BLOCKCHAIN May 2023

Ethereum Virtual Machine, everything you need to know about the blockchain

The Ethereum Virtual Machine (EVM), is a fundamental part of the Ethereum network and is responsible for executing smart contracts on the platform. Here we mention everything you need to know about this blockchain giant.

Index

• 1. Introduction, definition and utility of the Ethereum Virtual Machine
• 2. The infrastructure of the Ethereum Virtual Machine
• 3. The tasks of the Ethereum Virtual Machine
• 4. How the Ethereum Virtual Machine works
• 5. Ethereum Virtual Machine and network costs
• 6. Ethereum Virtual Machine and the gas fee of the network
• 7. Some smart contract use cases that can be created on the Ethereum Virtual Machine
• 8. The steps a developer must follow to create a smart contract on the Ethereum Virtual Machine

Introduction, definition and usefulness of Ethereum Virtual Machine

The Ethereum Virtual Machine (EVM), is a fundamental part of the Ethereum network and is responsible for executing smart contracts on the platform.

The EVM is a purpose-built virtual machine that runs on every node in the Ethereum network. It allows developers to write smart contracts using programming languages such as Solidity and then compile them into Bytecode that can be interpreted by the EVM. Smart contracts are self-contained computer programs that run on the Ethereum blockchain.

The EVM is a completely isolated execution environment, meaning that any code running on it has no direct access to the operating system or underlying hardware. This ensures that smart contracts run predictably and securely on all nodes in the Ethereum network.

In addition to executing smart contracts, the EVM handles Ethereum's native cryptocurrency, called Ether (ETH), and performs operations such as fund transfers and calculations related to contract execution.

EVM also enables the development of decentralized applications (dApps). Its versatility and security have driven the adoption and growth of the Ethereum ecosystem, providing innovative opportunities in crowdfunding, gaming, decentralized finance and more. EVM is a key component that provides the ability to reliably and securely execute code in Ethereum's decentralized environment.

The Ethereum Virtual Machine infrastructure

The Ethereum Virtual Machine has no physical hardware of its own, but simulates the operation of a powerful machine on the network. It could be compared to a virtual processing center where special software such as smart contracts is developed and executed.

It is not located in a single place, but consists of components that are coupled from different locations, converging into a puzzle that makes the "unit" of the machine that can be accessed from different terminals on the network.

This virtual machine is great because it doesn't require a huge warehouse full of super powerful hardware. Instead, everything happens in a digital environment where network users can voluntarily join and volunteer their processing power in exchange for receiving Ethereum rewards. It's as if they couple their hardware from their physical location to the EVM to aggregate processing power and confluence into a collective super machine.

Developers, meanwhile, can leverage this machine to create and execute the fundamental smart contracts they need for their decentralized applications (dApps). It's like having a digital laboratory at everyone's fingertips.

The tasks of the Ethereum Virtual Machine

The Ethereum Virtual Machine (EVM) is tasked with monitoring and controlling the state of each block in the Ethereum network. Although it sounds like a form of monitoring, it actually refers to state changes, which are events that trigger actions in computational systems. These changes can be on/off, activation/deactivation, sending/receiving data, or movement of files or documents.

These state changes cause changes in the data structure of the systems. EVM is responsible for examining state changes in the network and decentralized applications (dApps) to ensure the decentralized operation of Ethereum and its software. This involves considering aspects such as network congestion and priorities of operations.

Thanks to EVM, any developer can run code within an ecosystem that does not rely on trusting third parties. In addition, software execution and the results of interactions are guaranteed and predictable in this environment.

How the Ethereum Virtual Machine works

The Ethereum Virtual Machine (EVM) is a virtual machine that functions as a simulated computer system within Ethereum. It has its own hardware (CPU, memory, storage) and software (operating system, applications, files). However, the EVM has specific properties that distinguish it.

When a transaction or an operation occurs in a decentralized application (dapp), it triggers the execution of a smart contract. At this point, the EVM comes into action to monitor the necessary state changes and record them in the blocks generated in the network.

The EVM is completely isolated, as an independent entity that cannot be manipulated from the network. This ensures that the software implementation does not affect the transactional operation of the network or the management of Ethereum accounts. In addition, this isolation protects the EVM from potential malicious attacks.

The underlying Ethereum protocol ensures the continuous, uninterrupted and immutable operation of this special virtual machine. However, it is important to note that the EVM may experience disruptions due to its internal regulatory system.

Ethereum Virtual Machine and network costs

The Ethereum Virtual Machine (EVM) has the ability to run programs developed in Solidity, its supported programming language. However, this freedom has led to an increase in demand as the ecosystem of decentralized applications (dApps) grows. To regulate and prioritize transactions, as well as prevent a program from running indefinitely, EVM records the costs of implementing and executing smart contracts in units of Gas, a sort of tariff similar to other blockchain networks.

In Ethereum, Gas is used to order traffic and is part of the network's incentive system. When there is high operational demand on Ethereum, more Gas is charged. If someone wants priority processing, they can also pay more Gas. This Gas fee is paid with ETH, Ethereum's cryptocurrency, which has a variable value.

These two factors combined mean that virtually never will two similar transactions made at different times pay the same dollar rate. This is important to keep in mind when calculating trading costs on Ethereum.

Ethereum Virtual Machine and the network gas fee

The EVM plays a critical role in Ethereum's decentralized economy by managing gas fees, which are the costs associated with trading on the network. These gas fees are used to maintain Ethereum's economic system by compensating block validators and providing incentives, such as staking rewards.

Each code operation on Ethereum has a gas fee, which varies depending on the complexity of the code. These gas fees are collected and used to reward block validators in Ethereum's current proof-of-work system. They also function as a security measure, as the operational cost of carrying out a massive attack on the network becomes prohibitive.

Gas not only has monetary implications, but also technological ones. There are limits that determine the maximum amount of gas that can be consumed in all transactions in a block, which in turn determines how many transactions can be included in a block. Currently, this limit is 8 million gas per block, which is roughly equivalent to 380 single ETH transfers from one direction to another.

Some use cases of smart contracts that can be created on the Ethereum Virtual Machine.

Smart contracts on the EVM enable the creation of decentralized crowdfunding platforms. These contracts can set clear rules for how funds are raised and distributed. Participants can contribute Ether to a smart contract and, once the set funding goal is reached, the funds are automatically released to the project. This eliminates the need for middlemen and provides transparency and security in the crowdfunding process.

Another use case is the creation of blockchain-based digital games and collectibles. Smart contracts can define rules and properties of game elements, such as characters, items and non-fungible tokens (NFTs). These contracts can guarantee ownership and authenticity of digital assets, as well as enable direct exchange and sale between players without the need for a central intermediary.

EVM, too, has fueled the rise of decentralized finance on the Ethereum network. Smart contracts enable the creation of DeFi protocols that offer a wide range of financial services without traditional intermediaries. Examples include peer-to-peer lending, decentralized exchanges, interest generation and financial derivatives. These smart contracts define the rules and terms of financial services, providing transparency and automation in transactions.

The steps a developer must follow to create a smart contract on the Ethereum Virtual Machine.

We will describe the steps in general lines, although depending on the context or specific requirement these steps may vary or be subtly different:

1. Choosing a programming language: The first step is to choose a programming language compatible with the EVM, such as Solidity. Solidity is a language similar to JavaScript and is widely used to develop smart contracts in Ethereum.

2. Write the contract code: Once the language has been selected, the developer can start writing the smart contract code. This involves defining the variables, functions, and rules you want to set in the contract. For example, if you are creating a crowdfunding contract, you can define how the funds will be raised and distributed.

3. Compile the contract: After writing the code, you must compile the contract to convert it into bytecode understandable to the EVM. The compilation translates the source code written in Solidity into low-level instructions that the EVM can execute.

4. Deploy the contract to the Ethereum network: Once the contract has been compiled, the next step is to deploy it to the Ethereum network. This involves sending a special transaction that includes the contract bytecode to the network. The transaction will be processed by the Ethereum nodes and the contract will be deployed on the blockchain.

5. Interact with the contract: Once deployed, the smart contract can interact with other Ethereum contracts and users. Users can send transactions to the contract to execute its functions and get responses. For example, in a crowdfunding contract, users can contribute funds by sending a transaction to the contract.

6. Test and audit the contract: It is important to perform thorough testing and security audits on the smart contract to ensure its proper functioning and protect the assets involved. This involves testing different use cases and scenarios, as well as performing code reviews and security analysis.

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