Inside the Ethereum Virtual Machine: The Engine Driving Innovation - Reading time: about 3 minutes
Curious about the Ethereum Virtual Machine (EVM) and what it means for the crypto ecosystem? Well, this article seeks to shed some light on this component that is—and will continue—changing the face of the industry, particularly with the growing significance of EVM-compatible chains.
What is the Ethereum Virtual Machine?
The EVM is a key component of the Ethereum platform, the second-largest cryptocurrency by market cap and dominance as of this writing. It basically serves as a decentralized virtual machine that enables code written in Ethereum's programming language, Solidity, to be executed in a sandboxed environment using smart contracts. While the EVM exists as a single entity, it can be (and has been) powering all the applications on the Ethereum network within this runtime environment, making it an integral and tremendously powerful element of the protocol.
How Does The EVM Operate?
Meant to be deterministic i.e. expected to always produce the same output when given the same input, the EVM is designed to execute the smart contracts function securely by processing instructions from compiled native programming language (known as bytecode) without interfering with the overall functioning of the Ethereum network.
As a result, it enables the development of decentralized applications (dApps) on the Ethereum blockchain. dApps combine features of a typical application (as you have them on Google Play and Apple Store) with the capabilities of blockchain technology like decentralization, transparency, and security, without the need for an intermediary. The EVM enables dApps to use self-executing smart contracts, as well as interact with other contracts, to access blockchain data. Also, as gas is required to execute smart contract operations, the EVM’s gas mechanism helps prevent consumption abuse and improve efficiency for optimization in the transaction process.
In other words, when the Ethereum network is seen from the perspective of a playground, then the EVM is the toy factory, with dApps being the toys it produces. It brings ideas to life and allows developers to take advantage of the efficiency that has become synonymous with the Ethereum network.
These benefits have made the EVM even more popular, as it has become pivotal to the introduction of EVM-compatible protocols, which allow smart contract platforms to process transactions based on the same code as Ethereum—they have the ability to write smart contract code that is readable and recognizable by the EVM.
Why EVM-compatible Chains Are on The Rise
Data from DappRadar shows that EVM-compatible chains have been outperforming others in terms of network usage. As of February 2023, the platform that monitors dApps across various chains indicates that the top 10 most used dApps were built on EVM-compatible chains. dApps built on chains such as Binance Smart Chain (BSC), Polygon, and Avalanche, have all incorporated the power of the EVM to enable projects to scale, connect seamlessly, and adapt to changes as the virtual machine provides.
A major attribute that necessitates the use of EVM-compatible chains is their ability to create cross-chain bridges. The function allows for seamless communication and exchange of assets between blockchain networks, thus opening up the possibilities for interchain transactions and new use cases. This singular factor presents developers with a flexible option to build and deploy their dApps or smart contracts on the blockchain of their choice while, at the same time, maintaining compatibility with the established Ethereum ecosystem (and all the benefits that go with it).
When done properly, combining the strengths of various chains could result in projects functioning with lower fees and faster transaction times to be more appealing for project goals and users.
Aside from the easy integration with dApps which helps streamline the development process, the interoperability with the Ethereum ecosystem and Ethereum-based smart contracts enables developers to access existing tools and infrastructure that they can leverage to reduce the learning curve and save time and effort on building. This is particularly helpful for developers that are already familiar with Ethereum's programming language (e.g. Solidity) and development frameworks.
They also tap into Ethereum’s significant network effect which has developed over the years through its large user base, extensive liquidity, and the adoption of its native cryptocurrency, Ether (ETH) to enhance their project’s visibility and the adoption of their associated digital tokens among other things.
Another reason for the rise of EVM-compatible chains is that developers stand to gain access to the Decentralized Finance (DeFi) market—which is dominated by Ethereum-based applications—to offer their users services such as lending and yield farming.
While other blockchains like Solana and Fantom are now looking to compete with their own execution environments with features that seek to draw developers over, the Solidity-based EVM remains the most used in the Web3 space today. This is basically a result of the advantages it offers, which makes it attractive to developers, users, and stakeholders.
There are suggestions that the creation of EVM-compatible protocols is an indication of Ethereum’s lead in terms of innovation and decentralization. And from Ethereum’s larger user base to its more active community which can help provide valuable support and resources for developers, it is safe to say that EVM will remain the top option for offering a universal runtime environment that can guarantee predictable success for dApp projects. Moreover, with the ease at which EVM-compatible chains now build and deploy dApps, EVM is likely to maintain its spot as the industry leader for the foreseeable future, considering its widespread usage.