Automating Bulk Commodity Trading Using Smart Contracts

Blockchain technology as an approach for decentralized and distributed ledgers provides a natural fit solution for trading applications. A number of existing approaches have been developed in the recent years aiming to support trading in various markets by means of this technology. However, the role of blockchain in these approaches is in many cases confined to recording the consensus on the transferred assets prescribed by trade agreements that are made outside of the chain itself. The premise of this work is that blockchain smart contracts can actually be leveraged to automate the creation of those trading agreements, adding a new level of autonomy in the operation of the market itself. For these purposes we design and realize as a proof of concept an Ethereum-based network of peers trading electricity automatically using Solidity smart contracts. Beyond introducing automated matchmaking capabilities for bids in the market, the proposed approach also offers balancing of computational effort across peers. An additional benefit is that it minimizes the influence of single nodes to the operation of the automated market by moving into a proof of stake-like scheme of rotating leadership for block mining. Experimental evaluation of the work shows promise, but further work is required for a full blown solution. Lessons learned for Ethereum-based solution development are also offered.