Under the Hood: How Ethereum Powers Markets
Unlike traditional databases that are siloed and proprietary, Ethereum is a shared global state machine. This means every participant sees the same truth at the same time.
Smart Contracts as Clearing Houses
In the traditional world, clearing and settlement takes days (T+2) because multiple intermediaries (brokers, clearing houses, custodians) must reconcile their ledgers.
On Ethereum, a smart contract acts as the automated clearing house. When a trade is matched, the asset and payment are swapped atomically. Settlement is instant (T+0).
Simplified Settlement Logic
token.transferFrom(buyer, seller, amount);
cash.transferFrom(seller, buyer, price);
}
The World Computer (EVM)
The Ethereum Virtual Machine (EVM) is the global processor that executes smart contacts. It is:
- Turing Complete:Can execute any complex logic or financial algorithm.
- Deterministic:The same input always produces the exact same output, everywhere.
- Isolated:Code runs in a sandbox, protecting the rest of the network.
Transaction Lifecycle
The Transaction Execution Flow
Sign
User signs transaction with private key
Broadcast
Transaction sent to memory pool
Validate
Nodes verify signature & balance
Block
Transaction included in new block
Finalize
Block added to canonical chain
Smart Contracts in Action
Smart contracts are self-executing programs that run on the EVM. They act as automated custodians and clearing houses.
Why this matters for Equities?
Instead of a broker sending a PDF instruction to a custodian who calls a clearing house... code just runs.
Input: "Buy 100 TSLA"
Logic: Check Balance → Transfer Assets → Update Ownership
Output: Done (in 12 seconds).
Contract Simulator
Visualize how state changes on-chain