Preface

The emergence of Blockchain technology enables people to conduct decentralized, secure, and transparent information exchange. Not only can it facilitate cryptocurrency payments, but Ethereum's smart contracts also greatly expand the application layer, enabling various business logics and services. The Ethereum Virtual Machine (EVM) smart contract execution environment has become one of the most familiar platforms for developers in the blockchain industry, allowing the Ethereum blockchain to host a large and diverse ecosystem of projects.

However, with the development and innovation of Blockchain technology, different Blockchain projects have also begun to adopt or modify EVM to meet their own needs and characteristics. Different Blockchain projects compete in terms of compatibility, efficiency, security, scalability, etc., hoping to win the favor of users.

In EVM-supported blockchain projects, the Layer 2 ecosystem has received attention in recent years. However, in 2022, several black swan events occurred (such as the collapse of Luna and the closure of the FTX exchange), major public chain ecosystems encountered significant setbacks in 2022, leading to a continuous decline in overall development activities and user base.

With the rise of Arbitrum and Optimism, the flourishing DeFi ecosystem on Layer 2 has injected vitality into the quiet market again. Hundreds of thousands of users are returning to EVM chains to seek new opportunities. The competition for market share among public chain ecosystems is heating up again. In the following courses, we will introduce several blockchain projects that support EVM, analyze their differences, and finally discuss the development trends and challenges of future EVM projects.

Why support EVM?

A blockchain that supports EVM can create a code execution environment similar to EVM, allowing developers on Ethereum to easily deploy smart contracts to this chain without having to rewrite the code for smart contracts from scratch for this chain. This is very attractive to developers and can save them time and effort.

For users, the advantages of supporting EVM blockchain include lower gas fees, faster settlement speed, and the same address format as Ethereum, all of which can make the operating environment more user-friendly. In addition, there is high interoperability among EVM-supporting blockchains, which allows developers and users to use the same smart contracts and decentralized applications on different chains.

After the ICO bubble burst and the launch of major public chains in 2017, Ethereum's market share first experienced a significant decline and division. It hit bottom and rebounded in 2018, and the vibrant development of decentralized applications such as DeFi, NFT, and GameFi in 2020 once again boosted Ethereum's market share. Despite a slight decline during the bear market, with the upgrade of Ethereum 2.0 and the rise of the Optimism and Arbitrum networks, Ethereum's market share has nearly doubled in the past four quarters, returning to a high of 6%, still maintaining its dominant position in the public chain track.

Ethereum's market capitalization relative to blockchains other than Bitcoin

Currently, the EVM is the most mature and widely used smart contract environment, which has proven to safely run a large number of decentralized applications. In addition, the EVM supports multiple programming languages, allowing developers to choose the language that suits them to write smart contracts. Many blockchain projects have also adopted EVM architecture or compatible virtual machines, which means developers can use the same smart contracts and DApps on different chains and achieve cross-chain interoperability.

All in all, EVM-compatible public chains can make the blockchain ecosystem more diverse, and Ethereum is the most active chain for DeFi projects and users, as well as a gathering place for cutting-edge projects such as NFTs. If new public chains want to develop, the quickest way is to attract users from Ethereum by supporting EVM, in order to gain more advantages in the competitive market.

Pros and cons of supporting EVM

Advantages of supporting EVM:

• The most mature and widely used smart contract environment
  Ethereum has a large developer and ecosystem, with rich development tools support, making it easy for developers to create various decentralized applications (DApps). Therefore, for developers and enterprises, EVM is a low-risk, low-cost choice for developing and deploying blockchain applications, reducing learning and maintenance costs.

• Integrating different blockchain networks can bring obvious benefits
  EVM can be compatible or interoperable with other blockchain projects, such as Binance Smart Chain, Polygon, Arbitrum, etc. These projects all use EVM or EVM compatible virtual machines, allowing developers and users to use the same smart contracts and DApps on different chains. This increases the interconnection and interaction between blockchain projects, bringing more possibilities for the application and development of blockchain.

Disadvantages of supporting EVM:

• The performance and scalability of EVM are limited
  Each node needs to validate each transaction and execute each smart contract, which leads to problems such as slow transaction speed, high fees, low throughput, etc. This makes it difficult to implement certain applications such as high-traffic financial payment systems, large online games, high-frequency trading, big data storage, etc.

• The plasticity limitation of EVM
  Due to the need for EVM to maintain compatibility with the Ethereum blockchain, it is difficult to support some new features or capabilities, such as zero-knowledge proofs, cross-chain communication, sharding, etc., which need to be developed separately.

• Centralization crisis of EVM
  Different projects adopting EVM may suppress the development space and differentiated advantages of other blockchain projects, leading to market homogenization and centralization.

Despite these shortcomings of the EVM, as a mature and widely used smart contract environment, it still has many advantages, making it easier for developers and users to create and use blockchain applications. With the development of blockchain technology, EVM projects are also constantly innovating and improving, with the expectation of addressing its shortcomings, improving efficiency and scalability, enhancing security and reliability, and supporting more features and functionalities.

Blockchain projects that support EVM

• Fantom
  Fantom is a high-performance, low-cost public chain based on DAG (Directed Acyclic Graph) technology that can execute smart contracts and support EVM (Ethereum Virtual Machine). Fantom's consensus mechanism is Lachesis, an asynchronous Byzantine Fault Tolerance (aBFT) algorithm that enables fast transaction confirmation and a high level of decentralization. On the Fantom blockchain mainnet Opera, developers can deploy smart contracts and build DApps using the Solidity language. Fantom's token is FTM, used for paying network fees, staking, and governance.

• Cronos
  Cronos is a EVM-compatible blockchain network designed to expand the DeFi ecosystem on the Crypto.org chain, providing developers with the ability to migrate applications from Ethereum and other EVM-compatible chains. Cronos operates as a parallel chain to Crypto.org and is backed by the DeFi accelerator Particle B, launched by former CTO and co-founder of Crypto.com, Gary Or, which provides funding support and a range of development tools and resources, such as block explorers, Truffle, and Hardhat. The goal of the Cronos chain is to build an efficient, secure, and open blockchain network that connects with more than 10 million users within the Crypto.com ecosystem.

• Harmony
  The blockchain project Harmony supports EVM (Ethereum Virtual Machine) and Solidity smart contracts. In addition, it also supports Go language and WASM, which allows developers to use development tools and programming languages on EVM and deploy them more easily to the Harmony mainnet.

Harmony also adopts sharding technology, dividing the network, transactions, and state into multiple shards, each maintained by a group of validators. By introducing Verifiable Random Function (VRF) to achieve secure random sharding. VRF is a signature scheme used to generate random data. Harmony uses VRF to ensure that each validator is randomly assigned to a shard, ensuring the security of the entire network. In addition, Harmony's sharding technology is highly scalable, allowing more shards to be easily added to the network to improve throughput and network performance.

• EVMOS
  EVMOS is a blockchain project based on the Cosmos SDK, which supports EVM (Ethereum Virtual Machine) and smart contracts. EVMOS aims to provide an efficient, secure, and scalable platform for the Ethereum ecosystem and interconnect with other blockchains through the Cosmos network. Within the Cosmos ecosystem, EVMOS stands out uniquely, compatible with Ethereum tools and applications such as Metamask, Truffle, Remix, etc. It connects with the Cosmos Hub and other blockchain networks through the IBC protocol, supporting cross-chain asset transfer and data transmission. By adopting the Proof-of-Stake and Tendermint consensus algorithms, it achieves fast block generation speed and high throughput.

• Immutable X
  Immutable X is a Layer 2 protocol based on Ethereum, designed to provide efficient, scalable, and secure infrastructure for NFTs. By utilizing STARK zk-rollups technology, Immutable X enables the trading and creation of a large number of NFTs while maintaining the reliability and security of Ethereum. This allows users to benefit from instant transaction speeds and massive scalability without incurring any Gas fees.

Unlike other blockchain ecosystems in the Ethereum, Immutable X focuses on the application of NFTs and adopts a REST API abstraction layer, allowing every NFT-related interaction (such as minting, trading, and transferring) to be completed through simple API calls. This design is expected to attract more game and content companies to enter the NFT field, providing users and developers with a better user experience.

• Avalanche
  Avalanche is a mainstream public chain protocol that achieves high transaction output and scalability with a unique architecture. In addition to supporting EVM, it is also a competitor to Ethereum, aiming to provide support for decentralized applications and custom blockchain networks.

The Avalanche network consists of three independent blockchains, with C-Chain being the chain for smart contracts and DeFi applications, while X-Chain and P-Chain are used for sending and receiving funds on the Avalanche network and validating node activities.

Ethereum developers can run and deploy existing Ethereum applications and smart contracts on Avalanche, giving developers and users more choices and access to high transaction throughput, scalability, and secure services.

• EOS
  EOS is a smart contract platform based on the Delegated Proof of Stake (DPoS) consensus mechanism. It recently launched the EVM mainnet Beta version, allowing Ethereum developers to write and deploy smart contracts using the Solidity language, run their code on the EOS network, and be compatible with most decentralized applications (DApps) on Ethereum.

EOS's EVM has many advantages. First, it can leverage EOS's high performance and low fees to provide a better experience for developers and users. In addition, EOS combines Solana's speed and low cost with Ethereum's security and reliability, testing performance three times faster than Solana. The EOS team also promises to provide tens of millions of dollars in ecosystem funds for developers, opening doors for Solidity developers, and users in the future can also use services on the EOS network through wallets such as Metamask.

• Filecoin
  Filecoin is a decentralized storage network that allows users to rent out unused storage space to others and receive Filecoin tokens as rewards through blockchain technology and economic incentive mechanisms. The Filecoin team is developing a virtual machine called FVM, which includes an environment for EVM runtime so that Ethereum and Solidity developers can run their smart contracts on FVM without much modification. Developers can compile high-level Solidity code into EVM bytecode and execute it on FVM.

In addition to supporting the EVM, the project also plans to support the WASM virtual machine, which will execute faster than the EVM. The development team also recommends developers to use WASM to write Filecoin smart contracts to improve performance. The development is expected to be completed in the first quarter of 2023, at which time Filecoin will be able to have more interoperability with the Ethereum ecosystem.

• Near
  NEAR Protocol is a mainstream public chain, aimed at improving transaction speed, throughput, and interoperability, providing a friendly platform for developers and users. NEAR adopts a POS consensus mechanism called "Doomslug" and user-friendly account names. Doomslug is based on a two-round consensus, and when a block receives the first round of communication, it is considered final. This allows validators to take turns producing blocks, rather than competing directly based on their stake, achieving near-instant finality.

In addition, NEAR also adopts its unique Nightshade technology, an improved sharding scheme that achieves high throughput and instant transaction confirmation while maintaining low fees. NEAR achieves compatibility with the Ethereum Virtual Machine (EVM) through the Near EVM bridge, allowing developers to deploy and run Ethereum smart contracts on NEAR. Developers can use a variety of programming languages and smart contract frameworks, as well as enjoy NEAR's efficiency, low cost, and scalability.

• Zilliqa
  Zilliqa is a mainstream public chain protocol that adopts the PBFT consensus mechanism. Through sharding technology, it can effectively improve network throughput and achieve a high level of scalability. Zilliqa recently completed the development of compatibility with the Ethereum Virtual Machine (EVM), allowing smart contracts written in Solidity to be deployed and run natively on Zilliqa without any modifications. With this move, Zilliqa enables its ecosystem to attract a broader community of blockchain developers, and in the future, users will also be able to interact with the Zilliqa ecosystem using popular wallets such as MetaMask.

In terms of EVM compatibility extension, Zilliqa's programming languages Scilla and Solidity have achieved interoperability. Developers can deploy Scilla contracts to run on Ethereum, or deploy Solidity contracts to run on Zilliqa. Ethers.js and Web3.js are API libraries for interacting with EVM, which developers can use to build Ethereum-compatible applications.

Development trends of EVM projects and non-EVM projects

EVM compatible chains have a wide range of applications and important positions in the blockchain industry. Many emerging public chains have chosen to be compatible with EVM because EVM has good scalability, making it easy for Ethereum ecosystem projects to migrate and acquire users more easily. In addition, EVM also has a large developer community and an established ecosystem. These advantages have also been borrowed by other public chain projects.

According to the statistical data of Footprint Analytics, almost all of the top 10 blockchain networks by market value support EVM compatibility. In terms of the number and type of projects, there are more projects deployed on EVM compatible public chains than on non-EVM compatible ones. Nevertheless, non-EVM compatible public chains such as Solana account for more than 3% of the TVL compared to other EVM-related chains, and have secured a place in the fierce competition among public chains. Projects on non-EVM compatible public chains are usually more innovative, as these chains can generate more differentiated unique applications. EVM compatible chains are limited by the rules of Ethereum and EVM, and therefore have relatively poorer performance in terms of innovation.

The chart is from Footprint Analytics

The chart is from Footprint Analytics

Ethereum metrics slide, Layer 2 gains popularity

According to data from The Block, due to the bear market in 2022, the development and user activities of Ethereum and other public chains have decreased, with the non-EVM chains experiencing the largest decline. Although the activity of Ethereum and EVM-compatible chains has also declined, Ethereum itself still maintains a significant share.

Developers and user activities are important data for measuring the health of the blockchain ecosystem, which can usually reflect overall on-chain activities and the cryptocurrency market situation. When funds are withdrawn from the ecosystem, the funds for funding new projects and developers will decrease. Ethereum and BNB have the two largest crypto user bases, with 226 million and 274 million cumulative independent users, respectively. The average monthly growth rate of BNB Chain in the past year is 6%, but Ethereum's new user adoption rate has decreased by an average of 5%.

The number of smart contracts deployed on the Arbitrum network also saw significant growth by the end of 2022. On-chain data shows that the active addresses on Arbitrum have increased nearly 5 times against the trend, with a monthly average growth rate of 20% leading the industry. Arbitrum network retains more users than other ecosystems, with a retention rate of 30-40% over 12 months, while the industry average retention rate is below 20%. The popularity of Arbitrum and Optimism may be one of the reasons for the stagnant growth of Ethereum users.

The chart is from Messari

Traditional public chains hope to rejuvenate through EVM compatibility, and new projects will also choose EVM as their launch strategy. However, in today's market flooded with EVM public chains, it is not easy to attract market attention by simply implementing EVM. To maintain the popularity and capital flow brought by the ecological system after being connected, it is necessary to demonstrate the advantages beyond EVM in order to gain market recognition. Choosing EVM as the technical architecture is just the beginning.

Not EVM, seeking niche markets

Unlike EVM-based public chains that are moving closer to Ethereum, a large number of non-EVM public chains have their own unique features and compete with each other. Each project attempts to gain market share through specialized technology and application scenarios, showing a more free-spirited approach in conceptualizing, forming a situation where villages surround the city.

Application-oriented projects include the Cosmos and Polkadot blockchain networks, both dedicated to providing multi-chain interoperability and cross-chain communication capabilities. Cosmos interconnects independent blockchain networks through the Cosmos Hub, while Polkadot uses Parachains technology to allow developers to create unique functionalities and applications, providing better user services through customization.

Projects pursuing ultimate efficiency include Solana and the emerging Aptos and Sui networks. Unlike the horizontal layering and application sharding of blockchain networks, these high-speed blockchain networks aim to demolish and rebuild the existing framework, expecting to achieve multi-threaded expansion on Layer 1 through the development and introduction of new technologies. They all have better parallel computing designs to improve efficiency, but their performance in real-world applications still needs to be evaluated. Solana's frequent crashes are often criticized by users, and it remains unknown whether Aptos and Sui can withstand market stress tests.

Heterogeneous public chains have potential applications in fields such as DeFi, NFT, GameFi, payments, etc., and are more likely to establish ecological barriers through differentiation strategies. However, the development threshold of non-EVM compatible chains is relatively high, and the user migration cost is high. Whether it is possible to establish a loyal community and user base in the incremental market is a key factor in success.

Conclusion

In this course, we explored the dynamics of different EVM projects in the blockchain market. As the first blockchain network to implement smart contracts, the Ethereum ecosystem has a very obvious Matthew effect. Despite its poor performance, it still holds an absolute leadership position in terms of funding, protocol richness, user base, and other indicators.

Many public chain projects, in order to gain exposure and market share, have also chosen to support EVM to establish a bridge to the Ethereum ecosystem, in order to expand the developer community and ecosystem. However, supporting EVM is not without its drawbacks. On the one hand, it uses previous generation technology in terms of efficiency and plasticity, and on the other hand, it brings concerns about centralization.

Outside the Ethereum ecosystem, non-EVM protocols each strive to find breakthroughs and opportunities in technology or applications, but the high development threshold and conversion costs are the challenges that non-EVM projects must face before they can blossom. Institutions and enterprises often choose existing technical solutions and accept shortcomings to avoid exposure to unknown risks.

But Ethereum will not stagnate and watch the younger brothers below perform. The next Ethereum Improvement Proposal EIP-4844 will introduce the sharding technology of Proto-danksharding, and its efficiency improvement is expected to eliminate the reliance on Layer 2 protocols. However, this does not mean that Ethereum can continue to dominate. The only thing we are certain of is that the EVM battle will not end soon. With the rapid development of blockchain technology, new challengers will also join this party.

Key Review

• EVM is currently the most mature and widely used smart contract environment, supporting multiple programming languages. EVM-compatible public chains can make the ecosystem more diverse and rich. Different projects also adopt or modify the Ethereum Virtual Machine EVM to meet their own needs and characteristics.
• Blockchain that supports EVM has lower Gas fees, faster settlement speed, good interoperability, and is in line with the usage habits of most users.
• With the rise of Arbitrum and Optimism, the Layer 2 ecosystem is once again attracting market attention, intensifying the competition for market share in the public chain ecosystem.
• Ethereum is the most active chain for DeFi projects and users, as well as a gathering place for cutting-edge projects such as NFTs. The emerging public chains that support EVM can divert traffic from Ethereum and gain more advantages in the competitive market.
• The advantages of supporting EVM include a mature and widely used smart contract platform, programming in multiple languages, and compatibility or interoperability with other blockchain projects.
• EVM compatible chains play a crucial role in the blockchain industry, with almost all of the top 10 blockchain networks supporting EVM compatibility.
• The EVM project can enjoy the market dividend of Ethereum, but supporting EVM also has disadvantages in efficiency and plasticity, as well as centralization concerns.
• Non-EVM public chain projects are usually more innovative, striving for market share with specialized technology and application scenarios. However, the high development threshold and conversion costs are the issues they face, and institutions and enterprises generally prefer existing technologies to mitigate risks.
• The Ethereum ecosystem has a significant Matthew effect. Despite its relatively lackluster performance, it holds an absolute leadership position in all indicators, and sharding technology is the next focus of development.