The cost of privacy on blockchain: A study on sealed-bid auctions

Abstract

In order to preserve privacy in a blockchain ecosystem, the main objective is to keep a transaction's data private, such as the sender, the receiver, and the amount transferred. The current work studies the cryptographic tools commonly used to achieve this type of privacy, primarily focusing on the Ethereum blockchain. Such tools usually require many computational and storage resources, leading to additional fees. An anonymous auction protocol was developed as a case study to explore these costs, where hiding the identity and the amount of the bids utilizes a variety of cryptographic primitives. The proposed implementation was compared against three sealed-bid auction protocols, which utilize similar cryptographic tools for preserving privacy throughout the auction process. The results show that providing an additional level of anonymity, such as hiding someone's identity, can increase the gas cost significantly, up to 2.5 times, depending on the choice of the cryptographic tools, which determine the usage of the blockchain's storage and computational resources. By adjusting the level of decentralization on the application level by moving some operations off-chain and maintaining the role of the auctioneer, we show that we can maintain anonymity while reducing the gas cost by 40%.