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The Compelling Case For EVM Compatibility
By Nitin Kumar
Note: this article was adapted from the version originally published on the Forbes Technology Council site.
The Ethereum virtual machine (EVM)—aka the CPU of Ethereum—has captured a large developer mindshare in recent years. At least two waves (2017 and 2020) of Ethereum killers launched themselves in the name of alternatives (non-EVM) and better technological solutions but did not drive meaningful adoption at scale.
In my experience working with 200 enterprises and projects over the past few months, I’ve discovered some clear patterns that have emerged to make the enterprise case for EVM compatibility a requirement.
Speed, Efficiency And Network Effects
Developers can rapidly deploy smart contracts without rewriting code from scratch, creating speed-to-market appeal and efficiency. This attracts more developers and users to EVM-compatible chains, driving a network effect (i.e., Metcalfe’s Law). The network effect has established the EVM ecosystem as the de facto standard to reach developers and users, which enterprises and Web3 creators view as a distinct advantage.
Layer 2 ecosystem
Adoption And Amplification Friendliness
Some chains like 0x have lower network fees, faster transaction settlement and similar address formats. There are large and well-funded EVM-compatible chains with massive communities such as Binance Smart Chain, Avalanche, Fantom and Hedera, with supporting Layer 2 ecosystems like Arbitrum and Optimism adding to the strength of adoption around EVM-compatible chains. The Layer 2 ecosystems built on Ethereum have unlocked Reed’s Law of network effects (exponential to Metcalfe’s Law), with their own ecosystems growing at a more rapid rate than Ethereum itself. These phenomena are attractive to developers and enterprises commencing their Web 2.0 to Web3 journeys.
Barriers to new entrants
Interoperability And Security
Using incompatible languages and non-EVM has created barriers for rival chains to communicate between blockchains or transfer assets without fragile bridges. Frequent hacks on bridges have been widely reported, and enterprises are unwilling to put themselves at risk. I’ve worked with multiple chief information security officers who have been very concerned about this issue. Many Layer 1 blockchains understand this and have supported EVM on their chains.
Leaders And Challengers
Other than Ethereum and its ecosystem (e.g., Polygon, Optimism, etc.), there are a few possible winners on the enterprise turf.
Hedera, with its EVM compatibility and enterprise-friendly packaging, can enable a lot of functionality to be consumed as a service, and its KYC’ed validators lead the pack. Avalanche has focused on EVM compatibility, scalability and low gas fees as well as going SOC2-compliant, creating an appeal for enterprises. There are some new challengers in Polygon, Near Protocol and Algorand, where one can see a lot of promise and fan following. However, it remains to be seen how they fare when tested at a massive enterprise-grade scale. Many other protocols have tall claims toward the enterprise but have not resulted in enterprise adoption and are far behind in their understanding of enterprise needs.
Ethereum may not technically be the best VM in town (it is old), but the network effects (Metcalfe’s Law and Reed’s Law)—coupled with dominant first-mover advantage—are hard to beat. As ETH 2.0 unfolds (slower pace of execution than many people want), EVM will also be upgraded to a newer version. Until then, however, developers will likely live with older technology rather than trade-off adoption, reach, amplification, interoperability, compliance and security.
I don’t believe there is a compelling reason for enterprises to deal with non-EVM. A quick search can reveal the magnitude of adoption differences between EVM and non-EVM chains. In the multi-chain future, especially enterprise Web3 projects will prefer to work with known technology with proven advantages, which should drive adoption as developers understand the risk that many non-EVM blockchains could likely not exist or languish in their current state.
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