Peer-to-Peer Energy Trading meets IOTA Toward a Scalable Low-Cost and Efﬁcient Trading System

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Peer-to-Peer Energy Trading meets IOTA:

Toward a Scalable, Low-Cost, and

Efﬁcient Trading System

Conor Mullaney, Adnan Aijaz, Nathan Sealey, Ben Holden

Bristol Research and Innovation Laboratory, Toshiba Europe Ltd., Bristol, United Kingdom

ﬁrstname.lastname@toshiba-bril.com

Abstract—Peer-to-Peer (P2P) energy trading provides various

beneﬁts over conventional wholesale energy markets and makes

renewable energy more accessible. This paper proposes a novel

multi-layer P2P energy trading system for microgrids based

on IOTA 2.0, which is a distributed ledger technology (DLT)

primarily designed for Internet-of-Things (IoT) applications. The

proposed energy trading system, which is a manifestation of

a cyber-physical system (CPS), exploits the beneﬁts brought

by IOTA’s unique ledger structure as well as the recently

introduced IOTA smart contract protocol (ISCP). Further, it

implements a uniform double-auction market mechanism and

a hierarchical routing structure for interconnected microgrids.

Performance evaluation demonstrates key beneﬁts over wholesale

markets as well as speed, energy efﬁciency and cost beneﬁts over

conventional blockchain-based P2P energy trading systems.

Index Terms—Blockchain, CPS, DLT, IOTA, energy trading,

microgrid, P2P, smart contracts, Tangle.

I. INTRODUCTION

Increased penetration of distributed energy resources

(DERs) in the energy sector paves the way toward decentral-

ization of current energy markets by allowing consumers to

become prosumers [1]. Typically energy generation based on

DERs is intermittent and difﬁcult to predict, requiring robust

management systems to utilize them effectively. Peer-to-peer

(P2P) energy trading is a promising approach for effective

management of DERs in smart cities [2]. The fundamental

concept of P2P trading is that prosumers and consumers can

buy and sell energy amongst themselves directly in a com-

pletely decentralized manner. P2P energy trading promotes the

use of renewable energy by empowering prosumers to actively

participate in the energy market [3]. For example, a consumer

household with solar panels can trade surplus energy with

its neighbours. This will increasingly remove centralization

in energy generation and diminishes the need for large non-

renewable power plants.

The key principles for designing P2P energy manage-

ment systems (e.g., platforms) include decentralization, trans-

parency, privacy, scalability, energy efﬁciency and user con-

trol. Decentralization beneﬁts the entities in the system by

removing their need to trust in a centralized third party.

Transparency ensures that the system and all actors are acting

honestly whilst ensuring privacy. User control gives entities

the choice as to what they share and with whom. Scalability

becomes important due to rapidly growing demand; thanks to

the growth in population and Internet-of-Things (IoT) devices.

Energy efﬁciency of any system must be considered due to

environmental concerns.

Blockchain, which is the most well-known type of dis-

tributed ledger technology (DLT), has been identiﬁed as the

key to facilitating P2P energy trading due to the inherent

features of decentralization, resilience, privacy and security

[4]. However, conventional blockchain technologies still face

challenges when applied to a P2P energy trading use case.

DLTs based on a directed acyclic graph (DAG) structure

overcome many limitations associated with blockchains and

have been investigated from the perspective of blockchain

replacement in energy management systems [5].

To this end, this paper advances state-of-the-art by devel-

oping a P2P energy trading system based on IOTA Tangle,1

which is a DAG-based DLT speciﬁcally designed for IoT envi-

ronments. The proposed energy trading system is a realization

of cyber-physical systems (CPSs) approach and it provides

a multi-layer trading functionality involving microgrids, IOTA

smart contracts, and the Tangle. To the best of our knowledge,

this is one of the ﬁrst works investigating the use of IOTA

Tangle and smart contracts for P2P energy trading. The main

contributions of this work are summarized as follows:

•We develop a P2P energy trading system that exploits the

key beneﬁts of IOTA Tangle and IOTA smart contract pro-

tocol (ISCP) framework. The proposed system provides

key advantages of lower cost, lower transaction times,

and high scalability compared to conventional systems.

•We implement a market mechanism via smart contracts

employing a uniform double-auction to match producers

and consumers fairly in each bidding round, allowing

microgrids to act as a single entity when interacting and

trading. Our multi-layer trading system, underpinned by

IOTA, ensures the transparency and security of transac-

tions in a decentralized manner.

•We introduce a hierarchical routing structure of inter-

connected microgrids to fulﬁl all excess supply/demand

in the system per bidding round. This maximizes energy

utility and adheres to demand response standards.

1Our focus is strictly on the newer version, i.e., IOTA 2.0

(https://www.iota.org/) which is signiﬁcantly different from the ﬁrst

version.

arXiv:2210.06427v1 [cs.NI] 12 Oct 2022

Fig. 1. Illustration of a microgrid comprising prosumers and consumers.

•We provide testbed-based and simulations-based results

to assess the proposed system in various trading scenarios

using empirical data. Our results focus on both market-

centric and DLT-centric evaluation.

The rest of this paper is organized as follows. Section II

covers related work and preliminaries on the subject matter.

Section III describes our proposed IOTA-based P2P energy

trading system. Section IV provides evaluation results and

insights. The paper is concluded in section V with some

directions for future work.

II. BACKGROUND AND PRELIMINARIES

A. Energy Trading Market and P2P Energy Exchange

The problems and inefﬁciencies of wholesale centralized

energy trading markets have been the focus of various studies.

The authors in [6] present security and single point-of-failure

concerns. In [7], it has been shown that centralization of power

generation creates challenges for providing supply ﬂexibility

necessary to meet dynamic energy demands in an adequate

time. Privacy [8], lack of competitive pricing [9] and resilience

to cyber attacks [10] have been highlighted as well for central-

ized energy trading markets. These concerns are summarized

in [4].

P2P energy trading is an alternative to centralized markets

and it has been explored to address the aforementioned chal-

lenges as well as a solution to scalability, privacy control,

and transaction speed of the energy network [11]. P2P micro-

grid systems are a promising implementation of P2P trading.

They are considered an efﬁcient way to distribute energy

generation between energy sources thereby increasing supply

ﬂexibility [12]. Microgrids (illustrated in Fig. 1) are small-

scale electricity networks made to supply energy to a small

community, e.g. a neighbourhood, a university, or ofﬁce blocks

and can act in grid connected or islanded modes, connecting to

other grids through points of common coupling (PCC) [13]. A

typical microgrid contains two system agents, prosumers and

consumers, and facilitates P2P energy exchange between these

agents through a smart grid infrastructure.

B. Blockchain for P2P Energy Trading

Blockchain is a key technology for enabling P2P energy

trading markets with state-of-the-art in this area reviewed by

[14]. Blockchains not only bring the required decentralisa-

tion to the energy markets but also facilitate improvements

in privacy, cost, security [15] and transparency [16]. Some

blockchain technologies are more suited to energy trading

than others with the consensus mechanism making some too

energy expensive [17], slow or unscalable [18]. The challenges

blockchain faces to adoption within the P2P energy trading

market are reviewed by [19].

In [20], a blockchain-based energy trading system for re-

mote areas is presented. Pi4B hardware is used alongside the

Ethereum blockchain and Ethereum smart contracts. Power

Ledger [21] is a blockchain solution built on the Ethereum

blockchain (using proof-of-work as consensus) with a long-

planned move to the Solana network (using proof-of-stake

consensus) and offers low cost, high efﬁciency energy trading.

Pylon [22] network takes a different approach by building

a blockchain platform from the ground up. It uses a form

of proof-of-work consensus on federated nodes and aims to

simplify communication between all agents achieving fast,

secure and scalable communication.

Our work aims to present a structural optimization to energy

trading systems by offering an alternative topology DLT to

blockchain as well as an alternative smart contract technology

with the aim of improving cost, speed, and energy demands.

C. IOTA DLT for P2P Energy Trading

IOTA is a highly scalable DAG-based DLT built for IoT

networks and applications. Its role in P2P energy trading has

been explored in some previous studies like [23] and [5].

However, these studies mainly focused on IOTA 1.0 which

had an element of centralization in the form of a coordinator

and also lacked support for smart contracts and digital assets,

thereby making it unsuitable for effectively managing a P2P

energy trading system.

With the advent of IOTA 2.0 [24], IOTA has improved

on its original goals of decentralization, scalability, and IoT

support as well as gaining the ability to fully manage a P2P

energy trading system through improved consensus, support

for smart contracts, and enhanced security and privacy [25].

The ledger layer (Layer-1) is now fully decentralized through

the removal of the coordinator. Also, an IOTA smart contract

protocol (ISCP) allowing agents to interact over the network

securely has been implemented while keeping it scalable.

There have also been improvements in the energy efﬁciency of

the system through a lightweight adaptive proof-of-work over

conventional proof-of-work which incurs high energy cost.

A beginner’s guide to IOTA and the different types of

nodes involved like Wasp nodes (for smart contracts) and

GoShimmer nodes (running prototype software that allows

to reach consensus) is available at https://iota-beginners-

guide.com/category/iota-products/

D. ISCP Protocol

ISCP utilizes sharding to improve scalibility through split-

ting up the network into smaller blockchains known as shards,

with each shard only validating a subset of transactions

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Peer-to-PeerEnergyTradingmeetsIOTA:TowardaScalable,Low-Cost,andEfcientTradingSystemConorMullaney,AdnanAijaz,NathanSealey,BenHoldenBristolResearchandInnovationLaboratory,ToshibaEuropeLtd.,Bristol,UnitedKingdomrstname.lastname@toshiba-bril.comAbstractPeer-to-Peer(P2P)energytradingprovidesvariousben...

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Peer-to-Peer Energy Trading meets IOTA Toward a Scalable Low-Cost and Efﬁcient Trading System

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