Anonymous sealed bid auction protocol based on a variant of the dining cryptographers' protocol

Sealed bid auctions are a popular means of high-stakes bidding, as they eliminate the temporal element from the auction process, allowing participants to take less emotional, more thoughtful decisions. In this paper, we propose a digital communication protocol for conducting sealed bid auctions with high stakes, where the anonymity of bids as well as other aspects of fairness must be protected. The Dining Cryptographers’ Protocol (denoted by DC) was presented by David Chaum in 1988. The protocol allows the participants to broadcast a message anonymously. In a recent paper (Another Twist in the Dining Cryptographers’ Protocol, submitted to Journal of Cryptology) the authors propose a variant of the original DC eliminating its main disadvantages. In this paper we present a cryptographic protocol realizing anonymous sealed bid auctions, such as first price or Vickrey auction, based on this variant. The proposed scheme allows to identify at least one dishonest participants violating the protocol without the using of Trusted Third Parties. Additionally, we require that bids are binding. It is achieved by enabling all participants acting in concert (the so-called “angry mob”) to find out the identity of the winner, in case the winner fails to make the purchase. ∗This research was partially supported by the Momentum (Lendület) fund of the Hungarian Academy of Sciences and the European Union and the European Social Fund have provided financial support to the project under the grant agreement no. TÁMOP 4.2.1/B09/1/KMR-2010-0003.