diff --git a/ethchain/state_transition.go b/ethchain/state_transition.go
new file mode 100644
index 000000000..6ec9205e9
--- /dev/null
+++ b/ethchain/state_transition.go
@@ -0,0 +1,206 @@
+package ethchain
+
+import (
+	"fmt"
+	"github.com/ethereum/eth-go/ethutil"
+	"math/big"
+)
+
+type StateTransition struct {
+	coinbase []byte
+	tx       *Transaction
+	gas      *big.Int
+	state    *State
+	block    *Block
+
+	cb, rec, sen *StateObject
+}
+
+func NewStateTransition(coinbase []byte, tx *Transaction, state *State, block *Block) *StateTransition {
+	return &StateTransition{coinbase, tx, new(big.Int), state, block, nil, nil, nil}
+}
+
+func (self *StateTransition) Coinbase() *StateObject {
+	if self.cb != nil {
+		return self.cb
+	}
+
+	self.cb = self.state.GetAccount(self.coinbase)
+	return self.cb
+}
+func (self *StateTransition) Sender() *StateObject {
+	if self.sen != nil {
+		return self.sen
+	}
+
+	self.sen = self.state.GetAccount(self.tx.Sender())
+	return self.sen
+}
+func (self *StateTransition) Receiver() *StateObject {
+	if self.tx.CreatesContract() {
+		return nil
+	}
+
+	if self.rec != nil {
+		return self.rec
+	}
+
+	self.rec = self.state.GetAccount(self.tx.Recipient)
+	return self.rec
+}
+
+func (self *StateTransition) MakeStateObject(state *State, tx *Transaction) *StateObject {
+	contract := MakeContract(tx, state)
+	if contract != nil {
+		state.states[string(tx.CreationAddress())] = contract.state
+
+		return contract
+	}
+
+	return nil
+}
+
+func (self *StateTransition) UseGas(amount *big.Int) error {
+	if self.gas.Cmp(amount) < 0 {
+		return OutOfGasError()
+	}
+	self.gas.Sub(self.gas, amount)
+
+	return nil
+}
+
+func (self *StateTransition) AddGas(amount *big.Int) {
+	self.gas.Add(self.gas, amount)
+}
+
+func (self *StateTransition) BuyGas() error {
+	var err error
+
+	sender := self.Sender()
+	if sender.Amount.Cmp(self.tx.GasValue()) < 0 {
+		return fmt.Errorf("Insufficient funds to pre-pay gas. Req %v, has %v", self.tx.GasValue(), self.tx.Value)
+	}
+
+	coinbase := self.Coinbase()
+	err = coinbase.BuyGas(self.tx.Gas, self.tx.GasPrice)
+	if err != nil {
+		return err
+	}
+	self.state.UpdateStateObject(coinbase)
+
+	self.AddGas(self.tx.Gas)
+	sender.SubAmount(self.tx.GasValue())
+
+	return nil
+}
+
+func (self *StateTransition) TransitionState() (err error) {
+	//snapshot := st.state.Snapshot()
+
+	defer func() {
+		if r := recover(); r != nil {
+			ethutil.Config.Log.Infoln(r)
+			err = fmt.Errorf("%v", r)
+		}
+	}()
+
+	var (
+		tx       = self.tx
+		sender   = self.Sender()
+		receiver *StateObject
+	)
+
+	if sender.Nonce != tx.Nonce {
+		return NonceError(tx.Nonce, sender.Nonce)
+	}
+
+	sender.Nonce += 1
+	defer func() {
+		// Notify all subscribers
+		//self.Ethereum.Reactor().Post("newTx:post", tx)
+	}()
+
+	if err = self.BuyGas(); err != nil {
+		return err
+	}
+
+	receiver = self.Receiver()
+
+	if err = self.UseGas(GasTx); err != nil {
+		return err
+	}
+
+	dataPrice := big.NewInt(int64(len(tx.Data)))
+	dataPrice.Mul(dataPrice, GasData)
+	if err = self.UseGas(dataPrice); err != nil {
+		return err
+	}
+
+	if receiver == nil { // Contract
+		receiver = self.MakeStateObject(self.state, tx)
+		if receiver == nil {
+			return fmt.Errorf("ERR. Unable to create contract with transaction %v", tx)
+		}
+	}
+
+	if err = self.transferValue(sender, receiver); err != nil {
+		return err
+	}
+
+	if tx.CreatesContract() {
+		fmt.Println(Disassemble(receiver.Init()))
+		// Evaluate the initialization script
+		// and use the return value as the
+		// script section for the state object.
+		//script, gas, err = sm.Eval(state, contract.Init(), contract, tx, block)
+		code, err := self.Eval(receiver.Init(), receiver)
+		if err != nil {
+			return fmt.Errorf("Error during init script run %v", err)
+		}
+
+		receiver.script = code
+	}
+
+	self.state.UpdateStateObject(sender)
+	self.state.UpdateStateObject(receiver)
+
+	return nil
+}
+
+func (self *StateTransition) transferValue(sender, receiver *StateObject) error {
+	if sender.Amount.Cmp(self.tx.Value) < 0 {
+		return fmt.Errorf("Insufficient funds to transfer value. Req %v, has %v", self.tx.Value, sender.Amount)
+	}
+
+	// Subtract the amount from the senders account
+	sender.SubAmount(self.tx.Value)
+	// Add the amount to receivers account which should conclude this transaction
+	receiver.AddAmount(self.tx.Value)
+
+	ethutil.Config.Log.Debugf("%x => %x (%v) %x\n", sender.Address()[:4], receiver.Address()[:4], self.tx.Value, self.tx.Hash())
+
+	return nil
+}
+
+func (self *StateTransition) Eval(script []byte, context *StateObject) (ret []byte, err error) {
+	var (
+		tx        = self.tx
+		block     = self.block
+		initiator = self.Sender()
+		state     = self.state
+	)
+
+	closure := NewClosure(initiator, context, script, state, self.gas, tx.GasPrice)
+	vm := NewVm(state, nil, RuntimeVars{
+		Origin:      initiator.Address(),
+		BlockNumber: block.BlockInfo().Number,
+		PrevHash:    block.PrevHash,
+		Coinbase:    block.Coinbase,
+		Time:        block.Time,
+		Diff:        block.Difficulty,
+		Value:       tx.Value,
+	})
+	ret, _, err = closure.Call(vm, tx.Data, nil)
+
+	return
+}