EthCC 2: Mike Barrow

well this is pretty cool so this is pretty cool the first time i've been able to address the ethereum community and talk about wine making and organic viticulture so before you say off topic completely what i'm going to try to in this time we have together is explain how i think that wine is actually a really interesting uh i don't want to call it a commodity but an interesting item it's the best thing that we can use to talk about tokenization and to do so i'm going to talk about a project that i've been working on called openvino for the last two years so my name is mike barrow i'm a i.t person from 30 years working mostly in the unix linux data center cloud services space but in 2003 without putting too much thought or due diligence into it i decided to buy a small piece of property in mendoza argentina this is in the west of argentina it's the kind of the epicenter of wine production there argentina is the fifth sixth largest depending on how you look at it wine producer and so i kind of immersed myself in this project to do a small boutique winery at the same time doing continuing to do i.t stuff but really without having any idea what i'm doing no background in agriculture viticulture production my only real experience is i drink a lot i like a lot of any wine drinkers here so good um so that's kind of what pushed me into this after doing the first harvest first vintage in 2007 i said well this this should be easy i'll take advantage of the fact that i'm working in different places around the world in india doing a data center project at the time and start taking bottles under my arm and how difficult can it be to sell wine and i come across a series of questions that i think lines up really well and you'll see on a solution set that we can do a actual real world physical you know dirt thing that can we can solve with ethereum so this is what the openvino project is my company is called costa flores and i have a wine called mike tango bravo it's a blend of malbec pativado cabernet sauvignon but basically all this experience going to traditional you know wine fairs uncorking bottles restaurants contests and all these types of things i come across three questions over and over again and the first one is what price should i set my wine to be now we have an idea of well my cost is x i want to make y for profit and the better the quality the more expensive your wine is and that's not really how it works if i go into a wine shop or a restaurant and say here's my organic malbec from mendoza they're not going to say great uncork it let's taste it or how much is it they're not really concerned with that their main concern is look i already have 27 wines on my menu why is somebody going to ask for yours so once you've created a need for the market then we can discuss what the price should be so at the end of the day i find that some places i go to my products too expensive and other places it's not expensive enough so really what i want to get to is how can i let the market decide what the price of my wine is right so you can see where i'm going with this we're tokenizing our wine production and letting the market define the price the second question is more of a curiosity i mean i see cases pallets of wine going out of the winery and i wonder who's drinking them where are they going i mean i have a general idea if i'm selling to an importer in india or selling in argentina or brazil and spain but i don't know if it's ending up at somebody's birthday party if they're drinking home alone if they're drinking at the right temperature uh what they're really thinking and what is their experience drinking so how could i do er extreme traceability right which i call a vine wine dine mind like how can i get into the head of the person that's actually drinking it to see what they think about it so that's the second question but the third one i think is the most interesting and has to do with uh extreme transparency and honesty right so i'm doing an organic production and i realize that when i'm talking to people i say you know look we toss 40 of the grapes on the ground we're only harvesting when it's the right time and we put a lot of love into our production and there's a lot of quality concerns and then i realized yeah but what winery doesn't say that right and there's so much uh deception in marketing that it's really hard to distinguish who's telling the truth and who's not so not too long ago i was in ribera del duero in spain and i went to visit a friend's place his cousin has a 10 hectares in temporary a really beautiful grape and we're looking at it he's got this little stone hut outside and a little barbecue a little table and in this really beautiful place and he says oh you like this and he says he pulls out his phone and says let me show you an advertisement that was filmed here two weeks ago so it's this sweeping panning advertisement you see the vineyard in the background and you see a woman extending a tablecloth on the table and kids are running around and people are clinking glasses and the voice over is in our family for generations we've been doing this wine and we only do the best grapes and you know the typical speech and you look at it and you go it's not their vineyard it's not their kids it's not their barbecue so is there some way that people can say mike's not bullshitting when he's telling me this right so why not make an open source winery and use the blockchain to address these three questions of extreme transparency traceability and tokenization and the transparency and tokenization is fairly obvious the last one about traceability is what we call you drink it you own it how can we convert the consumer the drinker into a partner so let's look at the transparency layer first this is essentially using sensors in the vineyard so iot we have a raspberry pi in the middle of the vineyard connected through lora to what's called vinduino so it's basically an arduino with sensors collecting the data encapsulating this signing it and putting this into a side chain bitakura this would be a log so i want to know what happens in the vineyard every day what happens in the winery and how can we communicate this cameras 360 degree camera but the most interesting part is about the business layer what if we shared all the data how much we spent on the bottle on the label on the box on taxes how much we sold in each place and then publish that and essentially do we need blockchain here not specifically any database could take this but i want to do self certification for organics for fair trade and use the blockchain as a mechanism for non-repudiation so this opens up a different way to communicate ethical business practice and share all of the intellectual property how much we're spending how much we're doing how much we're paying if we're paying our taxes and collect information from the community now this also attaches to a problem which you see here the problem that there's so much confusion and manipulation in packaging and labeling so this is my deodorant here and it says naturally derived i don't know what that means cruelty free aluminum free gluten free and please recycle okay obviously none of these really mean much the only one of these labels that actually has any meaning is indian and continental 90 vegan so there's a lot of manipulation in the wine world you can't really see this but in the wine world this is even worse we have natural wines conventional wines organic wines you know which would here would be biologique we have biodynamic wines and the consumer doesn't really know what the difference is okay so now let's look at the price at what price should i set my wine well i think an interesting thing when we're talking about cryptocurrency tokenization crypto assets the biggest problem we have is that people don't really understand money in this conversation so here we have a painting on the left side tumbly baku sold in 2005 for around 20 million euro and on the right uh bing goose which is spanish wine 2 500 euro today for the 2005. now the difference in these two items is that we can all look at the painting and have our opinion about what the price should be but the bottle of wine on the right is something that has no intrinsic value it's a piece of glass it represents a future potential experience it represents something of value if we open it but then again when we open it it becomes worthless so in that sense it's more like a 100 euro note or a token so let's talk about a wine-backed crypto asset how does it work so the bottom's cut off here but basically how it works is in april we harvest the grapes into march beginning of april southern hemisphere so opposite from here once we've finished the fermentation process which is two three weeks we pretty much know how many liters of wine we're going to have and wine is also a pretty controlled substance in that it's a food source it has alcohol so i have to declare to the regulators in argentina how many liters of wine i have uh which tank it's in it's not something i can just make up so at the end of april beginning of may we know exactly how many liters we're talking about and therefore we can emit the equivalent amount of tokens for bottles so we did this last year was our first ico let's call it and we issued 16 384 erc 20 tokens called mtv18 for the 2018 harvest and this is equivalent to the 16 384 bottles so we put those up for sale uh sold roughly half of the tokens during the ico we're keeping a quarter of the tokens to spend on marketing to use as a as a funding for for payment and also keeping some of the tokens so that you know if a pallet falls in the winery and breaks i have some sort of way to to make sure that we still have enough wine for the tokens that are in circulation now starting in september we went on to repeal which is one of the largest exchanges in latin america and there's a pairing right now for the argentine pests on for the brazilian real and soon for btc and so this is where the fluctuation comes in volatility and this is how we want the market to define what the price should be now in this particular case 2018 so the cycle works like this we finish the fermentation it goes into tanks and oak barrels for one year and then two years in bottle so basically it's three years before these wines are ready to drink so in 2021 on the 6th of may we'll release the 2018 vintage and then anyone that's holding the tokens at the time can send the tokens to our e-commerce site pay the shipping expenses wherever they might be and basically we burn the token at that point so i'm not trying to create a thousand dollar wine what i'm trying to do is first allow the marketplace to define the price and uh so when somebody comes up to me and say what's the cost of your wine i'll say well which year are we talking about the 2020 well let's look uh the price is x and that's there's a certain honesty that i'm allowing the marketplace to define that so what's going to happen with the token i don't know this is an experiment there's some beautiful projects that i'm seeing here at the conference that came last year and the sensation that i have is that there's a ton of really interesting things that are happening you guys have been to all these different talks but there isn't a lot of real world applications that people like in my case are actually betting the farm on this to see what happens so we just started in 2018 we're preparing now for the ico for 2019 and there's a question is is the token going to mirror the arc of quality of the wine is it going to reflect scarcity over time why should a wine have the same price from the minute it's finished fermentation to the minute it hits the street until the the last bottles are leaving the winery there should be some difference and let's let the market define what that is it's also interesting because the speculation that that could happen from a crypto investor somebody that's speculating what the price of it is quite different from somebody who's buying it for the wine either to drink it or to resell it and so the idea here is that it doesn't matter to me if the price goes up or down at some point if the price crashes and it's near the bottom all i have to do is talk to my traditional importers and resellers and say you know the wine you've been buying for the past 10 years it's a steal if you get it right now just go on the exchange and buy the tokens okay so the last part is the transparency part and how do we evaluate quality well right now we can evaluate quality by looking at essentially three ways we can ask an expert so robert parker says this is you know 93 points or the the one critic of your choice we can say of course try it yourself that's the best way to evaluate anything or we can do crowdsourcing crowdsourcing opinion in wine world is vivino but you know tripadvisor it's the same kind of aspect people are voluntarily voting on it but we know that this is a very flawed system because people have no incentive to vote on something usually if they've had a bad experiences when they vote you know that's when people tend to use the trip advisor model so what's another way of doing it we call it you drink it you own it and basically it looks like this when the bottles of tokenized wine are available on the street so starting in may of 2021 doesn't matter how you got the bottle in your hand maybe you bought it with tokens and i sent it to you maybe you bought it in a shop in paying fiat and the shop bought it in tokens or maybe somebody gave you the bottle doesn't matter now you have the bottle in your hand be able to scan the back label serialized and then this will take you to download an app introduce name address maybe a tax id number age information about yourself geolocation take a selfie with the bottle and answer a series of questions about your experience drinking that particular bottle but in exchange for this tremendous invasion of your privacy which of course is completely optional what we'll do is give you one token which is a different token that represents one share of the company so now you've gone from being a consumer to being a partner the liquid that you have in your glass you're actually own that liquid right and so now let me ask you what you think about the wine and by the way this enables us because we're publishing all of the accounting data and the data from the vineyard from the the winery this allows us to do all kinds of things as far as deciding how dividends are distributed uh voting rights and all these fun things that that you can imagine right but we can go one step further so now you have an app you've given me all your data voluntarily because now you're part owner of the company this is actual shares of an argentine corporation and now we can ask you a question do you want to play a game in this case it can be you can participate in one of five categories so you could be study viticulturists right how to grow grapes enologists how to make wine sommelier a wine merchant or a blockchain iot specialist and to participate in one of these five categories and it's basically a didactic game we give you little snippets of information to study about these different categories but occasionally ask questions and if you answer the questions you win points if you don't answer the question or you're answering correctly you lose points and these could be trivia type questions but for the most part wherever possible we want to ask you questions that are related to the data that we're publishing so if i ask you should we irrigate the cabernet sauvignon the form that you would know to answer the question would be go to look at the sensor data so now you're a partner acting in a sense as a turk machine validating the data that we're producing from the sensors learning about wine and earning points which at the end of the year we do basically do a bounty and say 10 percent of all the vintage tokens we distribute to the game players in the firm of token coins for the vintage so you're earning money by playing the game uh you're a known entity because in order for you to collect your shares i actually need to do i have to do an effective kyc and by the way since this is a sort of a security token it allows us to call into question the howie tests because now you're not only a passive investor that has received shares of the company you're an active investor we've decentralized farming we've created a farmville with a real farm behind it right so this is the idea of you drink it you own it how can we take our consumers and turn them into active participants so we have the utility token for the vintage and the security tokens for the shares so the concept of vine wine dine minds um collecting business data user perception and data from the vineyard now before you poo-poo this and say oh but at the end of the day all you've done is created an erc 20 token to represent bottles and you have some sensor data going on to your own side chain there's no bonding curves here we're not doing any kind of uh voting algorithms or any of these types of things let me just say that because this is a real world example it's in production we're actively dealing with the lemon coin problem um for those of you familiar with the lemon coin video basically 90 percent of the people that have bought our tokens in this first year are first-time crypto users so this is an ico done in argentina uh we both had a crowd fun uh crowd sale uh where you could send ether to a smart contract and receive the tokens you could also go on the site and use credit card paypal uh bitcoin um and up front we collected information about you because i need to send out an invoice collect collects vat on the sale and you bought a bottle of wine so it's essentially how do we do this in a place where i can collect the ether and i think i'm probably the first person to turn ether into goat manure because that's a really good organic fertilizer and without breaking any laws in argentina so so there's a lot more complexity when you actually take some of these technologies we're talking about and map them to a real world situation so i think that's why wine is a really delicious metaphor for money but also for a tokenized asset if you want to know more about the wine or the the project costaflores.com we've got a few videos and information wiki.

costaflotus.com is where all of the information all the the code for the centers for the smart contracts for everything is published all of their intellectual property is there and we invite anybody to participate and share with that and also openvino.org so thank you very much and i think i have only about 30 minutes for questions so if anybody has any questions oh you have a microphone so if i buy a talking at that moment basically i'm uh i'm owning a bottle of wine correct uh what is happening if i never claim that talking for a while okay so we're setting the price at the ico each year remember this is an annual process the this first year we set it at cost price because that's the only non-arbitrary number i have to start with but that doesn't mean we'll be doing it at cost every year basically we'll take the medium from last year's price on the exchange and our cost and divide it in half and that's where we'll set each year to be the new ico price but yet you bought with one token you bought a bottle of wine and either when that wine is available and it could be available immediately it doesn't have to mean that you don't have to buy it at the time a vintage occurs or the fermentation you could buy it at any time so if we're in 2025 you could buy the 20 mtb 25 token and wait three years for the bottle you could buy the mtb 22 token for one that just hit the street or you could buy what's ever left of the mtb 18 from the exchange and cast those in now we give you a 10 year window and after 10 years if you haven't cashed in your token then i'm going to drink it or do auction it off or whatever it is because i can't keep it in cold storage forever yes yes i i was asking about the store storage because basically if you had uh have a good year i'm betting on on a good year and uh waiting for 10 years and got to really yeah you could speculate and keep the token for 10 years so the idea is again is is to juxtapose or counter uh oppose these these two forces so you might have bought a token let's say for five dollars in the ico and for whatever reason the tokens now at a hundred and you could say yeah i like mike's wine but i don't think it's a hundred dollar wine i'm gonna sell my tokens off well as soon as you start to do that anybody that was speculating the token itself as a crypto speculator is also gonna say hey the party's over let's cash out and now the price is going to drop okay let's say it plummets all the way to 50 cents a token yeah absolutely well then that's fine i mean it's that who you're not going to sell it if you've got it at 50 cents because you'd rather drink it and all i have to do is remind the traditional channel importers distributors wine shops say hey you can get the wine for 50 cents a bottle and sell it at whatever price you want in fiat so yeah and how do you plan to scale this on other wineries is this a base some kind of a show or showcase and then you will look at the services the the i think that there's enough there's enough questions still out there some of it has to do with the technology some of it has to do with business models some has to do with how this is going to overlap with regulation shipping there's so many questions right now that i don't really know how this is going to scale a lot of wineries have come to us and say great we want to do something like that what do we have to do my first answer is well it's all on the wiki you can download it and try it yourself but why don't you wait a couple of years to see what things work and what don't right it is pretty much an experiment we're in production i have bet my business on this i can't go back now from this but that doesn't mean that there aren't going to be adjustments so i'm not really focused on the scaling on how to sell this isn't it's an open source project it does have in a certain aspect as well which is marketing so we've got blockchain iot organic single vineyard wine the last part is we're just starting to work with a startup from oxford that's doing quantum non-linear spectroscopy which is an array of lasers that allows you to analyze the what wine it is so to know if it's a malbec a cabernet what year it's from without opening the bottle right so if you can put the word quantum there there you go it's another interesting thing right so yeah i don't i don't really know so you've kind of answered one of the questions that i had which was about pricing yes you mentioned this is your first token is harvest but have you had any other harvest that have sold in the market before like even if not talking it's just bottles that are actually out oh yeah we this is uh so my first harvest was 2007. so we've been making wine for over 10 years before even doing this and right now we're basically in we're selling off the last of the non-tokenized bottles um at the same time i couldn't really i had to start somewhere sure just excuse if there was like let's say a history of reviews that users could base their yeah no there's there's a reputational history from making wine over these years i mean at the end of the day it's really nice to do tokenization blockchain extreme transparency iot sensors uh you know apps and scanning out the back but if the wine is no good it doesn't make any sense right so yeah that have to start there and one question regarding the operational aspects because i'm curious that this is definitely one of those cases of crypto touching the real world you mentioned that you since you're effectively selling people a bottle of wine you had to charge v80 on it right but this at least for me in the abstract would have seemed more like getting a future contracts on a certain number of bottles that may or may not be delivered and the v8 needs to be paid by the final recipient or well the idea here is that we don't want to do uh we're not crowdfunding so i'm not saying here's what i'm going to do here's my beautiful purple paper about wine give me money and i'm going to go make one and give it to you later no it's it's after we've already finished the fermentation it's in a recognized it's in the bank let's say right it's in a controlled area i can't just take it anywhere right either the cold storage or the fermentation after fermentation and tanks is a controlled area and there's enough documentation backing it up to say yes this is a real thing um so in that sense it's not a futures market you're not predicting what's going to happen next year now in the first years if you're buying it right at the token at the time when fermentation is finished yes you do have to wait three years and yes something could go wrong with it you know if there's an earthquake and all the bottles are smashed for one year the best i can do is offer you a bottle from the next year it's not what you bought but i could do that but yeah they're i'm not saying there's no risk to the consumer here but it isn't uh a typical ico that where you're giving me money that to something i'm going to do in the future um just was curious about the v80 aspect but thanks as far as vit was concerned that's uh you know we wanted to i want to do something that there's no question that there's so much right now in argentina there's argentina is a fairly open country towards uh in the crypto space uh regulators we've talked to them and they said hey we don't you know we're not following the rules of the sec we're making our own rules but we're not sure we're kind of open help us with this but we wanted to do since i'm doing open source company publishing all my data like how much i pay in salaries how much i pay in taxes it doesn't make any sense to not be straight up and say here's the the tokens we sold pay the tax on it you've got the token now that's a voucher you can cash it in later for a bottle of wine if you took it to a secondary market right to the exchange and sold it to someone else and they sold it to someone else and there's money being made in the middle that's out of my hands right that's you know that would be your capital gains if you want to declare it as such but i've paid the tax up front i've given you a token that's valid for one wine model so for now your wine is not famous but imagine that your wine is famous now what keeps me from keeping your bottle but changing the wine well as soon as you so to get the bottle you have to send the tokens to me right yes and once you send me the tokens i burn the tokens and i send you the bottle of wine right so now you can do whatever you like with it now if you say i'm going to manipulate that particular bottle and put some horrible wine in it i guess that's your point that could happen in any case there's nothing i can really do about that now if i have a the fact that i'm doing an extreme traceability where i'm incentivizing you to become a partner with me by opening the bottle answering the questionnaire receiving a token as part of a company right i know who you are and by the way it doesn't you can't give me a pseudonym if you actually want to have a legal share of the company so uh yeah you that could always be the case somebody can maliciously adulterate your wine just to to affect it but yes but i think the impact is uh is more important on your side rather than on my side yes but what's your incentive to do that i i don't know maybe i'm your competitor i want to do something bad for you maybe i mean there are horrible people out there what can i say but the fact is i'm doing such a small quantity i'm not anybody's competition so yeah that but that could happen in any case without any of the tokenization thank you so right now uh if you can you can go to costaflores.com and see more information about this right now we're on repeal on the exchange it's about five euro i think for a token it's gone from about three to five in a year the fact is we've had uh very little volume because of the exchange i started with they're taking it offline and put it back online to include brazil so it's paired with brazil and argentina as for the fiat and it'll be happening now with uh but so indripio.

com for this exchange or just go to costaflores.com and hashtag openvino so thank you very much oh i'm sorry i'm sorry there's one one last question yeah sorry um i just wanted to get clarity on the concept of you buy it you own it and you said that um you drink it you own it maybe sorry you drink it yeah you get given a token um as an incentive for feedback is that public feedback or is that just for the company so is it because you positioned it as opposed to experts giving their opinion on wine right my worry is that if you're being given a token um at which you said was equivalent to a share in the company you would just give positive feedback if it was public because you'd want the value of the company to increase in value maybe i mean so dan ariely the sociologist basically does an experiment where he walks into a crowd and he gives a talk and he's got 10 books that he's published and he goes look i have some books to give out i don't have one for everybody and he hands out books to people and he says i want you all to put a number in your head what you think the the book's valued at right and if you ask the people that receive the books they'll say you know it's 25 book if you the people that didn't get the book it's a ten dollar book so i'm not saying that there isn't uh that couldn't skew some of the data as far as what their response is but getting a free book is very different to having a share in a company where you want the company to increase in value you aren't in that example you're not giving people a book and a share of um the publishers rights for example so that is a bit different to the question that i'm asking no i understand what you're saying am i skewing it am i manipulating them by saying i'm going to give you a share and now it's in your interest to say good things about it that's true but just as our friend over here pointed out there's a lot of hateful people as well that have no problem giving you their bad opinion of the wine even if they are a shareholder so you know and in any case you're going to run up against that that uh barrier and when you're crowdsourcing opinion all i'm trying to do is is to be a bit more honest to say if i'm going to ask you to make an intellectual effort to sit down and think about it and answer some questions i want to give you something in return and i want to give you something that that makes you part of this and and stop being the the target as a consumer but also being a partner and participating in this and that's why i value your feedback but i don't disagree that it could have uh some skewing or effect on your your opinion all right well thank you very much [Applause] you