Proof of Fairness Ledger (PoFL): Ensuring Verifiable Fairness in Decentralized Sealed-Bid Auctions

Abstract

We present the Proof of Fairness Ledger (PoFL), a unified cryptographic framework for decentralized sealed-bid auctions that jointly ensures privacy, input fairness, output correctness, and public verifiability. PoFL separates a minimal Commit-Open-Verify pipeline from optional extensions, keeping the core lightweight while enabling stronger auditability when required. Its central construct, the frozen root snapshot R*, instantiated as a Merkle-style hash accumulator, immutably binds all timely commitments before the opening phase and serves as a public anchor for verification. After opening, correctness can be proven either by direct bid comparison or by a succinct Zero-Knowledge Proof of Winner, which attests inclusion, commitment consistency, and bid maximality with respect to R*. We analyze PoFL under standard cryptographic assumptions - discrete logarithm hardness, collision-resistant hashing, and the Random Oracle Model—and discuss practical efficiency for on-chain and off-chain deployment. Constant-size verification and logarithmic inclusion proofs make PoFL suitable for smart-contract implementation. Additionally, PoFL can integrate dynamic collateral management and optional force-open mechanisms to ensure liveness and economic accountability. Overall, PoFL provides a practical and theoretically grounded approach to transparent, auditable, and privacy-preserving auctions in permissionless environments.