Sealed-bid Auctions on Blockchain with Timed Commitment Outsourcing

Abstract

Sealed-bid auctions play a crucial role in blockchain ecosystems. Previous works introduced viable blockchain sealed-bid auction protocols, leveraging timed commitments for bid encryption. However, a crucial challenge remains unresolved in these works: Who should bear the cost of decrypting these timed commitments? This work introduces a timed commitment outsourcing market as a solution to this challenge. We first introduce an aggregation scheme for timed commitments, which combines all bidders' timed commitments into one while ensuring security and correctness and allowing a varying number of bidders. Next, we remodel the utility of auctioneers and timed commitment solvers, developing a new timed commitment competition mechanism and combining it with the sealed-bid auction to form a two-sided market. The protocol includes bid commitment collection, timed commitment solving, and payment. Through game-theoretical analysis, we prove that our protocol satisfies Dominant Strategy Incentive Compatibility (DSIC) for bidders and Bayesian Incentive Compatibility (BIC) for solvers, and achieves optimal revenue for the auctioneer among a large class of mechanisms. Finally, in the forced-opening-only model in which bidders cannot self-open, we prove that no mechanism can achieve positive expected revenue for the auctioneer while satisfying DSIC and Individual Rationality (IR) for both bidders and solvers, together with ex-post IR for the auctioneer.

arXiv comment32 pages, 3 figures