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Why is cork traditionally used to stop wine bottles?

Cork is used to stop wine bottles because its structure renders it light, elastic, and impermeable to most liquids and gases, thereby keeping the quality of the wine. Corks are produced using the bark of cork trees (a type of oak, Quercus suber ) grown in the western Mediterranean, especially in Portugal . It is unique in that it can be peeled from the tree without hurting the tree.

Cork was known and used already back in Greece and Rome more than 2000 years ago. In medieval times wood was more generally used as stoppers for sacks and pottery urns. When glass bottles became common in the 17th century, wood did not work any more as a stopper. Cork was rediscovered and used ever since.

"Real" cork can sometimes develop a mould, and lead to 'corking' of the wine. This makes the wine completely undrinkable. To combat this, a number of wineries are turning to synthetic corks that have the wonderful sealing properties of real cork, but do not harbour moulds.

Source : http://www.wineintro.com/history/glassware/cork.html