Privacy-Preserving Verifiable Double Auctions

Abstract

Double Auctions are mechanisms to trade commodities such as electricity or parts of the wireless spectrum at optimal prices. Bidders and sellers simultaneously submit quantity-price pairs to an auctioneer, denoting the quantity they want to buy or sell at specific prices. The auctioneer aggregates the offers into demand and supply curves to compute the auction result by finding the intersection between supply and demand. In this way, commodities exchange owners in an economically efficient manner, driven by the market. In an ideal scenario, the auctioneer is a trusted third party that does not abuse the information they gain. However, in reality, offers reveal usage patterns of customers, such as electricity usage, or may be used by the auctioneer for their economic gain as insider information. The auctioneer also has opportunities to manipulate results of which there are real-life allegations in electricity trading or advertisement auctions. These concerns call for solutions that conduct the auction in a privacy-preserving and verifiable way while not compromising the auction functionality or economic efficiency.

Proposed solutions for privacy-preserving and verifiable double auctions offer confidentiality but do not allow participants to verify results independently or vice versa without interaction of participants in the full auction procedure. We specifically focus on electricity trading to design a solution covering the above concerns. To the best of our knowledge, we propose the first privacy-preserving and verifiable double auction scheme without interactivity of all participants, tailored to electricity trading on (inter)national exchanges. Using cryptographic schemes, including Homomorphic encryption, Commitment schemes, and Zero-knowledge-proofs, we propose a solution to establish a double auction protocol that preserves privacy and allows for verification.