FHE Vickrey Auction
We implements a Vickrey auction, a type of sealed-bid second-price auction, using fully homomorphic encryption (FHE) with Zama's Fhevm library. FHE allows data to be computed while encrypted, providing privacy for bidders while maintaining accurate auction results.
Project Description
The Vickrey auction is a sealed-bid second-price auction where bidders submit their bids in a hidden format. In this project, we implemented the Vickrey auction on a smart contract using FHE, with the help of Zama's Fhevm library. This allowed bidders to submit encrypted bids, keeping them secret, while the auction's result was calculated in an encrypted format, ensuring both accuracy and privacy.
FHE is an encryption technology that allows data to be computed while still encrypted, which is ideal for privacy-sensitive applications like auctions. By using FHE, we were able to ensure bidders' privacy while maintaining the blockchain's transparency.
Implementing a Vickrey auction on a blockchain with smart contracts was challenging because traditional blockchain technologies struggle with performing computations on encrypted data. Since smart contracts require transparency and public access to all transactions, it was difficult to keep bid amounts hidden from other participants. By leveraging FHE, we could overcome this limitation and create a secure and private auction system on the blockchain.
Vickrey Auctions make it easier to place honest bids is the structure of the second-price auction. Bidders do not have to engage in strategic bidding behavior because they bid the highest price and then pay the second highest bid. As a result, bidders can place honest bids. This feature also ensures that the overall auction results feel fair and credible.
The Vickrey auction is an auction format proposed by William Vickrey, winner of the Nobel Prize in Economics. His work has contributed significantly to the advancement of auction theory and economics, and Vickrey auctions are highly regarded by economists and the business community because they are an important concept in economic theory and provide a fair and transparent auction system.
How it's Made
Our project was built using Solidity with Zama's Fhevm library, which supports fully homomorphic encryption in smart contracts. The use of Fhevm allowed us to perform calculations on encrypted data, enabling the Vickrey auction to run on the blockchain without revealing the bid amounts to others.
The smart contract was deployed on Zama's devnet. Using FHE allowed us to maintain privacy during the auction while ensuring transparency in the blockchain, combining the benefits of security, privacy, and fairness in one system.
fhevmjs was used to encrypt bid amounts and other data on the front end before interacting with the smart contract.
