Verifiable Sealed-Bid Auction on the Ethereum Blockchain
The success of the Ethereum blockchain as a decentralized application platform with a distributed consensus protocol has made many organizations start to invest into running their business on top of it. Technically, the most impressive feature behind the
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Abstract. The success of the Ethereum blockchain as a decentralized application platform with a distributed consensus protocol has made many organizations start to invest into running their business on top of it. Technically, the most impressive feature behind the success of Ethereum is its support for a Turing complete language. On the other hand, the inherent transparency and, consequently, the lack of privacy poses a great challenge for many financial applications. In this paper, we tackle this challenge and present a smart contract for a verifiable sealed-bid auction on the Ethereum blockchain. In a nutshell, initially, the bidders submit homomorphic commitments to their sealed-bids on the contract. Subsequently, they reveal their commitments secretly to the auctioneer via a public key encryption scheme. Then, according to the auction rules, the auctioneer determines and claims the winner of the auction. Finally, we utilize interactive zero-knowledge proof protocols between the smart contract and the auctioneer to verify the correctness of such a claim. The underlying protocol of the proposed smart contract is partially privacypreserving. To be precise, no information about the losing bids is leaked to the bidders. We provide an analysis of the proposed protocol and the smart contract design, in addition to the estimated gas costs associated with the different transactions. Keywords: Ethereum
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· Smart contract · Sealed-bid auction
Introduction
Online auctions have played an important role in the world economy by transferring trillions of dollars in exchange for goods and services in the recent decades. An auction is a platform for sellers to advertise the sale of arbitrary assets where buyers place competitive bids as the highest prices they are willing to pay. Practically, auctions promote many economic advantages for the efficient trade of goods and services. Traditionally, there are four main types of auctions [7]: 1. First-price sealed-bid auctions (FPSBA). Bidders submit their bids in sealed envelopes and hand them to the auctioneer. Subsequently, the auctioneer opens the envelopes to determine the bidder with the highest bid. c International Financial Cryptography Association 2019 A. Zohar et al. (Eds.): FC 2018 Workshops, LNCS 10958, pp. 265–278, 2019. https://doi.org/10.1007/978-3-662-58820-8_18
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H. S. Galal and A. M. Youssef
2. Second-price sealed-bid auctions (Vickrey auctions). It is similar to FPSBA with the exception that the winner pays the second highest bid instead. 3. Open ascending-bid auctions (English auctions). Bidders increasingly submit higher bids and stop bidding when they are not willing to pay more than the current highest bid. 4. Open descending-bid auctions (Dutch auctions). Auctioneer initially sets a high price, which is gradually decreased until a bidder decides to pay at the current price. Arguably, the main advantage behind the sealed-bid auctions lies in the fact that no bidder learns any information about the other bids. Hence, the bidders are encouraged to bid accord
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