Ethereum Virtual Machine (EVM): What Is It & How It Works

You’ve probably heard before that if Bitcoin is the digital gold, then Ethereum is the digital oil used to run Web3. But what does that mean exactly, and how does the Ethereum Virtual Machine (EVM) fit that narrative?

Imagine a world where contracts and agreements can be digitally signed and executed without the need for sheets of paper, hours of reading, or intermediaries. That is the magic of smart contracts, which are powered by the Ethereum Virtual Machine.

So, what is EVM, how does it work, and what are its benefits and drawbacks? Join us as we explain this intricate concept in simple terms to help you better understand how the world of cryptocurrencies functions in general.

What Is an Ethereum Virtual Machine (EVM)?

The Ethereum Virtual Machine serves as Ethereum’s “operating system.” The concept was created by Vitalik Buterin in 2013, developed by Gavin Wood, and implemented in 2015. To better understand what EVM is, here are the two key concepts you should be aware of:

1. Virtual machines are (usually remote) digital simulations of computers. They can run apps and programs just like regular PCs.
2. Cryptocurrency blockchains are platforms that process and record crypto transactions. For instance, Bitcoin’s blockchain is often referred to as a distributed ledger, as it stores information about transactions on the computers of every network participant.

Vitalik Buterin combined these two concepts into one and created EVM—a programmable platform that could do more than just process transactions. In essence, he created a distributed virtual machine.

Programs that developers can create and run on an Ethereum Virtual Machine are called smart contracts. They are designed so that they self-execute when the terms written into the code are met. As a result, there’s no need for third parties to govern their administration.

Moreover, being a cryptocurrency platform, EVM maintains some of the benefits. For instance, it features a decentralized approach to smart contract implementation and execution. This means that no single entity has full control over the system, which makes it secure and tamper-proof.

Finally, the Ethereum Virtual Machine was developed with the original blockchain principles in mind, creating a trustless and transparent system.

What Is the Purpose of the Ethereum Virtual Machine?

The purpose of the Ethereum Virtual Machine is to act as a decentralized computer that runs the Ethereum network. It enables a myriad of functionalities that helped popularize Ethereum and make it the world’s most popular cryptocurrency, second only to Bitcoin.

Here are some of the main features of the EVM:

• Smart contract support. The main reason for the development of the EVM is to enable the creation and deployment of smart contracts. They make the Ethereum network programmable, are self-executing, remove the need for third-party interference, and prevent fraud, downtime, or censorship.
• DApp support. Decentralized applications represent a combination of multiple smart contracts with a user interface to create a Web2-like experience for users. DApps run using the Ethereum Virtual Machine, and they can be developed to facilitate everything from blockchain gaming to DeFi financial services while enjoying blockchain perks.
• Transaction support. The EVM has the functionality of simpler blockchain networks, such as Bitcoin’s. One of its primary purposes is still to facilitate transactions by ensuring all nodes in the network reach a consensus. After that, these transactions are packed into blocks and stored on the blockchain.

The existence of the Ethereum Virtual Machine has enabled applications and EVN crypto projects such as NFT marketplaces, DEXs, play-to-earn video games, gambling services, and more.

How Does Ethereum Virtual Machine Work?

The Ethereum Virtual Machine works as a layer that connects dApps and smart contracts with hardware. The EVM itself was written in C++, but the native programming language used for its smart contracts is Solidity.

However, the EVM is Turing-complete. That means it can theoretically perform any computation, given enough time and resources. It’s also compatible with most modern programming languages, including JavaScript and Python.

Still, the Ethereum Virtual Machine can’t “understand” the code written in a programming language directly. Instead, it has to go through the Ethereum compiler, which converts the code into bytecode, which is machine-readable.

Here’s a simple step-by-step list describing how a piece of code written in a programming language turns into an executable smart contract:

1. Solidity Code
2. Ethereum Compiler
3. EVM Bytecode
4. Ethereum Virtual Machine
5. Smart Contract

One of the key components that helps the EVM work is the gas mechanism. Since the EVM is a global, decentralized computer, every transaction or smart contract initiated requires a fee to be paid.

This fee exists as compensation for the resources used by node runners to facilitate transactions and execute smart contracts. The more complex the operation, the higher the gas fee.

Why is the Ethereum Virtual Machine Important?

The Ethereum Virtual Machine represents a vital element of the Ethereum ecosystem and the world of decentralized finance. Its ability to support smart contracts removes the need for any type of intermediary or central governing authority to enforce the contract’s terms.

Furthermore, the EVM is a platform for innovation. It allows competent programmers to build decentralized applications usable in various sectors, from entertainment to finance. It’s also one of the main reasons for the massive surge in popularity of NFTs.

Additionally, it plays a vital role in maintaining the network’s security and stability. It ensures that each node on the network processes transactions identically to maintain the integrity of the blockchain.

Finally, the Ethereum Virtual Machine fosters inclusivity and global accessibility. Anyone who meets the minimum hardware requirements and has an internet connection can run a node on Ethereum.

6 Benefits of EVM

The biggest benefits of the Ethereum Virtual Machine are as follows:

1. It’s Turing-complete, which means it’s programmable and can solve any problem that you give it. For instance, that stands in contrast to the Bitcoin network, which doesn’t offer that level of flexibility and is instead tailored towards transactions.
2. The intrinsic nature of the blockchain makes the Ethereum Virtual Machine secure. It’s almost impossible to tamper with or hack the Ethereum network, making it a reliable platform.
3. It creates a stress-free setting for developers since the EVM operates in a “sandbox” environment. They can execute their code without worrying about disrupting the network or impacting someone else’s data.
4. The open-source nature of the EVM allows developers from all over the world to contribute to the platform. And while the virtual machine is compatible with various programming languages, Solidity is arguably the best choice. Fortunately, there are plenty of tools and documentation that can help anyone join the ecosystem.
5. It isn’t exclusive to the Ethereum blockchain. There are many other EVM-compatible chain ecosystems, such as Tron, Avalanche, BSC, Polygon, Optimism, Arbitrum, and so on.
6. These are just some of the reasons why many consider the EVM to be the foundation for Web3 development. It offers a robust and versatile environmentthat drives innovation while ensuring security.

4 Downsides of EVM

While the EVM offers plenty of benefits, it’s important to recognize some of its drawbacks, such as the following ones:

• The EVM network can run into congestion issues during periods of high activity. This can lead to slow transaction times and exceptionally high gas fees, which can severely impact the user experience. Gas fees can get so high that it becomes impractical for some users to transfer funds or execute smart contracts.
• While there are many resources to help people learn Solidity, there is still a learning curve that can be a barrier to entry for new developers. And while it’s possible to write EVM-compatible code using other programming languages, even slight issues with optimization can drive gas fees up, making projects ineffective.
• The immutability of smart contracts, while necessary for security and stability, can be a serious drawback, as it prevents code modification. If developers find bugs or issues with smart contracts, they won’t be able to fix them. Instead, they’ll have to relaunch the contract again, at full cost.
• While the EVM is stable and tamper-proof, that can’t be said for every smart contract on the Ethereum network. Smart contracts can have security vulnerabilities left in them, either accidentally or deliberately. If they aren’t audited by a knowledgeable and reputable entity, they can be exploited, which can result in losses for some users.

Key Takeaways

The Ethereum Virtual Machine stands as a testament to the power of blockchain technology. In fact, it’s arguably the second-most important achievement in the world of cryptocurrency after the introduction of Bitcoin. The EVM enabled the creation of smart contracts and dApps, which continue to pave the way for a decentralized future.

While there are still challenges to overcome, the continuous innovation that the EVM fosters keeps it in the spotlight among crypto enthusiasts. So, anyone looking to understand the possibilities and potential future of cryptocurrencies and DeFi should keep a close eye on the EVM and the way it progresses.