Zero-Knowledge Mechanisms

TL;DR

This paper introduces a cryptographic approach using zero-knowledge proofs to enable mechanism commitment and verification without revealing sensitive information or relying on trusted mediators.

Contribution

It presents a novel framework that applies zero-knowledge proofs to mechanism design, allowing secure, private, and mediator-free commitments and verifications.

Findings

Mechanisms can be committed to without revealing private details.

Incentive properties can be verified privately.

Applicable to auctions, contracts, and bargaining scenarios.

Abstract

A powerful feature in mechanism design is the ability to irrevocably commit to the rules of a mechanism. Commitment is achieved by public declaration, which enables players to verify incentive properties in advance and the outcome in retrospect. However, public declaration can reveal superfluous information that the mechanism designer might prefer not to disclose, such as her target function or private costs. Avoiding this may be possible via a trusted mediator; however, the availability of a trustworthy mediator, especially if mechanism secrecy must be maintained for years, might be unrealistic. We propose a new approach to commitment, and show how to commit to, and run, any given mechanism without disclosing it, while enabling the verification of incentive properties and the outcome -- all without the need for any mediators. Our framework utilizes zero-knowledge proofs -- a cornerstone of modern cryptographic theory. Applications include both private-type settings such as auctions and private-action settings such as contracts, as well as non-mediated bargaining with hidden yet binding offers.