Available Technology
Zero knowledge proofs in large stock trades
Technology:
Practical software protocol for conducting sealed-bid auctions
Markets Addressed
Auctions and electronic marketplaces have been used to facilitate trillions of dollars in trade in the world economy. However, fraud is a big issue that can plague electronic auctions. Different fraud possibilities include an auctioneer deviating from the rules of an auction, an auctioneer “leaking” useful information about bids received during the bidding process, refusal of the auctioneer to accept bids into the auction and refusal by bidders to reveal bids after the bid submission deadline. Most past solutions on the use of cryptography for conducting secure auctions use multiple auctioneers or require shared computation among bidders. Thus the current state-of-the art for secure auctions is still not very scalable, nor is it practical in a business setting. Harvard’s secure online auction technology can be valuable and cost-effective for conducting secure sealed-bid auctions in any commercial setting. In addition to secure online auctions, the technology can be useful for foreign securities exchanges, auctions of financial instruments, sealed-bid quotations for large contracts, in procurement departments, in construction, government, or defense contract bid processes.
Innovations and Advantages
The invention is a practical software protocol for conducting sealed-bid auctions. The auctioneer must accept all bids submitted and follow the published rules of the auction. The bids are maintained secret from the auctioneer and all bidders until the auction closes and no bidder is able to change or repudiate her bid. After the auction, the auctioneer opens the bids but can still announce an outcome and prove it correct without revealing any bid. In addition to a seller, multiple bidders, and an auctioneer, our model uses witnesses to ensure the security of the auction. The witnesses protect both the bidder and the auctioneer against fraud and manipulation. Harvard’s novel technology guarantees bidders that the auction is fair. Our system reduces fraud and encourages honest bidding and competitive behavior among bidders. Insiders are unable to tip off outsiders about values and bidders receive proof that their bid was/was not the lowest. Our technology is scalable, accommodating tens of thousands of bidders in at most a day of computation on a 64-node network. By involving a single auctioneer, our model is also more realistic from a business perspective.
Additional Information
Intellectual Property Status: Patent(s) pending
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Inventor(s):
Parkes, David C.
Rabin, Michael O.
Thorpe, Christopher A.
Categories:
For further information, please contact:
Alan Gordon, Director of Business Development
(617) 384-5000
Reference Harvard Case #3066