Creating an auction smart contract without storing the ether

Question

I am currently looking into creating a smart contract for a NFT auction. But because of certain legal restrictions we are not allowed to store the ether bid during the auction period (that is what usually auction contracts do). So the preferred outcome would be that the user can bid without losing their ether and then if they win the exchange between the seller and the buyer will be handled. I saw that opensea seems to do something similar on their auctions with wrapped ether. But I still trying to figure out how they exchange it without storing the ether in the contract.

Thanks for all the help and suggestions!

Answer 1

The wrapped ether contract behaves like an ERC-20 contract. So it is possible to call approve on it. With this function, the NFT buyer can allow the auction contract to spend his tokens as per the bid. What the auction contract would do is call the transferFrom function. It would work because the auction contract is approved.

If the NFT holder also calls approve for their token, then the auction contract is allowed to do the transfers in both directions.

With this setup, the auction contract never holds the Ether, the wrapped ether or the NFT. It only swaps them atomically when the time comes.

Edit: named the function on NFT.

Edit 2: I deployed such a small contract here, where the important lines are:

IERC721(collection).safeTransferFrom(seller, buyer, tokenId);
require(IERC20(token).transferFrom(buyer, seller, price));