Blockchain application to the Auction Mechanism

Blockchain technology can be used in a variety of ways. DomRaider will develop the technological solution dedicated to the world’s first decentralized auctions blockchain network. This article outlines the fundamental stages to implement the blockchain mechanisms to real-time management of auctions worldwide.

This process is described from the perspective of micropayment for an ERC20 token available through the Ethereum network. This depiction can be adapted to any other platform. The process unfolds in 3 stages:

• Stage 1: Opening of micropayment channel. Each auction participant places a “deposit” through a Smart Contract, which represents a bid.

From the technical point of view, the deposit is a combination of “transferForm” functions (to the “smart contract address) and “approves” the ERC20 token standard.

• Stage 2: Off-Chain exchanges. Exchange of a signed character chain that combines the bid amount and its identity.
• Stage 3: Channel closing. Reimbursement of all auction participants other than the auction winner.

It is worth noting that the payment taken to initiate the bid may not represent the total amount, which would allow professional users to participate in numerous auctions (on the basis that they won’t win all of them). We can envisage payment of a small sum, for example 10% of the target amount, on the basis that a delay in payment by the winning bidder is possible. In the event that the amount is not settled, the user may lose their security deposit and get a bad reputation within the system, which may exclude them from certain types of auction.