Learning Objectives:

  • Describe the Ethereum ecosystem and its significance for DeFi.

  • Explain the Ethereum Virtual Machine (EVM), smart contracts, and token standards.

  • Understand the role of ERC20 and ERC721 standards.

4.1 The Ethereum Ecosystem

Ethereum is the leading platform for decentralised applications (dApps) and the foundation of the DeFi ecosystem. UCL’s module requires a detailed understanding of the Ethereum ecosystem, including the Ethereum Virtual Machine (EVM), token standards, and smart contract deployment . The HKSI course includes a dedicated section on “The Ethereum ecosystem” .

4.2 The Ethereum Virtual Machine (EVM)

The EVM is the runtime environment for smart contracts on Ethereum. It is a Turing-complete virtual machine that executes code in a decentralised manner, ensuring that smart contracts run exactly as programmed without the possibility of downtime, censorship, fraud, or third-party interference .

4.3 Smart Contracts

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. UCL’s module covers “smart contract deployment” as a core topic, including practical experiences such as minting tokens on testnets . Smart contracts are the building blocks of DeFi, enabling automated lending, borrowing, trading, and other financial services.

4.4 Token Standards: ERC20 and ERC721

Ethereum token standards define the rules for creating and managing tokens on the Ethereum blockchain :

  • ERC20: A standard for fungible tokens, used for cryptocurrencies and utility tokens within DeFi applications.

  • ERC721: A standard for non-fungible tokens (NFTs), enabling unique digital assets with distinct characteristics.

 

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