Build a Leaderless Shielded Bids Auction Reference Implementation for OTC Auction using Shutter Network

Abstract

We propose building a reference implementation for OTC auction using Shutter Network's commit-reveal capabilities. This implementation will create a transparent, trustless environment for SAFT and locked token trading, addressing market inefficiencies while maintaining privacy and preventing information asymmetry. The goal is to drive Shutter Network's adoption across diverse use cases and stakeholders. The system will be production-ready and support full stakeholder integration with Shutter Network's environment.

Problem Statement

This implementation will used as a foundation for stakeholders to integrate with and adopt Shutter Network, expanding its ecosystem and demonstrating practical real-world applications.

Current OTC Auction Problem

Propose leveraging Shutter encryption network's commit-reveal mechanism for SAFT/Locked token OTC trading, creating a trustless trading environment.

Should it adopt it address current market inefficiencies in OTC trading while maintaining privacy and preventing information asymmetry.

the SAFT/Locked token OTC auction typically has three users: a seller, a buyer and a broker.

The seller is selling some number of tokens for a price they have in mind
A number of buyers will bid their price (typically there will be some negotiation) and the amount they're willing to buy
Brokers usually keep their clients of buyers and sellers and broker the trade in between.
Where Shutter comes into play: First off, all bids can be encrypted. This offers some key advantages:

It will have bind auction instead of brokers having the advantage of knowing all bids where some clients could potentially change theirs bids to their advantage or collude on bid price

Better trust setup for sellers as all bids are encrypted and timestamped

Brokers don't have to share their clientele with each other but can still prove they provide honest service

Brokers have information advantage knowing all bids

Lack of transparency in bid timestamps and order

Trust between parties could be improved/enhanced

Brokers must expose client relationships for trade match verification

No audit trail

Core Features & Mechanisms
Encrypted Bidding
Timestamp verification for bid ordering
Binding auction mechanism
All bids encrypted using Shutter Network
Trust Architecture
Encrypted bids prevent price manipulation
Verifiable timestamp system
Broker blind-matching capability
Privacy Features
Bid privacy until reveal phase
Verifiable honest service for broker/platform
Task Scope
Phase 0: Business Development & Management
Product Management
Requirement refinement
Stakeholder communication
Feature prioritization
Business Development
Partner outreach/pitching Shutter Network
Integration support
Phase 1: Off-chain Implementation
Frontend Development
Basic web interface
User flow implementation
Shutter API Integration
API integration and testing
Encryption/decryption flow setup
OTC Trading Logic
Bid order creation
Buyer/seller order encryption/decryption ( optional based on feedback )
Bid encryption/decryption implementation
Data Storage Implementation
Database schema design
Encrypted bids
Decrypted Bids
Auction Ask
Actor IDs
Public keys of each actor
Data persistence
Phase 2: On-chain Implementation
Smart Contract Development
On-chain attestation via smart contract replacing a database store
Timestamp cutoff based on a chain mechanism
Multiple round auctions to prevent time attack (Optional)
Testing
Frontend Integration
Smart contract interaction
Testing and debugging

Success Metrics

Technical Metrics
Successful bid encryption and decryption
Fully functional user workflows
Integration with Shutter API production environment
Clean, maintainable open-source code

Integration Metrics

Number of successful integrations
Increase the usage of Shutter Network
Grant Request and Budget Breakdown
Total Budget: 5000 USDC + 600,000 SHU

Phase 0 & 1 (Off-chain Implementation): 3000 USDC
Phase 2 (On-chain Implementation): 2000 USDC + 600,000 SHU (vesting over 4 months)
Note: The SHU token grant (600,000 SHU) is contingent upon a successful business development outcome, defined as at least one (1) platform adopting and integrating the reference implementation. If this adoption milestone is not met, the token grant will be forfeited.

License

Code will be released under MIT license or other license as deemed appropriate by DAO members