Enhancing Peer-to-Peer Energy Trading in Smart Grids through Blockchain Interoperability Using Layer Zero

Blockchain technology has emerged as a transformative force across various industries, including the energy sector. It has notable potential to enhance efficiency, security, and transparency in peer-to-peer energy trading systems within smart grids. However, the diverse and often incompatible nature of different blockchain platforms poses significant interoperability challenges. This paper explores the critical issue of blockchain interoperability in the context of peer-to-peer energy trading in smart grids. We review existing interoperability mechanisms such as notary mechanisms, relay chains, hashed time-locked contracts, and blockchain routers, evaluating their applicability and limitations. Additionally, we propose an innovative approach leveraging Layer Zero for seamless cross-chain communication. Our proposed system utilizes an ERC-20 compatible cryptocurrency for secure and accurate energy trading, ensuring the integrity of transactions through token burning and minting processes. Through detailed analysis and case studies, this paper aims to provide a comprehensive understanding of how decentralized technologies can be harnessed to create a more efficient, secure, and sustainable energy system. The findings highlight the importance of overcoming interoperability challenges to fully realize the benefits of blockchain in the energy sector.