A second price auction is an auction format where the highest bidder wins the item but pays the price offered by the second-highest bidder. This mechanism, also known as a Vickrey auction, is designed to incentivize bidders to submit their true valuation for the item. It aims to prevent strategic bidding behavior and promote market efficiency. This format is widely studied in economics and game theory.
Context
Second price auctions are a relevant concept in digital asset markets, particularly in mechanisms for allocating scarce resources like block space or non-fungible tokens (NFTs). News might discuss their application in fee markets to determine transaction priority or in specific token sale events. A key debate involves the practical implementation challenges in decentralized environments, such as preventing front-running or ensuring transparent bid submission. This auction type offers theoretical benefits for truthful revelation of value.
This research introduces off-chain influence proofness, demonstrating EIP-1559's vulnerability to censorship threats and proving fundamental limits on TFM design.
The Cryptographic Second Price Auction uses encrypted bids to eliminate the miner's informational advantage, achieving a truly incentive-compatible, collusion-proof transaction ordering mechanism.
A new cryptographic auction model with miner-set reserves establishes 'Off-Chain Influence Proofness,' mitigating hidden MEV and redefining transaction fee mechanism design.
A new 'off-chain influence proofness' property challenges EIP-1559's security, proving a cryptographic second-price auction is required for true incentive-compatibility.
A new cryptographic second-price auction enforces off-chain influence proofness, fundamentally securing transaction fee mechanisms against miner censorship and rent-seeking.
Introducing "Off-Chain Influence Proofness," a new desideratum proving that EIP-1559 enables miner censorship threats, which a Cryptographic Second Price Auction can mitigate.
A new impossibility theorem proves no transaction fee mechanism can simultaneously satisfy all prior properties and be resistant to off-chain miner influence.
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