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Decentralized identity (DID) enables secure, peer-to-peer energy trading by verifying prosumer credentials (e.g., solar panel ownership) via VCs. Smart meters issue real-time consumption proofs, allowing grid operators to balance supply/demand dynamically. Microgrid participants use DIDs to authenticate transactions, reducing fraud. Blockchain-based reputation systems incentivize reliable energy sharing, while ZKPs protect user privacy during data exchanges.