Online auction is one of the most successful internet business models. However, auction fraud has become the highest threat and hazard to the future of this business model. The blockchain provides a new perspective to resolve this problem. It can be used for current financial services, certificates, remittances, and online payments; meanwhile it also provides several crucial services such as smart contract, smart property, trust system, and security services. This chapter discusses how to apply blockchain to a cloud-based online auction and the principle of operation. The purpose is to fundamentally solve the problem of online fraud caused by information asymmetry of electronic transactions. To the best of the authors' knowledge, this is the first time that the blockchain has been applied to authentication of online auction. The preliminary contribution is for preventing auction fraud from the aspects of smart properties and smart contract.
TopIntroduction
As one of the most significant electronic markets, online auction transfers the collectables business and e-commercial business to a global billion-dollar market (Grazioli and Jarvenpaa, 2000; Peters, et al., 2015; Corcoran, 1999). With the idea of frictionless economy, online auction is considered to be rapid and efficient platform to eliminate geographic boundaries and establish the accurate price based on supply and demand (Ba, et al., 2003). Alibaba, Amazon, and E-Bay are the exemplar cases in this area. These platforms offer low cost, excellent technical support, and massive data analysis so that traditional sales begin to transition to e-business model increasingly. The usage of online auction sites ranges from individuals to firms; however, the market fraud is rising. According to the Internet fraud operated by the National Consumers Union, online auctions were still the primary source of Internet fraud (Alanezi, 2016).
For this reason, a growing number of institutions, such as Alibaba, Samsung, Louis Vuitton, Internet Fraud Watch (www.ifccfbi.gov), are jointly developing new mechanism to combat this challenge (Chua and Wareham, 2004). Simultaneously, Alibaba and a myriad of financial institutions to propose a new solution - giant distributed database “block chain.” The blockchain is secured by Byzantine fault tolerance (BFT). This database is used to maintain a continuous growth of blocks. As shown in Figure 1, the design of blockchain is to prevent data modification. Once the data are recorded, it cannot be altered reversely anymore.
In blockchain, each block consists of block hash link, timestamp, and valuable data as shown in Figure 2 The blocks can be transferred from one blockchain to another. This technology has approved that it can eliminate the double-spending problem (Pilkington, 2015).
Thus, it can be utilised to various scenarios, such as financial services and medical record (Peters and Panayi, 2016). The blockchain might become the most critical online promising technology for Internet interaction (Zheng, 2016). This database is more magic than we expected. It could be the final solution to online auction fraud.
Figure 1. The diagram of blockchains
Figure 2. Bitcoin network (resource from bitcoin)
Based on the distributed blockchain technology, we create a broad range of distributed applications. The revolutionary methodology in this area is the Etherum platform, which includes a complete programable framework (English, 2016). This framework is utilised to implement smart contract. Moreover, the blockchain infrastructure facilitates virtual currency, such as Bitcoin, trust and contract applications. The most significant feature is that the linked data are decentralised so that we do not need to be dependent on central server anymore.