Abstract Prosumer-dominated thermal networks interconnect distributed prosumers. These networks form the infrastructure that allows to execute the trading of thermal energy as desired in the context of local energy markets. However, the significantly different behavior of such networks compared to conventional district heating and cooling networks has not yet been comprehensively investigated. This paper provides a compilation of instrinsic characteristics of prosumer-dominated thermal networks and discusses challenges that arise from these characteristics. As a basis for the investigations an underlying reference concept for the considered type of networks is described. Simulative case studies are combined with scientific deduction and literature references to gain new insights on the design and operation of this type of networks. It is found that due to the variability in these networks, the definition of a design case is a challenge for the dimensioning of concrete network implementations. To anticipate the strong coupling between prosumers and the nonlinear network behavior, it is concluded that centralized control combined with a model of the physical network behavior is necessary. The discussion of characteristics and challenges in prosumer-dominated thermal networks indicates open points in this field and thus provides a starting point for consecutive studies.