Paper 2024/189

ZeroAuction: Zero-Deposit Sealed-bid Auction via Delayed Execution

Abstract

Auctions, a long-standing method of trading goods and services, are a promising use case for decentralized finance. However, due to the inherent transparency property of blockchains, current sealed-bid auction implementations on smart contracts requires a bidder to send at least two transactions to the underlying blockchain: a bidder must first commit their bid in the first transaction during the bidding period and reveal their bid in the second transaction once the revealing period starts. In addition, the smart contract often requires a deposit to incentivize bidders to reveal their bids, rendering unnecessary financial burdens and risks to bidders. We address these drawbacks by enforcing delayed execution in the blockchain execution layer to all transactions. In short, the blockchain only accepts encrypted transactions, and when the blockchain has finalized an encrypted transaction, the consensus group decrypts and executes it. This architecture enables ZeroAuction, a sealed-bid auction smart contract with zero deposit requirement. ZeroAuction relies on the blockchain enhanced with delayed execution to hide and bind the bids within the encrypted transactions and, after a delay period, reveals them automatically by decrypting and executing the transactions. Because a bidder only needs to interact with the blockchain once instead of two times to participate in the auction, ZeroAuction significantly reduces the latency overhead along with eliminating the deposit requirement.