[WiV] MIP6c2 Application

Hello everyone,

This is our proposal to include WiV as a collateral asset

Application Form

1. Who is the interested party for this collateral application?

Anyone interested in investing into asset backed tokens, people with interest into alternative investments class, wine collectors and blockchain enthusiasts with an aim to contribute to merge the old broken way of trading and investing in wine into the new and more secure and transparent way of trading and investing in wine. All in all, people interested in making wine a secure investment class.

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

WiV Technology is a blockchain-based unique asset technology designed for wine producers and merchants. With offices in London, Oslo and Singapore, the WiV blockchain technology issues non-fungible tokens to create a secure global asset register and decentralised financial marketplace for fine wine and spirits. WiV facilitates provenance record-keeping, trading liquidity, geolocation and market assurance. For further information, go to www.wiv.io

WiV is launching a tokenised index fund product where each wine index fund has a Set of circulating fungible erc20 tokens on the blockchain for trade and investment on crypto exchanges. Each Set is a digital asset (ERC-20) that represents a fully collateralised portfolio of wine and fiat-pegged coins (DAI)

3. Provide a brief history of the project.

WiV Technology was formed in 2018 with a vision to fight fakes and make it easier and more secure to trade unique assets and turning it into a financial instrument. With that we created the best in class tokenisation platform for Unique Assets

In 2019, WiV Technology is awarded the ​“Seal of Excellence”​ from the EU’s Horizon 2020 programme for the WiV platform. EY (Ernst & Young) is a technology & audit partner for WiV.

As the first in the world WiV transacted a blockchain enabled wine futures in December last year and launched our marketplace at OpenSea in late February this year. WiV is currently the leading player for clearing wine trades

4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

Whitepaper

Documentation portals

Ethereum addresses:

5. Link any available audits of the project. Both procedural and smart contract focused audits.

Smartcontract written by EY. Based on OpenZeppelin contracts library for ERC-721. A straightforward and uncomplicated contract.

6. Link to any active communities relating to your project.

OpenSea MarketPlace

Twitter

Medium

7. How is the applying collateral type currently used?

Our collateral which is the WiV Token represents a 300 year old commodity that has been traded and used for collateral for hundreds of years. We have taken the assets and digitised them with our WiV Token which represents the value of the assets which is Wine. The value of each token is based on the asset, we use a real time valuation that is based on the LivEx median pricing.

8. Does one organisation bear legal responsibility for the collateral? What jurisdiction does that organisation reside in?

All wines that are tokenised with the WiV Token are under custodianship of Unique Asset Custody Limited which is a UK limited company under UK/Wales law. All wines are stored with a 3rd party secure storage facility which bear the legal responsibility of the collateral, it is also insured for theft, fire or breakage. Today most of the tokenised wine is stored in the UK, primarily Octovian and London City Bond.

9. Where does exchange for the asset occur?

It can either happen on WiV’s own platform or on the market place OpenSea.

10. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.

Legal Memo

Short summary: Wine as an asset that is stored in bond (see below) is an unregulated activity. Meaning that as long as the wine is stored in a secured 3rd party bonded warehouse that is approved by WiV there are no regulatory obstructions or grey zones. Most of our wine is stored in UK warehouses.

Bonded Wine:

Wines that are sold ‘bond’ have not had the duty and VAT – also known as sales tax – paid on them. This is a particularly common way to buy wine for investment, and is also used for wine that is purchased en primeur (futures).

11. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.

Our WiV tokens are 100% backed by a physical asset (wine) that are exempt from regulations in most jurisdictions that follow the WTO treaty this has been the case for hundreds of years. As long as they stay in a bonded warehouse they will be treated as investment wine, as soon as you pay duty and take them “out” they will be classified as alcoholic beverages in many jurisdictions and will also be treated that way thereafter.

12. (Optional) List any possible oracle data sources for the proposed Collateral type.

Trader, warehouse, chateaus/wineries.

13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.

There will be two options depending on the volume.

Low to mid volume: The liquidation will be through Wine Owners marketplace and Livex exchange.

Mid to high volume: The liquidation will be in addition to the above directed towards preferred wine merchants.

4 Likes

Hi @WiV_Ceo and welcome to the community!

Tokenized investment grade wine as stablecoin collateral, I am most intrigued.
As usual, I have some questions:

Who owns WiV?
What entity owns/controls OpenSea?
OpenSea primarily seems directed towards selling wine in bottles priced in Dai, but how will the assets be traded?
Will the assets be traded as ERC721 (unique bottles) or as parts of ERC20 indexes?
How is the wine insured while in the bonded warehouse (theft, fire, accidents)?
An ERC721 bottle is accidentally opened - what is the process of invalidating this asset?
What is WiV’s position on KYC/AML? And in which jurisdictions?
Could you detail the transition ERC721 (tokenised unique bottle) -> ERC20 (portfolio of bottles) -> ERC20 (wine index fund)?
What will WiV actually be? Parts of the index fund?
I feel there are some details missing regarding liquidation of Maker Vaults containing WiV: neither OpenSeas, Wine Owners marketplace or Livex exchange are crypto exchanges. So there is a missing piece of the puzzle here with regards to how underwater Maker Vaults will be liquidated. There are some options for this, but please explain how you think it should work.

Please correct me if I have misunderstood anything.

2 Likes

Thanks @Planet_X great questions! Please see our answers below

Who owns WiV?
WiV Technology is privately owned by its founders and small group of angel investors. The company is incorporated in Norway under ‘Winevault AS’ as the legal entity.

What entity owns/controls OpenSea?
OpenSea is a US company owned privately by its founders and venture capital and WiV have no interests.

OpenSea primarily seems directed towards selling wine in bottles priced in Dai, but how will the assets be traded?
They are actually cases of wine, OWC (Original Wooden Case), they are treated as digital collectibles and can be traded on OpenSea’s marketplace.

Will the assets be traded as ERC721 (unique bottles) or as parts of ERC20 indexes?
The ERC721 tokens (wine cases) in the ERC20 index will not be traded. We use the ERC721 tokens as a way to control and verify the ownership and history of the wine.

How is the wine insured while in the bonded warehouse (theft, fire, accidents)?
It is insured via the bonded warehouse who have insurance that covers theft, fire and accidents.

An ERC721 bottle is accidentally opened - what is the process of invalidating this asset?
When a case is opened by accident or damaged that is normally done by staff at the warehouse and we are covered under the insurance. They notify us and we then invalidate/dissolves the token. We will then replace it with a similar value wine.

What is WiV’s position on KYC/AML? And in which jurisdictions?
We have KYC/AML processes in our solution, we cover most of the global countries except US and some Asian countries like China.

Could you detail the transition ERC721 (tokenised unique bottle) -> ERC20 (portfolio of bottles) -> ERC20 (wine index fund)?
The collateral or the stored value will be investment grade wine stored in secured bonded warehouse. These cases of wine will be tokenised using the ERC721 standard as each cases of wine are a unique physical item – a non-fungible asset. The funds’ assets are then backed by ERC20 Fungible tokens representing the transferable ownership of the fund portfolio. The ownership can be fully owned by one owner or split across multiple owners and the ownership can be transferred fully or partially to other owners. The ERC20 Fungible Token have a predefined token supply. The owners of the tokens will have their pro-rata rights of the profits and dividends paid in DAI. The index will have no expiration date, however we will re-balance the stock when we see peaks in prices or its mature enough to be drinkable. This is investment graded wine with a high demand in the secondary market and we operate this as fund managers. There will also be opportunities for our wine investors to invest into exclusive wine instrument that we will offer. Wine as an investment is a very solid and less volatile investment done right.

What will WiV actually be? Parts of the index fund?
WiV will structure and operate the wine fund as asset managers and have the legal responsibility.

I feel there are some details missing regarding liquedation of Maker Vaults containing WiV: neither OpenSeas, Wine Owners marketplace or Livex exchange are crypto exchanges. So there is a missing piece of the puzzle here with regards to how underwater Maker Vaults will be liquidated. There are some options for this, but please explain how you think it should work.

In terms of the liquidation process of Maker Vaults containing WiV´s collateral the underlying assets which are physical bonded investment grade wine in owc there will be no sudden crash or a sudden low liquidation ratio. Since 1988, fine wine investments have outperformed all other major investment classes. Wine increased in value by 1474%, more than twice the appreciation rate of the Dow Jones Index (+783%) and the S&P 500 (+744%). We will have the Dai to Wine ratio predefined by Maker and the physical wine audited and verified

I’m not sure I quite follow your answer here. My model is the following, could you please take a look and correct me if I’ve made a mistake somewhere?

There is an ERC721 token for each OWC of wine. These are owned by an investment fund, the ownership of which is represented by an ERC20 token, WiV. Owners of this token receive dividends in DAI, and presumably the value of the investment fund ERC20 (WiV) can increase (or decrease). The investment fund is managed by your company.

What benefit do you gain from Maker with this setup? Where does the Vault usage come in? Is this just for secondary owners of the token to use it to get credit?

Sure, in theory. The liquidation system is there in case things go wrong. It doesn’t make rational sense for any user of the ETH-A vault to allow themselves to be liquidated. It still happens though.

Our benefit from Maker is that we can be part of a bigger community that all have the same interest in growing wine assets and introducing new investors to the Maker community.

Enthusiasts have been seeking out the best wines since the invention of wine itself. In that respect, wine investment has existed for decades – centuries, even – and what began with keen oenophiles filling their cellars with good Bordeaux and Burgundy has since blossomed into a lucrative global market which offers strong returns, minimal volatility and, for those who appreciate a good bottle, considerable enjoyment.
The fine wine market – worth some $5bn-$6bn per year globally – consistently outperforms other financial instruments, making it an attractive option for a wide range of investors. Indeed, it is no longer the sole preserve of luxury investors or high net worth individuals and increasing numbers of people from all backgrounds are considering wine investment as a fruitful alternative to the usual commodities.
Even though investment wine has a long history of being both and assets and collateral for thousands of year it has been more or less excludede from the normal financial system. With WiV Technology’s system and combined with Maker we have finally opened up the doors for wine to use the same facilities like credit with wine as a tradeable financial instrument.

If you compare wine to ETH in terms of volatility it is two different worlds. Firstly, wine is a physical asset stored in a secure vault and is insured. Secondly, the volatility of wine is more of 1% down worst case in one quarter, however the top 100 wine producers we offering have a pretty stable growth of value from en-primeur until bottled and matured. This is assets that grow steadily and some of the vintages quite significantly year on year. Have in mind that we want to lower the barriers to entry for people to diversify their portfolios and make it possible to invest with lover amounts than what the so called establishment now offer to wine investors. Wine as an financial instrument represent a very good hedge towards investments in more volatile assets. At the same time, as mentioned earlier, we aim to merge the traditional wine investors with the new world of DEFI and vice versa.