Dynamic Collateral Management in Decentralized Sealed-Bid Auctions

The evolution of decentralized platforms has introduced significant advancements in auction systems; however, these advancements bring forth complex challenges in collateral management within sealed-bid auctions. Traditional approaches, reliant on static collateral, often fail to account for dynamic market conditions and participant behavior, thereby limiting participation from individuals with restricted capital and reducing overall auction efficiency. This research identifies a critical gap in dynamic collateral management for decentralized sealed bid auctions and proposes a novel framework to address these challenges. The proposed method integrates dynamic collateral management within the Riggs-TC (Timed Commitment) protocol, enhancing its existing capabilities to handle collateral more flexibly. By leveraging cryptographic advancements, specifically Pedersen Commitments and Zero-Knowledge Proofs, the framework ensures that collateral adjustments are made in real-time, reflecting each auction phase and participant actions effectively. This method not only secures bid confidentiality but also upholds the integrity and fairness of the auction process. Empirical results from deploying this framework demonstrate a significant reduction in entry barriers for participants, an increase in capital efficiency, and heightened security and fairness across the auction lifecycle. Additionally, the framework's adaptability to various decentralized environments suggests its broad applicative potential beyond the initial case studies.