Alternative EVMs as the New DeFi Development Frontier

The Ethereum Virtual Machine, or EVM, is the key to running decentralized applications, or Dapps, on the Ethereum network. This is what makes Ethereum so much more sophisticated than the Bitcoin network; it is not just a ledger for recording transactions, but a distributed state machine, which according to the Ethereum website, can change from block to block according to a pre-defined set of rules, and which can execute bytecode (more on this below). Smart contracts live on the EVM, providing the basis for DeFi, a core pillar of the much-anticipated Web 3.0.

So are things that simple? Not by a long shot. While developers and users are hobbled by Ethereum’s slow throughput and high fees linked to network congestion, other blockchain projects are currently housing EVM’s on their own networks (or working towards this goal), giving developers the capacity to create and execute smart contracts in a better environment, while still being completely compatible with the Ethereum network.

What is a Virtual Machine?

As succinctly described in MyCrypto.com’s Medium post, virtual machines are a layer of abstraction between the executing code and executing machine. Virtual machines give users a way to run different or simulated operating systems without having access to the developer’s network or file system. This is perfect for decentralized applications, as once a Dapp is deployed, it cannot be manipulated by the person who created the smart contract the Dapp is written on, nor can any other singular individual.

What is an Ethereum Virtual Machine?

An EVM is slightly different from a normal virtual machine in that the many different nodes that make up the Ethereum network provide the distributed computational power to interpret and validate the smart contracts that are sent to it. This means that people from all over the world are using their computers to provide you with the power to deploy your smart contract and have it verified in a decentralized way.

How are Dapps deployed using an EVM?

Below is the flow related to executing a smart contract in the Ethereum Virtual Machine (in broad general steps).

1. Developers will often use an integrated development environment (IDE), such as Remix, to write a smart contract.
2. When developing on Ethereum, the developer-friendly Solidity programming language is used (although as EVMs for other blockchains develop, different languages are used; for example, NEAR uses Rust). Once you have written a smart contract, you will find it cannot be directly executed by the EVM.
3. A compiler (often built into the IDE) will take your code and make it machine-readable by reducing it into opcodes, which are then encoded to bytecodes for efficient storage. Once your Solidity (or other) source code is compiled into bytecode, it can then be executed directly by an EVM.
4. Finally, the smart contract code needs to be deployed so that it can become available to network users. This is achieved by sending an Ethereum transaction containing code without specifying a recipient.

Note: If not using the test network, you need the requisite gas fees, which are higher than for a normal transaction and depend on the operations encoded into your smart contract.

Benefits of an EVM

There are a few clear benefits that EVMs bring to the table:

1) Deterministic — This means that the whole history of the network will always provide the same outputs relative to inputs. If it were non-deterministic, changing over time or place, it would make it impossible for the decentralized nodes to reach consensus.

2) Secure — Virtual machines, as stated above, are shut off from other networks. The Ethereum Virtual Machine has its own originally defined set of opcodes. Execution of arbitrary code that does not conform to the Ethereum smart contract specification is not possible. The EVM is also sandboxed, preventing it from having access to other processes on the executing machine resulting in security through isolation.

3) Turing complete — An EVM is theoretically Turing complete, meaning that given enough time and computational power, it can solve any problem, no matter the complexity.

4) Infinite loop resistance— The EVM was implemented with a condition that transactions must set the maximum number of computational steps that it is allowed to take. This safeguard is used to prevent a malicious actor from recursively calling contracts that lead to an infinite loop, potentially halting nodes on the network.

Why are different protocols introducing their own EVMs?

It is only recently where varied projects have begun to build EVMs into their blockchains. This has been done for a simple reason; as we wrote about in our blog post, multichain ecosystems are the future of blockchain. While the talk used to be about “Ethereum killers”, it is increasingly obvious that there is no one blockchain that can satisfy the needs of growing groups of developers, companies, investors, and more. Now, the talk has shifted to interoperability as the key to expanding the DeFi network as a trusted part of Web 3.0.

Interoperability means that other blockchains can work with Ethereum (and each other) to create great applications that have more reach than ever before. An EVM on a blockchain that offers greater speeds and reduced transaction costs (now that Ethereum gas fees are routinely over $100 for even basic transactions), gives developers the ability to create applications that are completely compatible with Ethereum, just without the downsides. Furthermore, applications that are already on Ethereum can be ported to another blockchain’s EVM, so that users can benefit from the benefits that a newer and more scalable blockchain brings.

Alternative Blockchain EVMs

As mentioned above, gas fees are required for any transaction on the network, which is one of the major factors in the increasing popularity of other Layer 1 and Layer 2 blockchain solutions. Having an EVM is a way to grow interest in your project among investors and developers, encouraging the latter to develop native applications on your blockchain that remain Ethereum compatible.

1. Aurora — Aurora is an EVM developed by the NEAR Protocol team, with complete Ethereum compatibility. This means that if you were developing (or have already developed) a smart contract for the Ethereum blockchain, it can be deployed on NEAR instead, leveraging extremely fast-transactions, low transaction costs, and other developer-friendly features (while using ETH as a base currency).
2. Acala — In the last couple of months Acala EVM+ has appeared, linked to the Polkadot ecosystem. Acala EVM+ provides an analogous development environment to Ethereum while leveraging substrate, Polkadot’s blockchain framework. Any Dapp can be deployed on Polkadot with minimal changes; it even integrates the MetaMask wallet for the benefit of users.
3. Avalanche — Coming out of obscurity, Avalanche has become one of the most talked-about blockchain projects this year, with its native token rising by 4000% since the start of the year. Its primary network is comprised of three chains; Exchange X Chain, Platform P chain, and Contract C chain. The contract chain executes its own smart contracts, as well as EVM contracts, for complete Ethereum compatibility.
4. Ambrosus — Ambrosus is one of the original EVM-based blockchains that has this functionality built into its platform. It’s 95% compatible with Ethereum code, so only minor adjustments need to be made to take advantage of the network. Ambrosus is a truly decentralized blockchain ecosystem, with over 600 nodes providing lightning-quick transactions at negligible fees. For this reason, it has already had success with recording and transacting IoT data for supply chains; but it can be used for any type of decentralized application.

EVMs as the new DeFi development frontier

As mentioned above, EVMs are one crucial element driving interoperability in the blockchain world. Multichain ecosystems are no longer siloed, and in the near future, people will most likely be able to access Dapps without even needing to know what blockchain they are built on. As we reach the end of 2021, next year’s developments are already generating excitement, whether it be talk of DeFi 2.0, Ethereum upgrades, the Metaverse, Web 3.0, or IoT integration. In any case, my team and I are ready to support projects with advanced smart contract development, security audits, and any other blockchain- or DeFi-related project in between.

Make an appointment with INC4 to find the best solutions for your projects today!