IEEE Systems, Man and Cybernetics Magazine - July 2022 - 18

this technology has been introduced to other disparate
application domains, including but not limited to supply
chain management, digital health care, and document registration.
A blockchain can be regarded as a decentralized
database that maintains a growing list of data in a chronological
order. Each member of the blockchain holds an
individual record of data which he or she shares with other
members as well. Blockchains are updated only when all
members have validated new blocks of data. Accordingly, a
blockchain can be regarded as a decentralized database
that enables peer-to-peer transactions and communication
among anonymous parties, without the supervision of a
trusted central authority. Figure 9 compares the validation
of a ledger when a central authority is imagined in a database
with the point-to-point communication of members in
a blockchain.
Storing data based on a Merkle tree structure and the
associated hash encryption method makes this framework
tamperproof. The inherent distributed nature
associated with the blockchain technology along with
the verifiable and immutable storage of transaction
records are the driving forces needed to catalyze
automated and peer-to-peer energy exchange among
networked microgrids envisioned in transactive energy
frameworks. Accordingly, each MGC in an ADN would
have access to a cryptographic record of the previous
energy transactions among MGCs, which can be synchronized
globally. Moreover, deploying blockchain
technology as the underlying platform for energy transactions
can effectively discourage the dishonest behavior
of MGCs, further enhancing the security and
reliability of the entire power grid [9].
Blockchain capabilities have flourished in smart contracts
over and above other applications. Smart contracts
are, by nature, self-executable scripts that take effect in
distributed transactions based on a predefined logic
arranged and accepted by all parties. Since smart contracts
sit on blockchains as the basis, parties have access
to a verifiable cryptographic record of contract execution
to trace transactions. Thus, microgrids can trade energy
through smart contracts to reach a high level of autonomy,
flexibility, and cybersecurity, knowing that other
microgrids should respect established rules and regulations.
Figure 10 illustrates a potential fog/edge architecture
enabling a transactive energy framework based on
smart contracts.
Accordingly, DERs available at each microgrid,
(a)
(b)
Figure 9. The data flow of ledgers in (a) a centralized
framework and (b) a blockchain.
Smart
Contract 3
Smart
Contract 2
Smart
Contract 1
MGC 2
MGC 1
DER 1
DER 2
DER 3
WAN: Wide Area Network
LAN: Local Area Network
Figure 10. A transactive energy framework for an ADN based on
smart contracts.
18 IEEE SYSTEMS, MAN, & CYBERNETICS MAGAZINE July 2022
DER 4
MGC 3
Edge Layer
DER 5
DSO
Cloud Layer
WAN
Fog Layer
which reside at the edge level of the architecture, would
send their generation/consumption schedules as data
blocks to the associated MGC. Please note that, for simplicity,
in Figure 10 only the DERs of microgrid 1 are
illustrated. Based on smart contract 1, MGC 1 optimizes
the utilization of associated DERs considering their
operational constraints and sends them back to the
DERs. Cybersecurity at this level is critical as information
protection is often not available for DERs. At the
fog layer, each MGC participating in the peer-to-peer
energy trading declares its preset rules
for energy exchange through an individual
smart contract to which other
MGCs can have access. The bids and
offers of microgrids are calculated
through individual smart contracts at
this level considering the optimal operation
schedule of the associated DERs.
Thus, if the conditions of the MGCs'
LAN
smart contracts are satisfied in a transaction,
negotiations pertaining to the
energy exchange will be terminated, and
the trading results will be published.
When MGCs make energy deals, the DSO
as a nonprofit authority coordinates and
approves transactions to ensure that
they are aligned with the optimal power
flow of the distribution grid and can
maintain its secure operation. Thus, the
DSO submits trading adjustment messages
to each MGC through another smart
IEEE Systems, Man and Cybernetics Magazine - July 2022

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