Abstract

In a traditional sealed-bid auction, each offer is delivered in a sealed envelope, and no one knows how much the others have bid. On a public blockchain, a shared digital ledger that anyone can read, the opposite happens: bids and participants' identities are exposed in real time. This discourages large investors and enables abuses such as copying and preempting someone else's offer (frontrunning), or price collusion among competitors. Usual mitigations, such as the commit-reveal scheme, soften the problem but still reveal the losing bids at the end. This work investigates whether it is possible to run, on a public blockchain, a Vickrey auction, a sealed-bid format in which the highest bidder wins but pays the second-highest bid, without revealing any bid beyond the closing price, preserving the truthfulness property (under the second-price rule, each participant's optimal strategy is to bid their true value), and at what operational cost. To this end, the mechanism is implemented on Fhenix CoFHE, a Fully Homomorphic Encryption (FHE) infrastructure, a cryptographic technique that allows computing directly over encrypted data without decrypting it. The work delivers a smart contract that determines the winner and the second price without opening any bid, a formal analysis of what an adversary can and cannot learn, and an end-to-end validation on a public test network, with a graphical interface that encrypts bids in the user's own browser. The results show that the mechanism is viable: the per-operation cost does not grow with the number of participants, and the only information revealed is what the Vickrey rule itself requires, the second-highest bid and the winner's identity. The underlying cryptographic basis is, moreover, resistant to known quantum attacks.

Keywords: Vickrey auction; Fully Homomorphic Encryption; Public blockchain; Privacy; Fhenix CoFHE.