Proceedings of IEEE International Conference on Applied System Innovation 2018

IEEE ICASI 2018- Meen, Prior & Lam (Eds)

Blockchain based Smart Contract for Bidding System

Yi-Hui Chen
Department of M-Commerce and Multimedia Applications,
Asia University,
No. 500, Lioufeng Rd., Wufeng Dist., Taichung City 41354, Taiwan
Email: [email protected]

Shih-Hsin Chen*
Department of Information Management,
Cheng Shiu University,
No.840, Chengcing Rd., Niaosong Dist., Kaohsiung City 83347, Taiwan
Email: [email protected]
(Correspondence author: Shih-Hsin Chen)

Iuon-Chang Lin
Department of Management Information Systems,
National Chung Hsing University,
145 Xingda Rd., South Dist., Taichung City 402, Taiwan
Email: [email protected]

Abstract intermediary to provide a platform to help bidders and

auctioneers posting products, checking the highest bidding
Because of the popularity of the Internet, the integration price and committing the winner, such as eBay and yahoo
services have gradually changed people daily life, such as bidding system. However, E-auction has two main problems.
e-commerce activities on transactions, transportation and so on. First, a centralized intermediary is required in bidding system
The E-auction, one of the popular e-commerce activities, to help communication between bidders and auctioneers. The
allows bidders to directly bid the products over the Internet. As charge fees for the centralized intermediary to increase the
for sealed bid, the extra transaction cost is required for the transaction cost. Besides, the personal data and transaction
intermediaries because the third-party is the important role records are stored in database might cause privacy leakage.
between the buyers and the sellers help to trade both during the Secondly, in a sealed envelope [8], bidders have no way to
auction. In addition, it never guarantees whether the third-party ensure that lead bidder never leaks their bidding price.
is trust. To resolve the problems, the blockchain technology
with low transaction cost is used to develop the smart contract
of public bid and sealed bid. The smart contract, proposed in
1990 and implements via Ethereum platform, can ensure the
bill secure, private, non-reputability and inalterability owing to
all the transactions are recorded in the same but decentralized
ledgers. The smart contract is composed of the address of
Auctioneer, the start auction time, deadline, the address of Fig. 1: The role of the E-auction
current winner, the current highest price. In the experiments,
the accounts are created through Ethereum wallet. In miner This paper applies the blockchain technique into the
stage, the MinerGate is used in miner stage for obtaining money E-auction to resolve the two problems. The blockchain [5, 6, 14]
to pay the transaction fee. At recorder stage, the nodes of is peer-to-peer access structure such that points in the structure
blockchain are synchronized to generate smart contract. can trust each other points. Each location can securely
communicate, authenticate and transfer data to any of the other
Keywords: E-auction, Public Bid, Sealed Bid, Blockchain, sites. Consequently, in the decentralized structure, the
Smart Contract centralized intermediary can be removed to reduce the
transaction cost [7, 15]. As for the second problem, the smart
Introduction contract is used to avoid the bid price leaked by the lead bidder.
Some rules are written inside the smart deal which can not be
In recent years, E-auction [1, 3, 9, 10, 11, 13] is the popular opened before the deadline.
issue since its convenience and efficiency. E-auction integrates This paper is organized as follows. Section 2 reviews the
the network technique into the bidding system in order to traditional bidding system and the blockchain. Section 3 shows
reduce the cost of transactions. The main roles during how do we integrate the blockchain technique into the bidding
E-auction include bidders, auctioneers, and the third-party as system. In order to validate the proposed method, we conduct
shown in Fig. 1. Most of the third party is the centralized the experiments in Section 4 and we draw our conclusions in

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IEEE ICASI 2018- Meen, Prior & Lam (Eds)

Section 5.

Related Works
A. Traditional Bidding System
Nowadays, E-auction can be classified into two types,
namely public bid and sealed bid [2]. Public bid is that bidders
could raise the price to bid the products. Thus, the bidding price
gets increasing continuously until no bidders are willing to pay
a higher price. The bidder is as a winner if he bids the highest
price for such the product. During public bid, bidders can bid
several times; thus, public bid is also called multi-bidding
auction. Sealed bid is that bidders encrypts the bill and only
send the bill once. If the time is due, the auctioneer compares
all of the bills. The bidder who bids for the highest price is the Fig. 3: The field names of each block
winner of the sealed bid. Due to bidders only can bid once, it is
also called single-bidding auction. In the seal bid, all bidders’ In the blockchain, there might be different transactions in
prices are sealed until the bid opening deadline is compared to a block. When a new transaction is just triggered, each node
the prices of all bidders. There is a common shortcoming in collects unverified transactions to the block to produce a POW
electronic seal ticket auctions. Before the deadline for opening (Proof of Work). That is, the node can calculate the Nonce to
bids, the bidder cannot ensure that the bid price has been leaked verify the transaction as soon as possible to get some rewards.
by a third party (the principal bidder), resulting in malicious If the node completes the proof of work, it broadcast the block
bidders may collaborate with the bid winner to obtain the best to other nodes to verify whether the transaction is valid. If valid,
bid price. the block is attached to the blockchain.

B. Blockchain Research Method

The blockchain [5, 6, 14] is a technology that accesses,
verifies, and transmits network data through distributed nodes. The flowchart of E-auction is shown in Fig. 4, the seller post the
It uses a peer-to-peer network to achieve a decentralized data bidding information including product description and starting
operation and preservation platform. The blockchain is mainly price at the first stage. Bidders vote the sealed envelope to bid
based on the following technologies as the operating base: the product with a higher price. After receiving the sealed
(1) Identity identification and security: Identification and envelope, the auctioneer announces the highest rate right now.
anti-counterfeiting are performed using a public key The bidder is as the winner bidder until no one bid the product
infrastructure. Each account in the blockchain has a public with the higher price or the deadline is due. The auctioneer can
key and a private key used to send and receive the get the money from winner and send the product to the bidder.
transactions. After the private key encrypts the transaction We develop an open bidding system through blockchain with
message, the receiver then uses the sender’s public key to smart contracts. Bidders write the trade contract for the bids
decrypt the message, and the identity of the sender can be into the blockchain. With decentralized access structure, all
confirmed. bidders can bid the product by calling the open contract’s
(2) Message delivery and broadcasting: Message delivery and trading contract without intermediate brokers.
broadcasting are performed using a peer-to-peer technique,
allowing each node to connect and exchange messages
with each other. The transactions are stored in the same
ledger. Each node in the blockchain can verify the
transactions using the zero knowledge over the
decentralized access structure.
(3) Data preservation and linking: The transaction data stored Fig. 4: The flowchart of E-auction
in a block to generate a hash value and the block is linked
to the previous block with the hash values to construct a A complete public E-auction system must satisfy the following
blockchain as shown in Fig. 2. The fields in the block, as requirements:
shown in Fig. 3, to detail the records of the block such as (1) The identity of the person who is a bidder or winner
time-stamp, transaction quantity, hash value, etc. (successful bidder) is anonymous to everyone.
(2) During a transaction, the content of seal order cannot be
modified, and all the people can verify whether its
correctness and completeness.
(3) No illegal bidder can impersonate the legal one to bid the
product. After bidding, no one can deny the bidding if
they have ever bidded.
(4) The successful bidder always has the proof to get the
product.
(5) The seller can get the money from the successful bidder
Fig. 2: The relationship between the block and chain
but not for the other bidder.

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 Proceedings of IEEE International Conference on Applied System Innovation 2018
IEEE ICASI 2018- Meen, Prior & Lam (Eds)

(6) The sealed envelope must be delivered before the In the experiments, we create two blockchain accounts using
deadline; otherwise, the envelope is invalid. Ethereum Wallet for testing and bidding transactions. In the
(7) Before the deadline, the sealed envelope is private, and miner, we adopt command-line and MinerGate to execute the
no one can open it. data miner to get the coin for paying the transaction fee as
(8) A fair solution is required if the same price is voted by shown. We can use the command-line to check the transaction
two different bidders. status for the details of blocks in blockchain as shown in Fig. 6.
In smart contract creation, three stages, namely writing,
The smart contract [4, 12] is a set of codes and digits compiling, and announcing by using Solidity programming.
implemented via Ethereum platform. In an intelligent The bytecode is generated by Solidity realtime compiler. The
agreement, the contract is started if the time or event is Solidity runtime is used to generate the Interface as shwon in
triggered, such as sending a message, dealing with transactions, Fig. 5. Finally, we can use Ethereum Wallet to announce the
terminating the contract. The smart contract is described by smart contract to the blockchain as shown in Fig. 7. During the
Solidity, Serpent, LLL, and EtherScript. The Solidity is the way testing phase, the smart contract is verified to get the address of
we used in this article. The bytecode of smart contract retrieved the contract. The second account can add the new bidding to the
with JSON format is used for broadcasting all the nodes of contract by using Solidity and Interface.
blockchain and wait for verifying. If true, the smart contract is
announced with individual contract address and JSON
Interface to allow the other person to join in. Over Ethereum
Wallet, we use Watch Contract to invite other people to join.
Before the deadline, all the legal bidders can send the sealed
envelope to renew the price. All the sealed envelopes are
opened when the time is due. The highest price on the sealed
envelope is the final winner.
In the initialization data, we will announce the following
information in advance.
(1) Auctioner: The tenderer address used to record the
originating contract.
(2) AuctionStart: Used to announce the start time of the bid. Fig. 5: The smart contract and its corresponding bytecode and
(3) biddingTime: Used to announce the effective time of the interface
contract.
(4) highestBidder: The address of the bidder who currently
bids the product with the highest price.
(5) highestBid: Used to record the current highest price.

As for the contract, we define the following function:

(1) blindAuction(): Activate the contract by calling this
function, and use the auctionStart and biddingEnd to
record the start and end time.
(2) Bid(): This function can be called by any person to
perform the bidding action. Before the function is executed,
AuctionStart and biddingTime are used to judge whether Fig. 6: The details of smart contract
the contract is expired. If not, the bidder can send the bid
envelope if the price is greater than the current highest
price. The contract system will use highestBid and
highestBidder to record the current highest price and the
corresponding bidder’s address.
(3) reveal(): Opens the bid by calling this function, and
compares the prices of all the tickets to get the final
winner.
(4) AuctionEnd(): In this function, AuctionStart and
biddingTime are automatically used to determine the
contract validity time. If the effective time ends, the
successful bidder’s Address and the current highest price
will be automatically sent to the tenderer. This function
will be disabled to avoid repeated execution.
(5) withdraw(): Returns the amount of bids tendered by Fig. 7: Smart contract announcement
bidders other than the successful bidder.
Conclusions
Empirical Results
This paper provides an E-auction mechanism based on

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 Proceedings of IEEE International Conference on Applied System Innovation 2018
IEEE ICASI 2018- Meen, Prior & Lam (Eds)

blockchain to ensure electronic seals confidentiality, Conference (COMPSAC), 2016 IEEE 40th Annual, volume 2,
non-repudiation, and unchangeability. We expect to encounter pages 192–198. IEEE, 2016.
potential problems in the implementation of this work. In smart [13] Fangguo Zhang, Qiongfang Li, and Yumin Wang. A new secure
electronic auction scheme. In EUROCOMM 2000. Information
contracts for sealed orders, due to the complexity of the
Systems for Enhanced Public Safety and Security. IEEE/AFCEA,
contract, the bidders and bidders come, say may call the wrong pages 54–56. IEEE, 2000.
contract function. For example, the bidder inadvertently calls [14] Yan Zhu, Ruiqi Guo, Guohua Gan, and Wei-Tek Tsai.
Reveal() to open all bids, so that the bidding must be terminated Interactive incontestable signature for transactions confirmation
and re-arranged. For this purpose, we will set the authority in bitcoin blockchain. In Computer Software and Applications
judgment for different functions and will perform the function Conference (COMPSAC), 2016 IEEE 40th Annual, volume 1,
before first determine if the caller can perform this function. pages 443–448. IEEE, 2016.
[15] Guy Zyskind, Oz Nathan, et al. Decentralizing privacy: Using
Acknowledgment blockchain to protect personal data. In Security and Privacy
We thank the Ministry of Science and Technology for supporting this Workshops (SPW), 2015 IEEE, pages 180–184. IEEE, 2015.
research with IDs MOST 106-2221-E-230-009 and MOST
106-2221-E-468-001 and MOST 105-2410-H-005-023-MY2.

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