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Private Auctions and KYC solutions

Private Auctions and KYC solutions

Gnosis Auction offers different options to restrict the access to auctions. While setting up an auction, the auctioneer can specify an external smart contract to manage the access with any arbitrary logic using allow-list-manager argument. This contract will then be called every time users are placing orders. The order placement will only succeed if and only if the allow-list-manager contract returns its approval.
Let's look into a few possible implementations for this allow-list-manger contract:
Open auction
The default behavior is not to set an allow-list-manger contract at all. This means the auction will be completely open for participation and the contract allow-list-manger will not be called.
Offchain allow-list manager and KYC
This option is useful to implement KYC requirements. This option allows the auctioneer to specify an EOA account to manage the participation. This EOA account will be able to allow particular addresses to place an order by creating a signed message for these addresses. Upon order-placement, the user needs to provide this signed message as a parameter to the order placement transaction and the allow-list-contract will check this signature for validity. This mechanism carries few key advantages:
  1. 1.
    The allow-list can be updated at any time, even while the auction is running
  2. 2.
    Gas consumption is heavily reduced
  3. 3.
    Supported by Gnosis Auction Starter safe app.
The github repository for this audited contract can be found here.
Setup:
If KYC is required for your sale, then you have to work with different KYC providers like Fractal or Fireblocks. Once they provided you with a list of addresses with a successful KYC process, you can start the allow-listing steps.
  1. 1.
    Upon auction initiation, the auctioneer must specify the designated EOA in the Gnosis Auction Starter safe app. You can do this in the following field:
Once the auction was successfully initiated, all participants will see only the following screen in the interface:
  1. 1.
    The signed messages for the users can be created by running this generateSignatures hardhat-script by referencing the list of allow-listed addresses. It should be run with the additional argument post-to-api, such that the signatures are uploaded to the GnosisDAO backend. From there, Gnosis Auction will serve the signatures automatically to users once they connect to the UI.
  2. 2.
    Visit your auction on gnosis-auction.eth.link and connect to the site with one allow-listed address. Now, this account should no longer see the private auction warning but will be able to place an order.
Static on-chain whitelist
A simple allowlist manager could be developed which will include all allow-listed addresses at the time of auction initiation. This approach is less flexible and is gas inefficient but might be desireable for DAOs that don't want to delegate allow-listing authority to an external entity.
Integrating identity wallet solutions
Another solution would be to write an allow-list contract that checks the KYC level of identity wallets and allows owners to participate only if the KYC level satisfies specific criteria.
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