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Neagu, B.; Ivanov, O.; Grigoras, G.; Gavrilas, M.; Istrate, D. Blockchain Technology. Encyclopedia. Available online: (accessed on 14 April 2024).
Neagu B, Ivanov O, Grigoras G, Gavrilas M, Istrate D. Blockchain Technology. Encyclopedia. Available at: Accessed April 14, 2024.
Neagu, Bogdan-Constantin, Ovidiu Ivanov, Gheorghe Grigoras, Mihai Gavrilas, Dumitru-Marcel Istrate. "Blockchain Technology" Encyclopedia, (accessed April 14, 2024).
Neagu, B., Ivanov, O., Grigoras, G., Gavrilas, M., & Istrate, D. (2020, September 16). Blockchain Technology. In Encyclopedia.
Neagu, Bogdan-Constantin, et al. "Blockchain Technology." Encyclopedia. Web. 16 September, 2020.
Blockchain Technology

The blockchain is a new technology targeted at storing and managing sensitive data, where pieces ('blocks') of information are entered in a dedicated system by independent users and linked by cryptographic keys (forming the 'chain'). The particularities of a blockchain system are enhanced data security through encryption, anonymization, and immutability; decentralization through peer-to-peer operation, and transparency through open access. The main applications of blockchain are cryptocurrency mining, smart trading and contracts, secure information transfer.

blockchain technology prosumers smart contracts microgrid local energy market renewable energy sources

1. Introduction

The blockchain technology was created as a solution to the problem of mistrust and data security. The first steps were taken in 1991, when Stuart Haber and W. Scott Stornetta first spoke about a cryptographically secure blockchain integrating optimal Merkel type trees in the concept[1]. Following the financial crisis of 2008, the concept of blockchain as a distributed database was developed for the bitcoin cryptocurrency[2], proposing a solution to change the way monetary transactions are carried out in traditional markets. A blockchain represents a decentralized ledger of transactions that take place in a network. This network consists of nodes owned by independent entities that use a cryptographic protocol to validate the transactions that are entered in the ledger and to ensure that the entered data cannot be altered or changed. It is immutable, secure, and completely transparent. The decentralized blockchain networks are harder to penetrate and manipulate by dangerous entities. Some of the most known uses for blockchain technology are:

  • Cryptocurrency trading. The first blockchain was created for bitcoin mining[3].

  • Data storage. The blockchain system can be used for the safe storage of sensitive information: medical records[4] or scientific data[5] that need to be prevented from unauthorized access.

  • Secure, non-discriminatory, and transparent trading in all types of markets. The blockchain system can protect the offers from fraudulent modification or deletion by encryption and can ensure fair trading by anonymization and peer-to-peer, decentralized access. Also, new payment methods and financial services can be developed[6].

  • IoT infrastructure operation security in smart homes. The blockchain technology can be used for encrypting the sensor and communication data between the connected devices[7].

2. Example: The Use of Blockchain in the Energy Trading Sector

The electricity industry, with its complex supply chain with a need for increased transparency and improved data management and its highly transactional trading market that requiring fast settlement, is an extremely suitable candidate for blockchain technology-based innovation. Coupled with other innovative technologies (smart electricity grids, data mining, IoT devices), it has the potential to provide solutions to various challenges in the energy sector such as the incentivization of local generation from renewable resources[8] or the creation of local electricity markets[9] and energy poverty mitigation[10]. An example of a blockchain-based market model for local communities with local renewable generation is described in Figure 1[11]. Its main characteristics are:

Figure 1. A local market model for electricity trading in microgrids[11]

  • Trading is performed in a local market, operated at microgrid or community level;

  • Trading can be initiated when entities with generation surplus (called ‘prosumers’) want to sell electricity to local consumers;

  • The sell and buy offers are entered by the participants in an encrypted and anonymous blockchain ledger;

  • Only full quantity trading offers are accepted for settlement, no fractions are allowed;

  • Sell and buy quantity and price offers are traded on an hourly basis;

  • The prosumer and consumer selling and buying offers are managed by a local non-profit entity using two possible market mechanisms integrated into a blockchain trading system:

    • A primary market for prosumer-consumer trading.

    • A secondary two-tiered market for energy poverty mitigation and commercial trading.

  • The primary market can use two alternative trading methods: the ‘first-come-first-served’ method or the merit order method used in traditional day-ahead markets.

  • The secondary market provides two optional trading tiers:

    • The energy poverty mitigation tier for low-income consumers, which would benefit from electricity prices lower than the commercial tariffs used by commercial suppliers.

    • The commercial tier, with two alternative trading mechanisms:

      • Fee-access consumers, which enter the market occasionally, in exchange for a fee,

      • Invite-access consumers who do not enter offers directly, but are represented (invited) in the market by other participants.

  • Consumers can also enter the secondary market, if the traded quantity is higher than their actual consumption, generating a surplus.

  • For the invite option of the commercial tier, a consumer can acquire electricity only from prosumers with which they have signed previously peer-to-peer options contracts.



  1. Stuart Haber; W. Scott Stornetta; How to time-stamp a digital document. Journal of Cryptology 1991, 3, 99-111, 10.1007/bf00196791.
  2. Dave Bayer; Stuart Haber; W. Scott Stornetta; Improving the Efficiency and Reliability of Digital Time-Stamping. Sequences II 1993, II, 329-334, 10.1007/978-1-4613-9323-8_24.
  3. Craig S Wright; Bitcoin: A Peer-to-Peer Electronic Cash System. SSRN Electronic Journal 2008, -,, 10.2139/ssrn.3440802.
  4. Yi Chen; Shuai Ding; Zheng Xu; Handong Zheng; Shanlin Yang; Blockchain-Based Medical Records Secure Storage and Medical Service Framework. Journal of Medical Systems 2018, 43, 5, 10.1007/s10916-018-1121-4.
  5. Gamze Gürsoy; Charlotte M. Brannon; Mark Gerstein; Using Ethereum blockchain to store and query pharmacogenomics data via smart contracts. BMC Medical Genomics 2020, 13, 74, 10.1186/s12920-020-00732-x.
  6. Shuchih Ernest Chang; Hueimin Louis Luo; YiChian Chen; Blockchain-Enabled Trade Finance Innovation: A Potential Paradigm Shift on Using Letter of Credit. Sustainability 2019, 12, 188, 10.3390/su12010188.
  7. Ali Dorri; Salil S. Kanhere; Raja Jurdak; Praveen Gauravaram; Blockchain for IoT security and privacy: The case study of a smart home. 2017 IEEE International Conference on Pervasive Computing and Communications Workshops (PerCom Workshops) 2017, -, 618-623, 10.1109/percomw.2017.7917634.
  8. Tianyang Zhang; H.R. Pota; Chi-Cheng Chu; Rajit Gadh; Real-time renewable energy incentive system for electric vehicles using prioritization and cryptocurrency. Applied Energy 2018, 226, 582-594, 10.1016/j.apenergy.2018.06.025.
  9. Bogdan-Constantin Neagu; Ovidiu Ivanov; Gheorghe Grigoras; Mihai Gavrilas; A New Vision on the Prosumers Energy Surplus Trading Considering Smart Peer-to-Peer Contracts. Mathematics 2020, 8, 235, 10.3390/math8020235.
  10. Dimitrios J. Vergados; I. Mamounakis; Prodromos Makris; Emmanouel Varvarigos; Prosumer clustering into virtual microgrids for cost reduction in renewable energy trading markets. Sustainable Energy, Grids and Networks 2016, 7, 90-103, 10.1016/j.segan.2016.06.002.
  11. Bogdan-Constantin Neagu; Ovidiu Ivanov; Gheorghe Grigoras; Mihai Gavrilas; Dumitru-Marcel Istrate; New Market Model with Social and Commercial Tiers for Improved Prosumer Trading in Microgrids. Sustainability 2020, 12, 7265, 10.3390/su12187265.
Subjects: Energy & Fuels
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