The World’s First State Auction on the Blockchain Being Tested in Ukraine

This Monday, February 22, the Ukrainian platform for state e-auctions on a blockchain has been released for public testing. The source code is available on GitLab, and the platform integration manual has been detailed in the public note in Ukrainian and in English.

“The aim of the project is to build up a transparent, decentralised e-Auction system for state property privatisation and lease, for minimising the existing corruption and mismanagement risks, reduce the state budget expenditure and give barrierless access for participation in the process,” states Lasha Antadze, the project’s lead.

The project is run by Georgian reformers team from the Innovation and Development Foundation NGO in partnership with Distributed Lab. However, there are many other contributors to the project.

“With the help of volunteers from Distributed Lab, Oschadbank, Privatbank, Unitybars and Microsoft we developed a blockchain system yet without rivals in the world,” said Lasha Antadze.

Key Features

According to e-Auction’s draft concept, the consensus model is based on Proof-of-Stake. The “nodes” will usually act as private trading platforms, providing interfaces for auction participants and auctioneers. However, if you don’t trust any service provider, it is possible to set up a personal node, pay the participation fee to a bank client provider and start bidding. In the Consensus, the weight of each node will be determined by the sum of standard entry fees paid by participants to particular trading platform.

Entry fees will be paid by participants to trading platforms and might be specific for each lot and platform. Entry fees and integrated additional services will incentivise nodes to sustain the blockchain system and provide their services. At some auctions participants will have to provide a guarantee deposits if they take part in an auction with a significant starting value. Thus the economic mechanisms (Deposits, Participation fees, which as well serve as a KYC) can effectively prevent spamming.

e-Auction general structure

There will be two payment options: cryptocurrency payments directly to the platform via API, or “fiat” bank payments. Payments are verified via integrated API of bank accounts that received the participation fee, the transaction ledger is signed electronically and afterwards used by the protocol to identify the weight of the nodes.

Before we go

A dedicated draft law has been prepared in order to specify the legal status of the e-Auction network. However, as regulatory issues usually take time, there were some items preliminarily agreed upon.

“We don’t have to wait for the central legislative validation and we have several options for launching the project. We have successfully negotiated with the State Property Fund [of Ukraine], the State Agency of Land Resources [of Ukraine] and the Regional State Administrations of Odessa, Sumy and Kyiv, as well as Ministry of Economy (Department of state reserves) and the project will be launched in pilot mode,” Lasha Antadze told ForkLog.

“The ‘coding part’ is ready, and right now the system is being tested on virtual machines. We will be technically ready to launch the system in two weeks, however, it depends on politicians and remaining paperwork. Now we wait for the moment when we’ll gather every participating party in Kyiv and sign the Memorandum. The project’s advantage is that its primary product was built before the memorandum signed, not vice versa. Thus there is a guarantee that the concept will not remain just a piece of paper, and the project will be launched instantly,” he added.

Auction organisers and investors can be connected via trading platforms or using client-side apps under monitoring of NGOs and general public

The project’s code is open source and “docker file” for launching an e-Auction node is publicly available. Right now the system is tested using Microsoft Azure. But obviously users are not limited to any cloud or server provider.

by Eugene Muratov

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