These slides are used to introduce the concept of blockchain and how this technology can be used for peer to peer energy exchange linked with the wholesale energy market

1. BLOCKCHAIN: DEFINITIONS AND
CONCEPTS / VISION APPLY ON THE
ENERGY SECTOR
David Vangulick, PHD candidate University of Liège

2. AGENDA
• Introduction
• Definitions
• Concepts
• Role of miner
• Proof of work
• Proof of Stake
• Applications
• The Energy Sector
• Perspectives

3. INTRODUCTION
Talk about blockchain ...
It's opening a door to the
unknown
It's taking a step into a
strange world
It is humble to admit that
knowing everything is
impossible

4. DEFINITIONS
• The blockchain is not:
• Bitcoin, Ethereum, Litcoin ...
• Reserved for dark (deep) web
• A way found by mafia organizations or even terrorists wishing to go below the radar of
the authorities
• A thing for"crypto-punko-anarcho-Trotkist"

5. • Blockchain is
• An open, distributed ledger that can record transactions between two parties efficiently
and in a verifiable and permanent way.(*)
• (*) M. Iansiti and K. R. Lakhani, “The truth about blockchain,” Harvard Business Review, vol. 95, no. 1, pp. 118–127, 2017.
• A set of cryptography and information technologies put together to create a robust
system based on game theories and consensus.
DEFINITIONS

6. CONCEPTS
• Doing an exchange= create a transaction
Transaction
Georges Victoria
Mary

7. CONCEPTS
• The transactions are grouped into a block that is connected to the previous block.
It's the role of the miner to do so.
Transaction
Georges Mary
Transaction
Ferdinant Charlotte
Georges Charlotte
Ferdinand Victoria
Charlotte Victoria
Georges Mary Miner
POOL
Block H
Block I
Block J
Block K

8. CONCEPTS
• To create a valid transaction,
• First you have to prove the property of what you want to exchange
• Because we have received it from someone (and that we can go back to the origin)
• Because we have the right to create it
• You need to know the address of the recipient (his public key)
• The sender must sign
HMS Monarch (1911)
HMS Majestic (1895)
Launched during the reign of Victoria,
transmitted to Edward VII, then to Georges

9. CONCEPTS
• To perform these verification tasks and to effectively protect the ledger against
attacks, we need a technique that produces a control key that is:
• Effective from a computational power point of view (ideally with standard equipment
like CPU or GPU)
• Replicable i.e.
• the result always the same size (eg 256 bytes)
• Is identical if the entry is exactly the same
• Does (almost) never gave the same result if the input is different (even slightly) (collision
free)
• Reduces (or hides) the initial information
• Is not predictable (pseudo random) on the result
• => Cryptography
=> Cryptographic Hash Function

10. • Cryptographic Hash Function (e.g. SHA 256)
CONCEPTS
Input message
HASH
5b3594c5db15b9528a815452932e14
2b9ea9a04d07a5a51ab9335e494d84
d07e
“Ceci est un test”
a6e32f02f9101795f42ae6ace6c8cbf2
580199438737809db2bca9e4e6be2d
b6
“Ceci est un Test”

11. • Cryptographic Hash Function (e.g. SHA 256)
CONCEPT DE BASE
Input message
HASH
The reverse operation is
impossible

12. ROLE OF THE MINER
• The miner has a key role:
• He/she must check if the transaction is correct
• Guarantee of the origin of the « goods » : (Merkel tree)
Each miner keeps the whole chain of blocks

13. ROLE OF THE MINER
• The miner has a key role:
• He/she collects the transactions to put them into a block
that has a maximum size (to be able to manage the total size
of the chain)
• Who should be encentivized to play the game properly
• Who we do not trust (a priori)
To respect these requirements, there are 3 protection walls:
• The miner is chosen (pseudo) randomly in a community of
miners
• Other miners approve the work done by adding the newly
created block to their own blockchain
• Only the longest blockchain is valid

14. ROLE OF THE MINER
• The miner can be anyone who wants to put computing
power and storage space available to a community to
support a chain of blocks
• But how to motivate miners to put themselves as
candidate and how to select them "randomly“
• There are 2 ways
• « Proof of Work »
• « Proof of stake »

15. PROOF OF WORK
• Principle
• Solve a mathematical puzzle without knowing the starting image
• When the miner is successful, he/she receives an incentive (eg 12.5
Bitcoin are created) in addition to the transaction fees
• The probability of success (creation of a block) is known: eg. on
average every 10 minutes
• Avantages
• Simple to implement
• Allows you to vary the difficulty according to the computing power
to maintain the average resolution time
• Disadvantages
• High energy consumption
• Encourages the creation of specific equipment (no more in the
philosophy of using existing equipment)
• Do not allow processes with strong time synchronization

16. TX n
TX …
PROOF OF WORK
• Way of working = Hash
HASHTX 2
TX 1
Hash bloc -1
Nonce Ok create a blockyesno
Hash between
0000000000000000000000000000000000000010000000000000000000000
0000000000000000000000000000000000001000000000000000000000000

17. PROOF OF STAKE
• Principe
• Randomly designated (creating a random number)
• At most a miner has stake (interests/Wealth), the more likely he/she could be selected
• Payment based on transaction fees
• Avantages
• Energy efficient
• Can be temporally synchronized
• disadvantages
• Motivation of minors (only tx fee)
• Since it is not very expensive to make a block, the minor may be tempted to follow
several chains in parallel (weakened the consensus)

18. Voting token
•For each Tx a token
E (of a given value)
is created and is
assigned to the
transmitter (k)
Candidates
Announcement
•Each candidate
sends the #E that
he/she is ready to
use
Computation of the
Stake/Wealth
•For each candidate
=
Generation of random
numbers
•For each candidate
Uk between ]0;1]
Selection of the best k
•k =arg max Wk / Uk
PROOF OF STAKE
• Example
𝛼𝐸 𝑇 𝑖−1
𝑘
+
𝛽𝐴 𝑇 𝑖−1
𝑘
+
𝛾𝑅 𝑇 𝑖−1
𝑘
𝑖
A = Age of the last block created by the candidate
R = reputation of the candidate (e.g. # of her/his block in
the main chain )

19. APPLICATIONS
• Crypto currency
• goal : Being an alternative to the banking system bypassing intermediaries (central bank,
regulatory body)
• Allows relative anonymity (no need to know people's data, only their public key is
needed)
• Type of operation :
• « The code is the law !»
• Proof of work
• Main actors
• Bitcoin (and all the relative): The first fully operational blockchain created by a myth Satoshi
Nakamoto in 2008
• Ethereum (Proof of stake (Casper) Q1 2018 ? )

20. APPLICATIONS
• Case Bitcoin : valorization: 248.817.190.555 $ (december, 11th 2017)

21. APPLICATIONS
• Agri-food supply chain traceability
• “An agri-food supply chain traceability system for china based on rfid & blockchain
technology,” in Service systems and service management (icsssm), 2016 13th international
conference on, 2016, pp. 1–6.
• Follow up of clinical trial on human being
• “On the design of a blockchain platform for clinical trial and precision medicine,” in
Distributed computing systems (icdcs), 2017 ieee 37th international conference on, 2017, pp.
1972–1980
• Electronic Citizenship
• E-residency: A business platform for industry 4.0?” Entrepreneurship and Sustainability Issues,
vol. 3, no. 3, pp. 216–227, 2016.
• On line gaming (bet): “Blockchain: Best Thing For Gaming Since Invention of Internet”

22. SECTEUR DE L’ÉNERGIE
• A lot of initiatives e.g.:
• GRID + (https://drive.google.com/file/d/0Bz90riPGRHquNDVXVE81RmppaUk/view)
• In the short term: Energy Retailer relying on Ethereum to reduce these operating costs
(50%)
• Process Automation (Meter reading and Payment)
• Sort of pre payement(via cryptocurrency stored in smart agent)
• On the long run: Peer to Peer
• Operates on the basis of a particular token whose value is "guaranteed" by GRID +
• NRG token
• It's a VUB paper on creating a token to exchange energy between neighbors
• M. Mihaylov, S. Jurado, N. Avellana, K. Van Moffaert, I. M. de Abril, and A. Nowé,
“NRGcoin: Virtual currency for trading of renewable energy in smart grids,” in European
energy market (eem), 2014 11th international conference on the, 2014, pp. 1–6

23. THE ENERGY SECTOR
• A lot of initiatives e.g.:
• Solarcoin
• Origin Energy Trading plateform (Australie)

24. PERSPECTIVES
• The world of electricity needs to rethink its model to highlight the shortest circuits,
become unavoidable in the face of decentralized productions: It is the Peer to Peer,
collective self-consumption
• Local production can be shared between a producer and a consumer
• Accept and understand that this does not interest all categories of customers
• If the disruptive character of Peer to Peer is obvious, it must be borne in mind that
the electrical system depends and will always depend on the balance between
demand and generation.
• The notion of balance by 1 / 4h for Belgium and soon for all Europe
• For a LV customer, so far, his consumption profile is determined statistically (SLP
Profiles), but tomorrow ...
• There is a need for a mechanism to make a bridge over the gap between this new world
and this essential balance.

25. PERSPECTIVES
• Such a mechanism should ensure that :
• Precision and accuracy of measurements
• Trade and exchange traceability
• Respect for private life: that is to say, offer enough defence so that an external attack
can not access personal information
• Split "peer to peer" exchanges perfectly with what comes from the market on the same
time base
Does the blockchain meet these requirements?

26. PERSPECTIVES
• Precision and accuracy of measurements
• Trade and exchange traceability
• Respect for private life: that is to say, offer enough defence so that an external
attack can not access personal information
• Split "pairwise" exchanges perfectly with what comes from the market on the same
time base
Depends on the interface between the physical world and the blockchain but
also the speed of transactions
Ok, that's intrinsic to the very concept of blockchain
Ok, if we admit that anonymity is sufficient
Not ok with Proof of Work
To develop with Proof of Stake
=> The energy token do not allow it