Secure Multiparty Computation Goes Live

The Partisia team developed a secure exchange (also called a double auction) based on Secure Multiparty Computation (MPC). The exchange was the world’s first large scale application and commercial use of MPC.

Partisia Contract Exchange is used to trade contracts in the Danish sugar industry and address intricate problems of matching, pricing and confidentiality

A market solution for the Danish sugar industry

In close cooperation with the Danish sugar industry we have deployed Partisia Contract Exchange to help the industry adjust to the changing market situation. The Partisia Contract Exchange has run twice in 2008.
Partisia Contract Exchange was introduced to trade production contracts among sugar beet growers in Denmark during a period of many changes and difficult pricing issues. The new EU sugar regime reduces prices by approximately 40 %. The sugar industry in Denmark and other EU countries is therefore in the process of adjusting to these changes. Danisco, the only processing company in Denmark, has closed one of three processing plants. In addition, initiatives have been made to increase the productivity of the sugar beet growers. With thousands of diverse growers and with approximately one third of them located on a different island than the two remaining processing plants, reallocating the contracts was one of the main challenges. Reallocation is one of the most effective ways to adjust since the results appear directly when production is moved from high to low cost producers. Needless to say that such gains are possible in a stable market situation as well since the productivity of individual producers tend to develop over time.


A central exchange as mediator

Before the Partisia Contract Exchange was introduced, the contracts could be traded bilaterally among the growers; however, the growers had a hard time finding the right contract quantities and to settle prices. Uncertainty about further EU initiatives and highly fluctuating prices on alternative crops further complicated the market situation. On the island where the sugar plant was closed, the growers even started to coordinate transport to the remaining sugar plants. This successful cooperation limited the reallocation of contracts further. In this difficult situation, the Partisia Contract Exchange unlocked the situation by enabling optimal matching of buyers and sellers and by settling a single market price for the contracts that maximized the gains from reallocation.“Partisia Contract Exchange was an important element to ensure a fast adjustment to the new market situation that was a result of the EU sugar reform.” (Lars M. Petersen, Head of Department, Danisco Sugar).

In the long run, productivity changes may be two-fold and come from actual productivity changes at the individual producers and a continuous reallocation of the existing contracts to exploit differences in the individual productivities.

The bids remain confidential forever

The innovative security approach removes any disadvantages of having a central coordinator since all bids are kept confidential. In questionnaires answered by the growers, about 450 users confirmed the importance of confidentiality protection. 80 % stated that keeping the bids confidential was either important or very important. Reasons for keeping the bids confidential include:

General reluctance to share private information

Avoiding central accumulation of private information

Hold back information that may be used in renegotiations of the profit sharing

“The secure approach contributed to our decision to use Partisia Contract Exchange. It turned out, however, to be of greater importance for the growers than I initially thought“ (Klaus Sørensen, daily manager of the Danish Sugar beet growers’ organization)

The confidentiality protection in the contract exchange is important in the ongoing renegotiation of contracts conditions. These renegotiations take place between multiple interest groups and the result impacts the division of the total profit among these groups. There are differences in interests – not only between the processors and the growers, but also among different grower groups with different distances to the processing plants, different soil conditions etc. Since a bid on the contract exchange reveals information about the individual growers’ valuation of the contract, confidentiality is of great importance in order not to change the negotiation positions of the different interest groups.

Confidentiality is a common concern on exchanges like the Partisia Contract Exchange. The confidentiality is usually handled by e.g. a consultancy house or another trusted third party or mediator. However, this solution is costly and even then the confidentiality may be compromised e.g. by multiple employees having access to information at the trusted mediator’s (such solutions in fact only provide shallow confidentiality. With Partisia Contract Exchange no confidential information is revealed to anyone at any time, thus providing deep confidentiality. This makes it a more secure, simple and efficient solution both to use and to administrate than any existing solutions.


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