What Is Ethereum Virtual Machine (EVM)?

What Is EVM? 

Ethereum Virtual Machine is a software environment responsible for executing the terms of smart contracts and running decentralized applications (DApps) on the Ethereum network. Simply put, EVM is a global distributed computer capable of performing any computational task given sufficient resources.  

Key Features of EVM 

The virtual machine plays a key role in the operation of the ETH blockchain: 

Execution of smart contract code 

When a user initiates a new operation, EMV launches the algorithm code and executes the specified conditions. Each Ethereum node (a computer or server that supports the network) has a copy of the virtual machine that autonomously processes transactions. This ensures that a smart contract will execute identically on all devices, regardless of their location or configuration.

Support for security and decentralization of operations

A network with EVM receives additional protection against attacks and fraud. The executable code of smart contracts is isolated from the main blockchain system and cannot harm it. 

Moreover, EVM eliminates centralized control over operations, and the large number of nodes makes the network resistant to censorship and failures. Even if some of them fail, others will continue to support the blockchain. 

Support for DApp development and deployment

EVM allows you to create DeFi services, games, NFT marketplaces, and more.

Smart contracts are created using the Solidity programming language. During development, the algorithm code is converted into a format that EVM can understand. As a result, DApps can run correctly on all devices. 

How Does EVM Work? 

EVM manages two types of Ethereum blockchain states: 

• At the machine level, it is responsible for executing transactions in real time by executing the algorithm code and consuming node resources. 
• At the general level, it stores smart contract data, wallet balances, and the results of executed transactions. 

The Concept of Gas and Its Role in EVM Calculations

Gas is a special unit of measurement for resources in the Ethereum network that performs two important functions: 

• Determines the cost of calculations. Each operation in EVM requires a certain amount of gas — the more complex the code, the more resources it consumes. 
• Protects the network from overload. If transactions were free, attackers could run endless computations and block the network.

When making a transaction, the user sets a Gas Limit — the maximum amount of resources they are willing to spend. EMV executes the code, consuming gas. If there are too few resources, the transaction will not be completed, but the sender will lose the gas already spent. If the limit is high but the actual consumption is lower, the balance is returned to the user.

Advantages and Limitations of EMV 

Now that we know what EVM is, let's look at the pros and cons of this technology.

Advantages

EVM supports: 

• Decentralization. Anyone can develop and deploy smart contracts on the Ethereum blockchain without prior permission. 
• Security. EVM executes code in an isolated environment, protecting the network from attacks and errors. 

Limitations

The Ethereum Virtual Machine also has disadvantages: 

• High fees and low speed. Processing a limited number of transactions per second slows down the network, and under high load, operations become expensive. 
• Risk of errors. Vulnerabilities in the code can lead to financial losses, and fixing or updating an already deployed algorithm is a complex and costly task.

EVM-compatible Blockchains

Some networks use the same virtual machine as Ethereum. Let's take a closer look at the different types: 

• Sidechains. These networks support EVM but operate according to their own rules. They reduce the load on Ethereum and decrease transaction costs. Examples of sidechains: Polygon PoS (optimal for DApps), Gnosis Chain (a decentralized network with a focus on security), Loom Network (a platform for games and social networks on the blockchain). 
• Layer 2 (L2) solutions. These EVM networks operate on top of the Ethereum blockchain. They use Rollups technology to combine multiple transactions into one, speeding up transactions. Examples: Optimism (focus on speed), Arbitrum (cheap and secure transactions), zkSync (instant transfers).

Compatible EVM networks are technologies that allow programmers to transfer DApps from Ethereum to other systems without rewriting code, while investors save on fees.

To interact with the Ethereum virtual machine and compatible blockchains, you need a crypto wallet that can generate an EVM address. What does this mean? These services allow you to store and send cryptocurrency and actively use DApps, smart contracts, and NFTs. They have private cryptographic keys that enable you to manage assets and sign transactions, as well as public keys used to create EVM addresses. This is a public identifier (a string of characters) used to receive funds and perform other actions on the blockchain.

Examples of EVM Use

Ethereum Virtual Machine has given investors and the crypto community many innovations, reducing dependence on banks and other centralized systems.

ERC-20 tokens

Smart algorithms allow you to create and manage digital assets, such as ERC-20 tokens. They are used in payment systems, DeFi projects, and for issuing stablecoins.

Decentralized exchanges

On DEX platforms, you can exchange cryptocurrencies without intermediaries through smart contracts. Automatic market makers provide liquidity, simplifying trading.

NFT

These are unique certificates that confirm ownership of digital objects (art, music, game items). Smart contracts and computers are used to create NFT collections.

DeFi lending 

Smart contracts allow you to lend and borrow funds without banks. Finance is available against the collateral of cryptocurrency, while lenders can earn interest.

Prospects for EVM Development 

The Ethereum roadmap includes many initiatives that will optimize the performance of its virtual machine. An update to Pectra is planned for 2025, which includes several improvements: 

• EIP-7702 will allow users to temporarily program wallets as smart contracts and perform more complex operations. Also, when executing transactions, the sender will be able to delegate gas fees to other users. 
• EIP-7251 will increase the maximum validator stake from 32 ETH to 2048 ETH, eliminating the need to split the amount across multiple nodes. 

Conclusion

EVM has changed how blockchains work, paving the way for creating smart contracts and DApps. Today, it serves as the foundation for Ethereum and many other networks, providing developers with a flexible platform for innovation. The technology continues to evolve, and upcoming updates promise to make blockchain interactions even more versatile and convenient, and transactions faster and more accessible.

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