Ethereum Blockchain Architecture: A Beginner’s Guide to Understanding Its Structure and Function

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Understanding blockchain technology doesn’t require a computer science degree. With the right breakdown, even non-technical readers can grasp how systems like Ethereum work. This article dives into the Ethereum blockchain architecture, building on foundational concepts to explain how transactions, smart contracts, and the Ethereum Virtual Machine (EVM) interact to power one of the most influential platforms in decentralized technology.

We’ll explore the journey of an Ethereum transaction—from initiation to confirmation—and examine how smart contracts are deployed and executed. By the end, you'll have a clear picture of what makes Ethereum more than just a cryptocurrency network.

The Evolution: From Blockchain 1.0 to Ethereum (Blockchain 2.0)

Bitcoin introduced the world to decentralized digital currency, but its functionality is limited to transferring value. Enter Ethereum, widely recognized as Blockchain 2.0, which expanded the use of blockchain beyond payments by introducing smart contracts—self-executing agreements coded directly onto the blockchain.

Vitalik Buterin envisioned a platform where developers could build decentralized applications (DApps), enabling everything from token issuance to complex financial instruments. This leap was made possible through Ethereum’s unique architecture, particularly the Ethereum Virtual Machine (EVM).

👉 Discover how Ethereum powers next-gen decentralized applications

What Is the Ethereum Virtual Machine (EVM)?

At the heart of Ethereum’s innovation lies the Ethereum Virtual Machine (EVM)—a runtime environment that executes smart contracts across all nodes in the network.

Since nodes run on different hardware and operating systems, the EVM ensures consistency by providing a standardized computational environment. Every node runs the EVM independently, executing the same instructions and arriving at the same state changes—this is crucial for maintaining consensus across the decentralized network.

The EVM handles:

All operations within Ethereum are processed through the EVM, making it the engine behind every interaction on the network.

The Lifecycle of an Ethereum Transaction

Unlike Bitcoin’s UTXO (Unspent Transaction Output) model, Ethereum uses an account-based model, similar to traditional banking. There are two types of accounts:

  1. Externally Owned Accounts (EOAs) – controlled by private keys (users)
  2. Contract Accounts – controlled by code (smart contracts)

Let’s walk through three key scenarios in Ethereum’s transaction lifecycle.

A. Simple Ether Transfer

When a user sends ETH to another address, here’s what happens:

  1. The user initiates a transaction via a wallet (e.g., MetaMask).

  2. They specify:

    • Recipient address
    • Amount of ETH
    • Gas price and limit
    • Optional input data (e.g., a message)
  3. The transaction is signed using their private key.
  4. The signed transaction is broadcast to nearby Ethereum nodes.
  5. Nodes verify that the sender has sufficient balance in the state database.
  6. Valid transactions enter the transaction pool (Tx Pool), sorted by gas price.
  7. Miners (or validators post-Merge) prioritize high-gas transactions for inclusion in a new block.
  8. The transaction is executed in the EVM, updating account balances.
  9. Once confirmed, the block is added to the chain and propagated across the network.

This process ensures secure, trustless value transfer with transparency and immutability.

B. Deploying a Smart Contract

Smart contracts are programs deployed on Ethereum that run exactly as coded.

Here’s how deployment works:

  1. Developers write contract code using tools like Remix IDE.
  2. The code is compiled into bytecode, a machine-readable format.

  3. A deployment transaction is created:

    • To: address is set to 0x0 (null address), signaling contract creation
    • Input Data contains the compiled bytecode
    • Appropriate gas limits are set based on complexity
  4. The transaction is signed and broadcast.
  5. Upon validation, nodes execute the bytecode in the EVM.
  6. The contract is stored in Program Code ROM—a read-only memory space.
  7. A unique contract address is generated based on the sender’s address and nonce.
  8. The contract can now store data in memory (e.g., tracking token balances for ERC-20 tokens).
  9. The final result—including gas used—is recorded in the blockchain.

Once deployed, a smart contract cannot be altered—ensuring code integrity and trustlessness.

👉 Learn how developers build secure smart contracts on Ethereum

C. Interacting With a Smart Contract

Users interact with deployed contracts through function calls:

  1. A DApp interface generates a transaction targeting the contract address.

  2. The transaction includes:

    • Function selector (first 4 bytes of the function signature hash)
    • Encoded parameters in hexadecimal format
  3. The user signs and broadcasts the transaction.
  4. Nodes validate funds and add it to the Tx Pool.
  5. Miners pick up the transaction and execute it in the EVM.
  6. The EVM retrieves the contract code, identifies the function, and processes inputs.
  7. For example, calling transfer() in an ERC-20 contract updates token balances accordingly.
  8. Results are written back into the state database upon successful execution.

This interaction model enables powerful decentralized applications—from DeFi protocols to NFT marketplaces.

Frequently Asked Questions (FAQ)

What is Gas in Ethereum?

Gas is the unit measuring computational effort required to execute operations on Ethereum. Users pay gas fees (in ETH) to compensate miners/validators for processing transactions and running smart contracts.

Can smart contracts be changed after deployment?

No. Once deployed, smart contracts are immutable. However, developers can design upgradeable contracts using proxy patterns—though this introduces additional complexity and risk.

How does Ethereum ensure all nodes agree on state?

Through consensus mechanisms: originally Proof-of-Work (PoW), now Proof-of-Stake (PoS) after "The Merge." All nodes run transactions through the EVM independently and compare results, ensuring agreement across the network.

What happens if a transaction runs out of gas?

If gas is insufficient, the transaction fails, changes are reverted, but gas fees are still charged since computational resources were consumed.

Why is the EVM important for decentralization?

The EVM provides a sandboxed, deterministic environment so every node computes the same outcome regardless of underlying hardware—critical for maintaining trustless consensus.

How do wallets interact with Ethereum?

Wallets manage private keys and facilitate transaction signing. They don’t store ETH directly but control access to your account on the blockchain via cryptographic signatures.

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Final Thoughts

Ethereum represents a paradigm shift in how we think about computing and trust. Its architecture—built around accounts, smart contracts, and the EVM—enables a new era of decentralized innovation. While complex under the hood, its core principles are accessible: transparency, immutability, and autonomy.

Whether you're sending ETH, deploying a token, or interacting with a DeFi protocol, understanding these foundational mechanics empowers you to navigate the Web3 landscape with confidence.

👉 Start exploring Ethereum-based assets securely today