LeoFinance - What is EVM and Why Is It Important to be EVM Compatible?

EVM is short for Ethereum Virtual Machine. In today's post we discuss the premises of what EVM means and moving forward why it is important to know if a blockchain project is EVM compatible. A lot maybe at stake when it comes to investing in decentralized finance (DeFi) so lets begin.

What is Ethereum Virtual Machine (EVM)?

Bare with me as I am no programmer here, but get the fundamentals of EVM that would be easy for anyone to grasp. The popular Ethereum blockchain is likely derived from its ability to create smart contracts. Smart contracts can be think of as running programs that gets executed under a set of conditions that is met. The programs are often have the execution automated.

What makes smart contracts very popular stems from DeFi. From operating complex mathematical algorithms and keep track of all operations it makes finance simpler for people to understand and invest in. Bottom line with out smart contracts we would not have liquidity pools to farm, NFTs to play, and many other creative uses we are doing today in the crypto space.

On that note EVM is important in regards that blockchains can run their own smart contracts that can tie back to Ethereum blockchain. Why would any other blockchain want to link back to Ethereum? Ethereum currently has close to 60% of all Defi total value locked.

As the founding father of smart contracts the most adoption of blockchain with smart contracts is none other than Ethereum. Other blockchains that wants to compete in the smart contract space would only grow their onboarding if they have some form of linage with Ethereum. This is where EVM comes in.

EVM compatible allows blockchain to operate on the Ethereum blockchain whether on a layer 1 or layer 2. This in turn allows the non-Ethereum blocks to run their own smart contracts and still be recorded on the Ethereum blockchain. With the collaboration of an EVM compatible blockchain to Ethereum blockchain the non-Ethereum blockchain can integrate the Ethereum user base directly with the compatibility of Ethereum blockchain.
Lets look at one of the most overlooked examples of EVM compatibility.

Metamask

Millions of cryptocurrency users will know what Metamask and the main reason it is so popular is because the wallet can store many different kind of coins and tokens on multiple blockchains. From coinmarketcap the top 10 blockchains by market cap has 8 of them EVM compatible. By being EVM compatible it allows the blockchains to connect to Ethereum there by use any product or application that is developed for Ethereum can be also used for EVM compatible blockchains. For instance a Metamask wallet can store BNB tokens of the Binance Smart Contract chain or FTM tokens of the Fantom Directed Acyclic Graph (DAG) and so on. These chains and DAGs are EVM compatible therefore can be used on Metamask.

Conclusions

Metamask is just the tip of the iceberg. Any application that uses ETH for smart contracts such as DeFi projects in liquidity pools, borrowing and lending, NFT smart contracts, and so forth can all be forked and applied to the blockchains that are EVM compatible. This allows multiple blockchains to offer similar products that ETH can perform or have an unified collaboration with ETH projects without building a product from scratch.

ETH was the first in smart contract and hence have so much adoption relatively speaking than many of the other blockchains after it. As smart contracts remain very important in the expansion of the crypto space and user adoption it is vital that many of the blockchains that want to operate with smart contracts be able to link to the ETH blockchain. That way the chains can link users together and share ideas of projects and applications to one another. A form of collaboration in the crypto space that would draw closer to unifying the mass in crypto rather than divide them.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!