with web3 tools, wine has unique characteristics that match perfectly as a cryptoasset.

These include, primarily:

• Built-in scarcity

• Quality evolution over time

• Elastic pricing

But also, include:

• Friction-full supply chain

• Multiple quality attestations

• Fungibility

• Cultural Significance

This section concisely outline each of these characteristics. These qualities combine into a product ripe for tokenization.

Built-in scarcity

Whereas wineries can vary greatly in size, with larger wineries producing millions of bottles annually, across dozens of different labels, and the tiniest wineries producing only a few hundred bottles per vintage, wine production remains finite, and wine is a consumible.

This means that wine has built-in scarcity; only so many bottles are produced per year, for each vintage and label, and those bottles are consumed over time.

Wine gets better over time…until it doesn’t

Very few consumible products get better with aging. In between perishables and durables, we have products like olive oil, coffee, and spices, products that have a longer shelf-life than a vegetable, but nevertheless, lose quality over time. Coffee is never better than the day it was roasted, olive oil the moment after pressing.

But wine improves as it ages. Immediately after grape must fermentation ends, we can call our product wine, but wine needs a certain amount of time before it is enjoyable to drink, and even more time before perfection. At some point, this aging improvement reaches it’s zenith, and quality decreases.

Spirits, like whiskies, rums, and Cognac, stored in oak barrels, tend to improve with aging, but generally speaking, this improvement is linear in nature: the older the better.

Different wines evolve at different rates, and quality improvement and deterioration are subjective. Some wines reach their peak drinking moment after only six months, others require decades. And some people prefer wines “before their time” while others seek out those that are “rancid”.  To compound matters, the volatility from one bottle to another increases over time. Where one 20-year old bottle might be fantastic, another undrinkable.

Finally, because consumers associate fine wine aging with quality, the idea of storing bottles for the future is not foreign. Wine drinkers that collect bottles in their cellars understand that these represent future delicious experiences. These are physical tokens, waiting to be “cashed-in” on a special occasion.

Elastic Pricing

A bottle of wine represents neither a commodity, nor a unique object of art.

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Source: winefolly.com

A bottle of wine represents so much more than the liquid contained within. History, provenance, scarcity, story-telling and branding all contribute considerably to a wine’s valuation. A bottle of wine represents a snapshot of a place and time, reflecting where the grapes were grown, when and how they were harvested and fermented, tradition, the weather, decisions made by the winemaker and the viticulturist in the field, the sweat and toil of the farmworkers, even the yeast in the air when fermentation began.

Wine combines all these factors into a product supporting very elastic pricing.

There are $2 bottles of wine on the market, $20,000 bottles, and everything in between.

A brewer who crafts an extraordinary, “100-point” beer, will still have a very difficult time fetching $100 for a bottle. This is not the case with wine.

Wine’s cultural and historical significance, combined with it’s inherent quality variability over time and built-in scarcity, translates into price elasticity that consumers appreciate. People “get it”. They know wines are valuable, and accept the fact that when they walk into a restaurant, they will be paying a considerably higher price for the same bottle of wine they could buy in the super market.

Even as an asset class, investors appreciate the value of wine.

“Rich Gen Zers and millenials are investing in jewelry, sneakers and fine wine instead of traditional assets, says Bank of America.”

The friction-full supply-chain

The majority of wine sales pass through three tiers: importers, distributors, and retailers (wine shops, and restaurants), before reaching consumers. Only a tiny fraction of wine sales today are DTC (direct-to-consumer).
The reason you don’t see wine available on Amazon is because wine contains alcohol, and alcohol sales are highly regulated. The USA maintains regulations on the books, legacy of 1920’s prohibition, that prohibit some interstate alcohol sales. The European Union is an open customs zone for the sale of goods across borders, with the exception of alcohol, tobacco, and fuel.

The appeal of wines to consumers has much to do with provenance: high-altitude malbecs from Argentina, sauvignon blancs from south island New Zealand, Bordeaux wines from … Bordeaux. Locally producing a Bordeaux in Chicago is not an option. And wine is heavy and fragile, liquid in a glass bottle, susceptible to temperature fluctuations.

Wine imports are highly taxed, as compared to other consumibles. A $5 bottle of malbec in Argentina becomes a $40 bottle in a shop in Sao Paulo, a $100 bottle in a New Delhi restaurant. Most of the price increase is because of excise taxes. Since wine is locally produced in 100+ countries, protectionism in the form of tariffs, add to the import taxation burden.

The wine pricing problem

Wine producers face a unique challenge, in part because they are beholden to this three-tier supply-chain. Despite built-in scarcity, elasticity, and quality variability, wine producers lack mechanisms for dynamically adjusting their prices.

Once a wine producer provides a suggested retail price, it is very difficult for them to increase price, to accommodate scarcity and demand, nor can they readily slash prices on slow moving wines, or wines that are reaching the end of their drinkability.

Boutique wine shops complain that supermarket chains undercut prices below the cost distributors provide. Wine stock that has failed to sell quickly becomes unsellable, and wineries cannot dump product without using the grey-market, thus competing with their existing channel. And the few wineries that do sell DTC, cannot be seen as competing with their retailers. For this reason, buying wine directly from the winery is rarely a good deal for the consumer.

Attestations

Consumer consciousness increasingly focuses on traceability and provenance, understanding where the things that we buy come from and how were they made. This focus is especially acute when it comes to wine.

Wine drinkers prize uniqueness, those qualities that differentiate one wine from another. So this presents a challenge and an opportunity for wine makers: how can they best differentiate their labels from a sea of offerings.

These are some of the attestations, or claims, that wineries use to distinguish their brands. Many of these attestations require complex and costly certification processes.

• Provenance:
  Declaring where a wine comes from involves complex certification processes defined by regional wine authorities. Denominación de Origen (DOC) in Spain, or Appellation d'Origine Contrôlée (AOC) - France, are examples.
  
  The label for the denominación de origen “Ribera del Duero” in Spain, describes not only the geography where the grapes were grown and the wine made, but also the grape variety (predominately “tempranillo”) and the wine making process.
  
  Provenance can include specifics, like “single-vineyard”, and characteristics of the vineyard soil, altitude, and irrigation methods.

• Varietals:
  Many wine regions have their flagship wine varietals, malbec in Argentina, pinotage in South Africa, carmenere in Chile.

• Wine-making styles:
  Was the wine fermented or aged in oak barrels? Was it American or French oak?

• Authorship:
  Was the wine made by a famous winemaker?

• Organic / Biodynamic:
  Were the grapes grown, and the wine made, according to “organic” standards.

• Sustainability:
  Is the winery “Carbon-Neutral”? What about the water footprint, and other sustainability metrics?

• Vegan-friendly:
  Was the wine clarified without using animal products, like egg whites or bone marrow?

• Fair Trade:
  Does the winery follow acceptable ethical and social standards?

A Highly Regulated Product

As a foodstuff and an alcoholic beverage, wine is scrutinized by public health authorities. Additionally, wine often serves as a token of regional and national cultural identity.

For example, in Argentina, wine is considered a “National Beverage”. Malbec is more than a grape varietal, it is a protected national brand. Therefore, by law, every wine produced in Argentina, must include a legend on the label “Bebida National” (National Beverage), and every wine purporting to be a Malbec, must contain at least 85% of fermented must from malbec grapes. Both the malbec vineyard and the resulting wine production must be registered and monitored by the national wine board INV “Instituto Nacional Vitivinícola” for authenticity.

Similar regulations exist in wine producing countries around the world, protecting regions in Europe, like Champagne, Rioja, and Toscana.

Wine fraud is a real problem. Fake labels on bottles, and wines misresenting their regions comrepresenting their regions contribute to substantial economic losses.

Fungibility

Wine is a fungible product: one bottle should taste the same as any other bottle of the same label and vintage. As such, wines can be tokenized with fungible tokens (i.e. ERC-20).

Having said that, wine is a “living liquid”, evolving over time, even after bottling.  And while two bottles of the same vintage should taste them same, slight differences and defects can occur in outlier bottles. These small inconsistencies can be a result of wine bottle storage or cork deficiencies, but also from serendipity. Whatever the case, this volatility provides sufficient quality randomness to inject variability in quality assessment and valuation.

Tokenizing wines with NFT’s, instead of fungible tokens, can be interesting when dealing with “library wines”, collectible rare bottles of a particular wine and pedigree.
By combining fungible tokens, issued across and entire vintage, and You Drink It, You Own It, serialization NFT’s OpenVino provides wineries and consumers with the best of both worlds, fungible and non.

Cultural Significance

Wine drinkers represent a passionate audience, who search uniqueness. Golf, cars, and wine are internationally seen as a status symbols, but of the three, wine is the most accesible. Wine drinkers prize the uniqueness, those qualities that differentiate one wine from another.

Consumer focus on traceability and provenance, understanding where the things we buy come from and how were they made, is even more targeted when it comes to wine.

What problems OpenVino solves, and who are our user?

OpenVino provides value to everyone in the wine ecosystem. This section enumerates OpenVino’s benefits for:

• customers (wine drinkers)

• supply-chain partners (importers, distributors, wine shops and restaurants, influences, brand ambassadors, wine regulators)

• wine producers

• wine partners (winery service providers)

• the cryptosphere: token speculators, RWA funds, web3 protocols

For the winery

1. Access a broader market

Even people in Iran can buy wine tokens.

2. Early access to liquidity (“Liquidity from Liquid”)

Wineries harvest and crush grapes, and ferment grape juice (must). But the resulting wine needs time before it is ready to drink. The amount of time between ferment and drinkability varies greatly from one wine to the next. Some wines are ready to drink in just a few months, others require years of aging.

OpenVino tokenization provides wineries with the ability to capture revenue only days after fermentation.

2. The export Chicken-and-egg problem

Most wine importers do not choose which wines they import based on price or quality. They choose wines that they know will sell. This is the chicken-and-egg problem for wine producers. Creating space in a new market is a very expensive and time consuming proposition.

By tokenizing wines, producers can promote wine token sales in markets where they do not currently have an importer. Convincing an importer to bring wines into the country where token holders exist is a much easier ask.

3. Access to price volatility

Because wine has built-in scarcity, and for better or worse, evolves over time, wineries need a mechanism to quickly adjust prices. Unfortunately, this tool is not readily available with the current wine supply-chain.

Tokenization insures that wines that are underperforming in the marketplace can drop in price, and scarcer, in demand bottles, increase.

4. Import / Excise tax reduction

A significant percentage of the price of imported wines is directly correlated to import and excise taxes. By setting a low initial price during the Vintage Coin Offering (VCO) and utilizing this price, with adjustments for inflation, as the base price for export, these taxes can be reduced significantly.

Wineries today often resort to illegal dual-invoicing schemes to reduce their tax burden. OpenVino tokenization solves this problem by segregating the value of the physical bottle from the digital token.

5. Eliminate certification costs (BioDigitalCert)

Today’s certification process is expensive, and certification does not improve the taste of the wine. BioDigital Certification removes the certification expense.

6. Direct to Consumer sales channel

Global online alcohol sales are expected to reach $36 billion by 2028, reflecting a 20% increase. Wine sales, along with other alcohol categories, are benefiting from the shift to digital platforms, where consumer engagement, research, and purchasing are increasingly influenced by online interactions. Growth is driven by China’s booming e-commerce sector and the rise of omnichannel models in the U.S. Online shoppers are seeking new brands, emphasizing the need for strong digital marketing, competitive pricing, and enhanced product discovery. With a growing number of consumers conducting thorough research before purchasing, the online wine market requires brands refine their digital strategies and adapt to evolving consumer behaviors.

7. Connect with real customers - validate quality

Wineries do not know who their customers are and what they think of their product. “You Drink It, You Own It” connects wine makers with wine drinkers.

8. Token backed loans

Wine tokens are real-world assets (RWA’s). Wineries can stake these tokens on decentralized P2P lending platforms and receive loans agains their tokenized collateral.

Here is a real example of a peer-to-peer loan using pwn.xyz:

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Costaflores Organic Vineyard used 1300 MTB20 wine tokens as collateral for a $6406 loan (DAI) to buy 10 truckloads of goat guano and supplies to build a chicken-coop.

For the supply-chain

1. Risk reduction

A wine distributor or retailer who purchases large volumes of tokens at an attractive price, can choose to redeem small amounts at a time, maintaining the option to liquidate the tokens if the wine is not selling as expected, or if the token price increases beyond the threshold they consider acceptable.

2. Fulfillment - Access to new customer base

A wine importer that works with OpenVino wineries can choose to be act only as a forwarder, fulfilling orders from token holders, without being part of the sales cycle. But the importer still gains access to the delivery customer data.

3. Imprinting customers as new crypto users

People remember when they buy their first crypto-currency. Wineries that onboard new crypto users imprint their brand on this memory.

4. Ability to pay brand ambassadors / influencers / markets in wine tokens

Marketers promise the moon to their customers, but are rarely held accountable for moving the needle in sales. By paying marketers in the assets they are meant to be selling, their success or failure is immediately compensated.

5. Regulatory friction reduction

Wine regulators are not meant to financially burden wineries. BioDigital Certification allows wineries to self-certify their productions by reducing cumbersome bureaucracy.

6. Fraud reduction

The wine industry if fraught with fraud. BioDigital Certification reduces fraud.

For the consumer

1. Price authenticity

The OpenVino.exchange decentralized marketplace provides consumers with a “real” price for wines, as determined by supply and demand.

2. Belonging to the community

“You Drink It, You Own It” brings together validated wine drinkers with wine producers in a token-gated community.

3. First NFT, wine and DAO tokens: a risk-free entry into crypto

Consumers are less averse to buying volatile crypto currencies, experimenting with NFT’s and DAO’s, if they know that, at the end of the day, they can always “drink” their investment.

4. Attestation authenticity

Is this wine really organic/vegan/carbon neutral? BioDigital Certification provides the proof.

5. Gifting, prizes

Gifting a bottle of wine is never easier than sending someone a token.

6. Liquidity farming and P2P lending

OpenVino gives people the chance to learn about “liquidity farming” with a REAL farm.

For OpenVino partners

1. Onboarding services

OpenVino partners can deliver training and onboarding services to wineries, and keep %100 of the fees for their services. Partners decide their fees based on what pricepoint their market will support.

For every winery a partner brings onto OpenVino, they receive OpenVinoDAO tokens worth ~$2,500.

2. Integration services

Wineries that implement OpenVino will want to integrate their ERP and CRM systems. This is revenue for OpenVino partners.

3. Certification services

Even though wineries can self-certify their wines, for free, with BioDigital Certification, they may still need consulting services to help insure that they are in compliance.

4. Wine analytics and AI. This is how OpenVino can help the world make better wines.

Combining wine token pricing, with BioDigital Certification data, and You Drink It, You Own It consumer feedback opens limitless opportunities for wine analytics and AI.

Imagine joining spectrographic data to wine tokens with partners like VeriVin or db.wine, or even Vivino.

5. Access to OpenVinoDAO community

OpenVinoDAO brings together wine producers, drinkers, and investors in a token gated community. As OpenVinoDAO members, OpenVino partners gain access to this community.

For the cryptosphere

OpenVino has the power to transform an industry that has existed since the dawn of civilization, and provide a desperately needed real-world use-case for web3.

1. Token speculation

Like any other asset class, if the value of a wine token tends to increase over time, speculators will buy them.

2. Tokenization of a Real-World Asset class

Wine tokens are “utility tokens” and thus present fewer legal obstacles than other RWA’s - it is based on a utility token.

2. Participation in stable coins

RWA assets are joining the basket of stable coin currencies.

3. Tokenized carbon credits

Wine tokens that are BioDigital Certified as “carbon-neutral” could be used within composable tokenized carbon credits.

The OpenVino Business Model

Wineries can use OpenVino Tokenization, Traceability and Transparency for free.

The only requirement for wineries is that they become members of OpenVinoDAO. For the first ~300 wineries, OpenVinoDAO subsidizes the cost of joining (nominally equivalent to $2,500 USD).

So how does OpenVino make money and generate value for investors and other OpenVinoDAO members?

The three primary vectors of value generation for OpenVino are:

• Direct Revenue

• OpenVinoDAO inflationary token

• Composable wine data

Direct Revenue

OpenVino generates revenue from two primary sources: token swaps, and YDIYOI data fees.

All revenue generated is received into an OpenVinoDAO Revenue Wallet. Periodically the contents of the revenue wallet are disbursed to OpenVinoDAO token holder wallets. The automatic disbursement schedule is adjustable, daily / weekly / monthly.

Here is the full direct revenue model.

Token Swaps

Whenever someone purchases or sells a wine token issued on OpenVino.Exchange, a transaction fee (swap fee) equal to 1% of the value of the token swap is levied.

This swap fee is divided into two payments:

• 50% of the swap fee is paid to the token liquidity provider(s). Initially the winery issuing the token is the liquidity pool provider, but anyone holding wine tokens can participate in the liquidity pool, including OpenVinoDAO.

• 50% of the swap fee is paid to the OpenVinoDAO revenue wallet.

Essentialy, the more token swaps occur, and the higher the price of the tokens, the more revenue that is generated for OpenVinoDAO.

Here is an example of swap fee revenue projections:

“You Drink It, You Own It” (YDIYOI) NFT data fee

As a wine producer, how much would you pay to receive a photograph of your customer drinking your wine, their personal information, and answers to five questions about their drinking experience?

Wineries that use “You Drink It, You Own It” to capture their customer’s drinking feedback and personal information, pay a data fee for each successful NFT minting experience. This fee is an adjustable rate, and represents information of real value for wine producers.

In exchange for their feedback, photo, and personal data, customers receive a free NFT of their drinking experience and OpenVinoDAO tokens.

Not only do customers provide real, personal feedback, they become part of the winemaker’s community and members of OpenVinoDAO: You Drink It, You Own It!