A Zero-Trust Layer-2 Blockchain Architecture for Privacy-Preserving and Scalable Peer-to-Peer Energy Trading

Abstract

Blockchain technology is transforming peer-to-peer (P2P) energy trading by providing secure, decentralized, and auditable infrastructure. However, native on-chain implementations face significant challenges, including limited transaction throughput, high computational costs, and privacy risks related to prosumer energy data. To address these issues, this paper proposes a scalable and privacy-preserving Layer-2 (L2) off-chain energy trading framework anchored to a Layer-1 (L1) consortium blockchain. The architecture uses an L2 sequencer to execute a Continuous Double Auction (CDA), with heap-based data structures enabling efficient order matching. To support privacy, auditability, and scalability, the framework employs Pedersen commitments and a two-tier Merkle tree. The commitments and Merkle tree information are stored off-chain using the InterPlanetary File System (IPFS), while only summary proofs, specifically the Merkle root and net market commitment, are anchored to the L1 smart contract. This design significantly reduces gas costs and keeps on-chain costs constant regardless of workload. A proof-of-concept simulation evaluates the proposed system by demonstrating computational efficiency, homomorphic commitment consistency, and independent prosumer-side trade verification without exposing plaintext trade values.