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Cream: a Smart Contract Enabled Collusion-Resistant E-Auction This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI 10.1109/TIFS.2018.2883275, IEEE Transactions on Information Forensics and Security 1 CReam: A Smart Contract Enabled Collusion-Resistant e-Auction Shuangke Wu, Yanjiao Chen, Member, IEEE, Qian Wang, Senior Member, IEEE, Minghui Li, Cong Wang, Senior Member, IEEE, and Xiangyang Luo Abstract—Auction is an effective way to allocate goods or I. INTRODUCTION services to bidders who value them the most. The rapid growth of e-auctions facilitates online transactions but poses new and Thanks to the dramatic development of Internet and rising distinctive challenges. It is difficult to establish trusts among popularity of electronic commerce, the scope and reach of sellers, buyers and auctioneers without the centralized auction websites or platforms (the auctioneer) that collect bids and electronic auctions (e-auction) have far exceeded what the derive the auction results. However, these third parties may initial purveyors had anticipated. E-auctions break down and be untrustworthy, and malicious sellers or buyers may refuse remove physical limitations of traditional auctions such as to deliver the goods or payment according to the protocol. geography, presence, time, space, and a small target audience Moreover, the open and anonymous online environment may [1]. It is projected that the rapid expansion of online e-auctions stimulate auction participants to form collusion coalitions to rig the auction and reap unfair profit. Many auction designs have will account for 30% of all e-commerce [2], ranging from been proposed to address these concerns, but they fall short of individuals conducting online “garage sales” to companies simultaneously achieving decentralization (i.e., held without a liquidating unwanted inventory. trusted third utility), strong consensus (i.e., the establishment of One of the major challenges faced by e-auction is a lack trust), collusion-resistance and practical implementation. of trust among sellers, buyers and auctioneers. The openness We present CReam, the first decentralized collusion-resistant and anonymity of the online environment may give rise to e-auction system that is implemented with smart contract on the transactional misbehavior, e.g., sellers may fail to deliver the blockchain. With the carefully-designed smart auction contract, mutually distrustful and rational sellers and buyers are stimu- goods after the auction, or buyers may abort during auction or lated to operate properly hence transact safely without trusted refuse to pay the required price. The online auction websites third parties. The auction mechanism in the smart contract can and platforms that serve as auctioneers may not be trustful. The effectively prevent bidder collusion and realize economic robust- establishment of trust among auction participants and a safe ness, i.e., truthfulness. We implement a fully functional CReam transact environment have been recognized as the key stimuli on the Ethereum network. Extensive experimental results confirm that CReam can greatly reduce the probability of collusion and for online transactions and a major concern in e-auctions [3], achieve an approximate optimal revenue at a low cost of contract [4]. Existing works on building trust are mainly based on execution. economic incentives and reputation analysis [4], [5], most of which require trusted third parties to handle the transaction Index Terms—Blockchain, smart contract, auction theory. process. Similar to traditional auctions, e-auctions are also vulnerable to collusions. In an e-auction, buyers bid to compete for the goods or services provided by sellers. Selfish and rational Yanjiao’s research is supported in part by the National Natural Science buyers and sellers have incentives to collude with each other to Foundation of China under Grant 61702380, in part by the Hubei Provincial Natural Science Foundation of China under Grant 2017CFB134, and in part rig the auction for unfair profits [6], [7]. The auctioneer may by the Hubei Provincial Technological Innovation Special Funding Major also collude with buyers or sellers for economic return. By Projects under Grant 2017AAA125. Qian’s research is supported in part by allowing geographically-distant participation, e-auctions make the National Natural Science Foundation of China under Grants 61822207 and U1636219, in part by Equipment Pre-Research Joint Fund of Ministry it easier for anonymous online auction participants to form of Education of China (Youth Talent), and in part by the Outstanding Youth collusion coalitions without being detected [8]. Case studies Foundation of Hubei Province under Grant 2017CFA047. Cong’s research is have confirmed the universal existence of collusions in real- supported by the Research Grants Council of Hong Kong under Grants CityU 11276816, CityU 11212717, CityU C1008-16G and the National Natural world auctions (e.g., Treasury auctions [9] and FCC spectrum Science Foundation of China under Grant 61572412. Xiangyang’s research auctions [10]). The internet crime complaint center (IC3) is supported by the Plan for Scientific Innovation Talent of Henan Province reports showed that the auction related frauds (e.g. auction under Grant 2018JR0018. (Corresponding author: Xiangyang Luo.) fraud and no-delivery fraud) are among the top popular frauds S. Wu, Y. Chen, and Q. Wang are with the School of Computer in the U.S. [11], [12]. The IC3 report of 2015 shows that Science, Wuhan University, China, (E-mail: fwsk9551, chenyanjiao, qian- there are 116,296 online auction-related complaints submitted, [email protected]). M. Li is with the School of Cyber Science and Engineering, Wuhan which led to a loss of $18,906,416. Apart from collusion- University, China, (E-mail: [email protected]). resistance, an ideal auction mechanism should also achieve C. Wang is with the Computer Science Department, City University of economic-robustness, i.e., truthfulness [13]. Truthfulness is Hong Kong, Hong Kong (E-mail: [email protected]). X. Luo is with the State Key Laboratory of Mathematical Engineering and essential for an auction scheme to resist market manipulation Advanced Computing, Zhengzhou, China (E-mail: [email protected]). and ensure auction fairness as well as efficiency. In untruthful 1556-6013 (c) 2018 IEEE. Personal use is permitted, but republication/redistribution requires IEEE permission. See http://www.ieee.org/publications_standards/publications/rights/index.html for more information. This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI 10.1109/TIFS.2018.2883275, IEEE Transactions on Information Forensics and Security 2 auctions, there are chances for selfish bidders to gain an edge Smart Contract at the expense of other participants by manipulating their bids Response 1 to game the system. In truthful auctions, the dominant strategy External Input Response 2 for bidders is to bid truthfully, this it insures that each bidder (transaction, Predefined Predefined event,data, Trigger Response Response 3 will be motivated to put in a bid at the full value of the item to etc.) Conditions Actions himself, thereby eliminating the fear of market manipulation (time,event (action, and the overhead of strategizing over others. Moreover, with etc.) event,etc.) . the true valuations, the auctioneer can allocate items efficiently Response N to buyers who value it the most, hence assuring an optimum allocation of resources. State Value We propose CReam, the first decentralized collusion- resistant e-auction system that is implemented with smart Fig. 1: The structure of a typical smart contract on Ethereum. contract on the blockchain. We aim to create a distributed, trustworthy, transparent and secure transact environment for auction participants to reach consensus over the auction re- Many famous international companies use e-auctions in their sults. We replace the centralized auctioneer (online auction deals such as British Airways, FedEx, Exxon Mobil, and platforms) with smart contract based on the blockchain. The Nestle. Despite the rising popularity of e-auctions, there are blockchain keeps a public, decentralized, and verifiable ledger several challenges, among which we are especially interested and the contract specifies the transaction agreements, which in untrustworthy centralized auctioneers and collusions among will be automatically and faithfully executed. We leverage bidders. the discrete timer on the blockchain and the deposit-and- Internet auctioneers, e.g., online auction websites, serve as refund mechanism to prevent contractual breaches and aborts the intermediary that provides a transaction platform for buyers from malicious participants. We carefully design the auction and sellers. Their major role is to ensure that the transactions algorithm to be executed by the smart contract, combining can be conducted in a safe and secure manner. The centralized the techniques of random rounding and profit estimation to platform which addresses the trust problem between buyers achieve both collusion resistance and feasibility. and sellers, however, faces scalability issues and the internet We implement a fully functional prototype of CReam on auctioneer itself may be untrustworthy. the Ethereum network. Since the contract execution consumes The vast profits of
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