For the problems of large communication load and low security in the transmission process of distributed smart grid terminal data, based on the blockchain technology, this paper proposed a novel data privacy protection algorithm for distributed smart grid terminal. To be specific, by judging whether there are malicious relay nodes in the transmission path, the relay nodes whose trust degree does not satisfy the threshold are isolated from the whole blockchain network, which can ensure the security of the public ledger and realizing that private data will not be disclosed. The experimental results show that, compared with the traditional data privacy protection technology, the proposed algorithm has strong practicability, effectively improves the security factor of data in the transmission process, and provides effective protection for the safe access of information and data privacy of distributed objects in smart grid. And compared with the traditional methods, the distributed data storage effectively solves the single point of failure problem and enhances the resilience of the network. And the combination with blockchain technology provides powerful support for more complex smart grid environments.