Distributed Ledger Technology (DLT) / Blockchain

DLT is an asset database that is shared and stored across a decentralized network of different and independent users, respectively nodes. All active network nodes guarantee that changes in the database (e.g. digital records or transactions) follow defined rules via a consensus mechanism, which makes the DLT tamper-proof. There are different forms of DLT designs, such as Blockchain (Bitcoin, Ethereum, EOS, etc.) or Direct Acyclic Graphs (DAG) (IOTA, Hashgraphs, etc.). A Blockchain is a list of records, i.e. linked blocks that are cryptographically secured. Participants in a Blockchain network have access to the records of every transaction, which are securely stored in the ledger in a permanent way. This technology, for the first time, allows online transactions between individuals without the need of a trusted middleman /platform.

On top of the DLT/Blockchain, a smart contract concept has been developed. This brings automation capabilities to the Blockchain technology, based on the principle “If This Then That” (IFTTT), and enables new applications such as automatic payment after charging an electric vehicle. The data, the smart contract, while deployed on the Blockchain, is immutable.


Technology Types

The Blockchain technology dimensions:

  • DLT design (Blockchain, DAG)
  • Protocol definitions (e.g. speed, block size, etc.)
  • Consensus algorithm (PoW, PoS, DPoS, PBFT, …)
  • Governance principles (on-chain vs. off-chain)
  • Public vs. private (i.e. permissionless vs. permissioned)
  • Anonymity built-in (or not)
  • Others components (tokens…)

Components & enablers

  • A DLT-layer (built from scratch, copy of an existing framework, or a public platform (e.g. Ethereum, EOS
  • Application layer (in the form of smart contracts)
  • So-called “oracle” has to be used to trustworthily link the DLT to the real world (human oracle, SW oracle, HW oracle, consensus-based oracle)

Advantages & field of application

A non-exhaustive list of TSO/electricity DLT use cases:

  • Peer-to-peer flexibility trade for system purposes
  • Peer-to-peer energy exchanges
  • Peer-to-peer certificates trade (origin, CO2 emissions)
  • Cybersecurity improvement in settlement (time-stamp)
  • Certification of data (fingerprint of a dataset on the Blockchain).

DLT has potential to:

  • Facilitate efficient integration of smaller and decentralized production and flexibility units
  • Lower entry barriers for participation to markets
  • Improve transparency and trust among different players

Technology Readiness Level

No full-scale commercial projects in the electricity industry have been developed so far. Further improvements are needed [4]. Limitations are e.g. low scalability, and lack of standardization but DLT is developing fast.

2020: TRL 7, 2025: TRL 9


Research & Development

Research is required for mass adoption in the energy sector:

  • Scalability problem (e.g. 2nd layer (off-chain) vs. 1st layer (on-chain) solution)
  • Energy efficient, scalable, secure consensus mechanisms
  • Confidentiality (for public Blockchain)
  • Performance comparison: DLT v. other IT solutions
  • Policy/regulation issues - technology/security standards
  • Governance issues of Blockchain networks
  • Potential security/safety risks

Best practice performance

Specific design requirements for good performance e.g.

  • Smart contract architecture: consider future needs (e.g. mother smart contract with immutable characteristics, linked to other smart contract which can be adapted)
  • Limit the data to be put on-chain to those necessary: e.g. only a fingerprint of data (hash which is a crypted and unique representation of the data).

Best practice application


References

  1. LO3 Energy-Local energy solutions. [Link]
  2. Power ledger-Energy reimagined. [Link]
  3. TenneT-Blockchain technology. [Link]
  4. NERA-Blockchains in Power Markets. [Link]
  5. Energyweb. [Link]
  6. Acciona. [Link]
  7. Share&charge-Open charging network. [Link]