Thread by @pseudotheos

Let's start 2022 off with the basics and dive into the Ethereum Virtual Machine (EVM), the current smart contract standard, and how it works. We'll also discuss how L2s open the door to a supercharged EVM!

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The ETH blockchain exists to run a state machine, the EVM. Let's break it down further, and discuss what a state machine is!

A state machine is any machine that takes inputs and provides outputs based on those inputs. Here's a diagram of a simple state machine:

Your computer is a (very complex) state machine. It takes user and program inputs and changes state depending on the inputs.

Now that we have basic knowledge of state machines, onto the EVM. Every wallet, token, and smart contract lives inside this state machine. Think of the Ethereum Virtual Machine as a distributed computer that everyone has access to.

Bitcoin blocks update the Bitcoin ledger to track wallet balances and synced between nodes. The EVM uses blocks to update the machine state and make sure the state is synced across the network.

When you send an Ethereum transaction, you sign + send an instruction to this machine to change state. This allows for arbitrary flexibility with dApps and smart contracts, as well as value transfer just like Bitcoin!

Here's a diagram from ethereum.org for an EVM visualization.

Alright, so why does changing the machine state cost Gas? Gas is the cost of changing state. The more complex the state change is, the more it costs. There is also a gas limit per block. This keeps the network secure.

Because the state change (execution) is on-chain, there is a limit to the complexity and a cap on how much the state can change at any given time, as the blocks have limited space. With rollups, the execution is off-chain.

The completed output of the state change is then "rolled up" into the equivalent of a .zip file of transactions and published to Ethereum L1. There's a lot of fancy math involved proving that the state changes were legitimate, but that's for another time.

With zero knowledge rollups, gas isn't as much of an issue, which opens the door to smart contracts that would be impossible on L1! #L222 is here, and the future is VERY bright.