8 ♠ · Strategy · Draft

Blind Bid, Second Price

An auction where bids stay sealed, the highest bidder wins, and pays only the second-highest bid.

The Blind Bid, Second Price card: 8 ♠ of Strategy

How it works

Each bidder submits a hidden bid, often as a hash (a scrambled commitment) with a deposit, before the deadline. Nobody can see the other bids during the bidding period. After the deadline, bidders reveal their bids and the contract checks them against the hashes. The highest bid wins the item. The winner pays the amount of the second-highest bid, not their own. Because you cannot lower your price by underbidding, the best strategy is to bid exactly what the item is worth to you.

Use it when

  • You sell a scarce item and want bidders to state their true value.
  • Stop bidders from watching each other and bidding at the last second.

Watch out for

  • A two-step process: bidders who miss the reveal window forfeit their deposit.
  • Colluding bidders can agree to keep the second bid low.

Example

Ethereum Name Service. ENS sold its first .eth names from May 2017 through sealed bids with a reveal step, and each winner paid the second-highest bid.

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