What is EVM?

The Ethereum Virtual Machine (EVM) is a decentralized computation engine that executes smart contracts on the Ethereum network. The EVM operates as a runtime environment distributed across thousands of computers (nodes) worldwide, ensuring every node processes transactions identically to maintain consensus.

The EVM enables several blockchain capabilities:

• Smart contract deployment and execution
• Decentralized application (dApp) operation
• Token creation (ERC-20, ERC-721, ERC-1155 standards)
• DeFi protocol functionality
• NFT minting and trading
• Decentralized autonomous organization (DAO) governance

Launched in July 2015 alongside Ethereum, the EVM introduced programmable blockchain functionality beyond simple value transfers. Conceptualized by Vitalik Buterin and designed by Gavin Wood, the EVM processes transactions through a deterministic system where identical inputs always produce identical outputs across all nodes.

How does EVM work?

The EVM operates as a stack-based virtual machine that processes smart contract code through a multi-step compilation and execution process.

Developers write smart contracts in high-level programming languages. Solidity is the most widely used language, with Vyper as a Python-like alternative. Compilers translate this human-readable code into bytecode—machine instructions the EVM can interpret.

When a transaction triggers a smart contract, the EVM loads the bytecode and begins execution. The EVM uses a 256-bit word size optimized for cryptographic operations like hashing and elliptic curve calculations that secure blockchain transactions.

The EVM processes bytecode through opcodes—low-level instructions that perform specific operations. These include:

• Stack operations (push, pop, swap)
• Arithmetic operations (add, subtract, multiply, divide)
• Memory operations (load, store)
• Control flow (jumps, conditionals)
• Account interactions (balance checks, transfers)

Every node runs the EVM simultaneously, processing the same transactions and reaching consensus on the resulting state changes. This distributed execution ensures no single entity controls contract outcomes.

EVM gas fees and limits

The EVM uses gas as a metering mechanism to measure computational work and prevent network abuse. Every operation consumes a specific amount of gas based on its computational complexity.

Gas prices are denominated in gwei, where 1 gwei equals 0.000000001 ETH. Transaction costs depend on two factors:

• Gas limit: Maximum gas units the sender allows for transaction execution. A simple ETH transfer requires 21,000 gas units, while complex smart contract interactions may require 150,000-250,000 units.
• Gas price: Amount the sender pays per gas unit. During network congestion, gas prices can spike from 10 gwei to over 200 gwei.

Following Ethereum's EIP-1559 upgrade, the fee structure includes:

• Base fee: Protocol-set price that adjusts automatically based on network demand, burned rather than paid to validators
• Priority fee (tip): Optional amount users add to incentivize validators to process transactions faster
• Max fee: Total amount the sender is willing to pay, calculated as (base fee + priority fee) × gas units used

For example, if the base fee is 25 gwei and a user sets a 2 gwei priority fee on a 21,000 gas transaction:

Total cost = 21,000 × (25 + 2) = 567,000 gwei = 0.000567 ETH

If a transaction runs out of gas mid-execution, the EVM reverts all changes but still consumes the allocated gas as compensation for the computational work already performed.

EVM-compatible blockchains

The EVM's standardized architecture allows other blockchains to implement EVM compatibility, enabling developers to deploy Ethereum smart contracts with minimal modifications.

Major EVM-compatible blockchains include:

• Layer 2 solutions: Arbitrum and Optimism use optimistic rollups to process transactions off-chain while inheriting Ethereum's security. Base, launched by Coinbase, also operates as an Ethereum Layer 2.
• Sidechains: Polygon provides a multi-chain ecosystem including sidechains, zk-rollups, and zkEVM solutions for scaling Ethereum applications.
• Alternative Layer 1s: Avalanche's C-Chain supports EVM execution alongside its unique subnet architecture. BNB Smart Chain offers EVM compatibility with faster block times than Ethereum mainnet.

EVM compatibility provides several advantages:

• Code portability: Smart contracts written in Solidity deploy across multiple chains without rewrites
• Developer tooling: Existing Ethereum development tools (Remix, Truffle, Hardhat) work across EVM-compatible chains
• Cross-chain interoperability: Tokens and contracts can interact across EVM networks through bridges
• Ethereum ecosystem access: EVM-compatible chains tap into Ethereum's 100M+ wallet users and established DeFi liquidity

Networks adopt EVM compatibility to attract Ethereum developers while offering improvements like lower fees, faster transactions, or specialized features. Avalanche reportedly processes over 4,500 transactions per second compared to Ethereum's approximately 15 TPS on mainnet.

Turing completeness and limitations

The EVM is Turing complete, meaning it can theoretically execute any computable program given sufficient resources. This enables complex smart contract logic including conditional statements, loops, and recursive functions.

However, the EVM's Turing completeness is constrained by gas limits. Gas serves as an economic mechanism to prevent infinite loops and denial-of-service attacks. If a contract consumes all allocated gas, execution terminates automatically.

This "quasi-Turing complete" design balances computational flexibility with network security. Developers must optimize contract efficiency to minimize gas consumption while maintaining functionality.

Common use cases for EVM

The EVM powers diverse blockchain applications across industries:

• Decentralized finance (DeFi): Lending protocols, decentralized exchanges, yield farming platforms, and automated market makers run on EVM-based smart contracts that execute financial operations without intermediaries
• NFT marketplaces: The EVM enables creation and trading of non-fungible tokens through standards like ERC-721 and ERC-1155, supporting digital art, gaming items, and collectibles
• Cross-border payments: Payment infrastructure companies use EVM-compatible blockchains to settle stablecoin transfers instantly at lower costs than traditional rails
• Token issuance: Companies launch fungible tokens (ERC-20) for utility, governance, or fundraising through initial coin offerings
• Supply chain tracking: Smart contracts on the EVM verify product authenticity and track goods through complex distribution networks
• Gaming: Blockchain games use EVM smart contracts for in-game asset ownership, play-to-earn mechanics, and interoperable items across multiple games
• Decentralized identity: Self-sovereign identity systems store verified credentials on-chain while giving users control over personal data

EVM vs non-EVM blockchains

Not all blockchains use the EVM. Non-EVM blockchains like Solana, Cardano, and Bitcoin implement different virtual machines or scripting languages optimized for their specific architectures.

Key differences include:

• Programming languages: EVM chains primarily use Solidity and Vyper, while Solana uses Rust, Cardano uses Haskell and Plutus, and Bitcoin uses Script
• Performance characteristics: Some non-EVM chains achieve higher throughput through alternative consensus mechanisms or parallelized transaction processing
• Developer ecosystem: EVM compatibility offers immediate access to Ethereum's mature tooling and extensive documentation, while non-EVM chains may require learning new development frameworks

For payment infrastructure and fintech applications, EVM compatibility simplifies multi-chain deployment. Companies can write smart contracts once and deploy them across Ethereum, Polygon, Arbitrum, Base, and other EVM-compatible networks, reducing development costs while expanding market reach.

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