diff --git a/account/account.go b/account/account.go
index 3974413b6..5c8bfda30 100644
--- a/account/account.go
+++ b/account/account.go
@@ -30,10 +30,12 @@ func SignBytes(o Signable) []byte {
 // on the blockchain.
 // Serialized by binary.[read|write]Reflect
 type Account struct {
-	Address  []byte
-	PubKey   PubKey
-	Sequence uint
-	Balance  uint64
+	Address     []byte
+	PubKey      PubKey
+	Sequence    uint
+	Balance     uint64
+	Code        []byte // VM code
+	StorageRoot []byte // VM storage merkle root.
 }
 
 func (account *Account) Copy() *Account {
@@ -42,7 +44,7 @@ func (account *Account) Copy() *Account {
 }
 
 func (account *Account) String() string {
-	return fmt.Sprintf("Account{%X:%v}", account.Address, account.PubKey)
+	return fmt.Sprintf("Account{%X:%v C:%v S:%X}", account.Address, account.PubKey, len(account.Code), account.StorageRoot)
 }
 
 func AccountEncoder(o interface{}, w io.Writer, n *int64, err *error) {
diff --git a/block/tx.go b/block/tx.go
index 6ea8a7503..2a85ac13c 100644
--- a/block/tx.go
+++ b/block/tx.go
@@ -26,7 +26,7 @@ Tx (Transaction) is an atomic operation on the ledger state.
 
 Account Txs:
  - SendTx         Send coins to address
- - CallTx 	  Send a msg to a contract that runs in the vm
+ - CallTx         Send a msg to a contract that runs in the vm
 
 Validation Txs:
  - BondTx         New validator posts a bond
diff --git a/common/byteslice.go b/common/byteslice.go
index ebc9ae38a..da42db810 100644
--- a/common/byteslice.go
+++ b/common/byteslice.go
@@ -6,6 +6,15 @@ func Fingerprint(slice []byte) []byte {
 	return fingerprint
 }
 
+func IsZeros(slice []byte) bool {
+	for _, byt := range slice {
+		if byt != byte(0) {
+			return false
+		}
+	}
+	return true
+}
+
 func RightPadBytes(slice []byte, l int) []byte {
 	if l < len(slice) {
 		return slice
diff --git a/state/state.go b/state/state.go
index 8d2baf1c8..78a065e78 100644
--- a/state/state.go
+++ b/state/state.go
@@ -12,6 +12,7 @@ import (
 	. "github.com/tendermint/tendermint/common"
 	dbm "github.com/tendermint/tendermint/db"
 	"github.com/tendermint/tendermint/merkle"
+	"github.com/tendermint/tendermint/vm"
 )
 
 var (
@@ -97,6 +98,12 @@ func (s *State) Save() {
 	s.DB.Set(stateKey, buf.Bytes())
 }
 
+// NOTE: the valSets are not Copy()'d.
+// See TODOs in Copy() below.
+func (s *State) Reset(checkpoint *State) {
+	*s = *checkpoint
+}
+
 func (s *State) Copy() *State {
 	return &State{
 		DB:                   s.DB,
@@ -104,9 +111,9 @@ func (s *State) Copy() *State {
 		LastBlockHash:        s.LastBlockHash,
 		LastBlockParts:       s.LastBlockParts,
 		LastBlockTime:        s.LastBlockTime,
-		BondedValidators:     s.BondedValidators.Copy(),
-		LastBondedValidators: s.LastBondedValidators.Copy(),
-		UnbondingValidators:  s.UnbondingValidators.Copy(),
+		BondedValidators:     s.BondedValidators.Copy(),     // TODO remove need for Copy() here.
+		LastBondedValidators: s.LastBondedValidators.Copy(), // That is, make updates to the validator set
+		UnbondingValidators:  s.UnbondingValidators.Copy(),  // copy the valSet lazily.
 		accounts:             s.accounts.Copy(),
 		validatorInfos:       s.validatorInfos.Copy(),
 	}
@@ -268,7 +275,9 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 		return nil
 
 	case *blk.CallTx:
-		accounts := map[string]*account.Account{}
+		accounts := make(map[string]*account.Account)
+
+		// validate input
 		inAcc := s.GetAccount(tx.Input.Address)
 		if inAcc == nil {
 			return blk.ErrTxInvalidAddress
@@ -284,7 +293,7 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 			return err
 		}
 
-		// validate output address
+		// validate output
 		if len(tx.Address) != 20 {
 			return blk.ErrTxInvalidAddress
 		}
@@ -292,19 +301,54 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 		if outAcc == nil {
 			return blk.ErrTxInvalidAddress
 		}
+		if inTotal < tx.Fee {
+			return blk.ErrTxInsufficientFunds
+		}
 		accounts[string(tx.Address)] = outAcc
 
-		inTotal -= tx.Fee
+		// Remember unmodified state in case call fails.
+		checkpoint := s.Copy()
 
-		// Good! Adjust accounts
-		s.AdjustByInputs(accounts, []*blk.TxInput{tx.Input})
-		outAcc.Balance += inTotal
+		// Good! Adjust accounts and maybe actually run the tx.
+		value := inTotal - tx.Fee
+		s.AdjustByInputs(accounts, []*blk.TxInput{tx.Input}) // adjusts inAcc.
+		outAcc.Balance += value
 		s.UpdateAccounts(accounts)
 
 		if runCall {
-			// TODO: Run the contract call!
-			// TODO: refund some gas
+			appState := NewVMAppState(s)
+			params := vm.Params{
+				BlockHeight: uint64(s.LastBlockHeight),
+				BlockHash:   vm.BytesToWord(s.LastBlockHash),
+				BlockTime:   s.LastBlockTime.Unix(),
+				GasLimit:    10000000,
+			}
+			caller := toVMAccount(inAcc)
+			callee := toVMAccount(outAcc)
+			appState.AddAccount(caller) // because we adjusted by input above.
+			appState.AddAccount(callee) // because we adjusted by input above.
+			vmach := vm.NewVM(appState, params, caller.Address)
+			gas := tx.GasLimit
+			ret, err_ := vmach.Call(caller, callee, outAcc.Code, tx.Data, value, &gas)
+			if err_ != nil {
+				// Failure
+				// Revert the state while charging gas for the user.
+				s.Reset(checkpoint)
+				callee.Balance -= tx.Fee
+				s.UpdateAccounts(accounts)
+			} else {
+				// Success
+				appState.Sync()
+			}
+			// Create a receipt from the ret and whether errored.
+			log.Info("VM call complete", "caller", caller, "callee", callee, "return", ret, "err", err_)
+		} else {
+			// The mempool does not call txs until
+			// the proposer determines the order of txs.
+			// So mempool will skip the actual .Call(),
+			// and only deduct from the caller's balance.
 		}
+
 		return nil
 
 	case *blk.BondTx:
@@ -706,6 +750,11 @@ func (s *State) UpdateAccounts(accounts map[string]*account.Account) {
 	}
 }
 
+func (s *State) RemoveAccount(address []byte) bool {
+	_, removed := s.accounts.Remove(address)
+	return removed
+}
+
 // The returned ValidatorInfo is a copy, so mutating it
 // has no side effects.
 func (s *State) GetValidatorInfo(address []byte) *ValidatorInfo {
diff --git a/state/vm_app_state.go b/state/vm_app_state.go
new file mode 100644
index 000000000..247e42c4f
--- /dev/null
+++ b/state/vm_app_state.go
@@ -0,0 +1,217 @@
+package state
+
+import (
+	"sort"
+
+	ac "github.com/tendermint/tendermint/account"
+	"github.com/tendermint/tendermint/binary"
+	. "github.com/tendermint/tendermint/common"
+	"github.com/tendermint/tendermint/merkle"
+	"github.com/tendermint/tendermint/vm"
+)
+
+// Converts state.Account to vm.Account struct.
+func toVMAccount(acc *ac.Account) *vm.Account {
+	return &vm.Account{
+		Address:     vm.BytesToWord(acc.Address),
+		Balance:     acc.Balance,
+		Code:        acc.Code, // This is crazy.
+		Nonce:       uint64(acc.Sequence),
+		StorageRoot: vm.BytesToWord(acc.StorageRoot),
+	}
+}
+
+// Converts vm.Account to state.Account struct.
+func toStateAccount(acc *vm.Account) *ac.Account {
+	return &ac.Account{
+		Address:     acc.Address.Address(),
+		Balance:     acc.Balance,
+		Code:        acc.Code,
+		Sequence:    uint(acc.Nonce),
+		StorageRoot: acc.StorageRoot.Bytes(),
+	}
+}
+
+//-----------------------------------------------------------------------------
+
+type AccountInfo struct {
+	account *vm.Account
+	deleted bool
+}
+
+type VMAppState struct {
+	state *State
+
+	accounts map[string]AccountInfo
+	storage  map[string]vm.Word
+	logs     []*vm.Log
+}
+
+func NewVMAppState(state *State) *VMAppState {
+	return &VMAppState{
+		state:    state,
+		accounts: make(map[string]AccountInfo),
+		storage:  make(map[string]vm.Word),
+		logs:     make([]*vm.Log, 0),
+	}
+}
+
+func unpack(accInfo AccountInfo) (*vm.Account, bool) {
+	return accInfo.account, accInfo.deleted
+}
+
+// Used to add the origin of the tx to VMAppState.
+func (vas *VMAppState) AddAccount(account *vm.Account) error {
+	if _, ok := vas.accounts[account.Address.String()]; ok {
+		return Errorf("Account already exists: %X", account.Address)
+	} else {
+		vas.accounts[account.Address.String()] = AccountInfo{account, false}
+		return nil
+	}
+}
+
+func (vas *VMAppState) GetAccount(addr vm.Word) (*vm.Account, error) {
+	account, deleted := unpack(vas.accounts[addr.String()])
+	if deleted {
+		return nil, Errorf("Account was deleted: %X", addr)
+	} else if account != nil {
+		return account, nil
+	} else {
+		acc := vas.state.GetAccount(addr.Address())
+		if acc == nil {
+			return nil, Errorf("Invalid account addr: %X", addr)
+		}
+		return toVMAccount(acc), nil
+	}
+}
+
+func (vas *VMAppState) UpdateAccount(account *vm.Account) error {
+	accountInfo, ok := vas.accounts[account.Address.String()]
+	if !ok {
+		vas.accounts[account.Address.String()] = AccountInfo{account, false}
+		return nil
+	}
+	account, deleted := unpack(accountInfo)
+	if deleted {
+		return Errorf("Account was deleted: %X", account.Address)
+	} else {
+		vas.accounts[account.Address.String()] = AccountInfo{account, false}
+		return nil
+	}
+}
+
+func (vas *VMAppState) DeleteAccount(account *vm.Account) error {
+	accountInfo, ok := vas.accounts[account.Address.String()]
+	if !ok {
+		vas.accounts[account.Address.String()] = AccountInfo{account, true}
+		return nil
+	}
+	account, deleted := unpack(accountInfo)
+	if deleted {
+		return Errorf("Account was already deleted: %X", account.Address)
+	} else {
+		vas.accounts[account.Address.String()] = AccountInfo{account, true}
+		return nil
+	}
+}
+
+func (vas *VMAppState) CreateAccount(addr vm.Word) (*vm.Account, error) {
+	account, deleted := unpack(vas.accounts[addr.String()])
+	if deleted || account == nil {
+		account = &vm.Account{
+			Address:     addr,
+			Balance:     0,
+			Code:        nil,
+			Nonce:       0,
+			StorageRoot: vm.Zero,
+		}
+		vas.accounts[addr.String()] = AccountInfo{account, false}
+		return account, nil
+	} else {
+		return nil, Errorf("Account already exists: %X", addr)
+	}
+}
+
+func (vas *VMAppState) GetStorage(addr vm.Word, key vm.Word) (vm.Word, error) {
+	account, deleted := unpack(vas.accounts[addr.String()])
+	if account == nil {
+		return vm.Zero, Errorf("Invalid account addr: %X", addr)
+	} else if deleted {
+		return vm.Zero, Errorf("Account was deleted: %X", addr)
+	}
+
+	value, ok := vas.storage[addr.String()+key.String()]
+	if ok {
+		return value, nil
+	} else {
+		return vm.Zero, nil
+	}
+}
+
+// NOTE: Set value to zero to delete from the trie.
+func (vas *VMAppState) SetStorage(addr vm.Word, key vm.Word, value vm.Word) (bool, error) {
+	account, deleted := unpack(vas.accounts[addr.String()])
+	if account == nil {
+		return false, Errorf("Invalid account addr: %X", addr)
+	} else if deleted {
+		return false, Errorf("Account was deleted: %X", addr)
+	}
+
+	_, ok := vas.storage[addr.String()+key.String()]
+	vas.storage[addr.String()+key.String()] = value
+	return ok, nil
+}
+
+func (vas *VMAppState) Sync() {
+
+	// Determine order for accounts
+	addrStrs := []string{}
+	for addrStr := range vas.accounts {
+		addrStrs = append(addrStrs, addrStr)
+	}
+	sort.Strings(addrStrs)
+
+	// Update or delete accounts.
+	for _, addrStr := range addrStrs {
+		account, deleted := unpack(vas.accounts[addrStr])
+		if deleted {
+			removed := vas.state.RemoveAccount(account.Address.Address())
+			if !removed {
+				panic(Fmt("Could not remove account to be deleted: %X", account.Address))
+			}
+		} else {
+			if account == nil {
+				panic(Fmt("Account should not be nil for addr: %X", account.Address))
+			}
+			vas.state.UpdateAccount(toStateAccount(account))
+		}
+	}
+
+	// Update or delete storage items.
+	storage := merkle.NewIAVLTree(
+		binary.BasicCodec, // TODO change
+		binary.BasicCodec, // TODO change
+		1024,              // TODO change.
+		vas.state.DB,
+	)
+
+	for addrKey, value := range vas.storage {
+		addrKeyBytes := []byte(addrKey)
+		addr := addrKeyBytes[:32]
+		key := addrKeyBytes[32:]
+		if value.IsZero() {
+			_, removed := storage.Remove(key)
+			if !removed {
+				panic(Fmt("Storage could not be removed for addr: %X @ %X", addr, key))
+			}
+		} else {
+			storage.Set(key, value)
+		}
+	}
+
+	// TODO support logs, add them to the state somehow.
+}
+
+func (vas *VMAppState) AddLog(log *vm.Log) {
+	vas.logs = append(vas.logs, log)
+}
diff --git a/vm/common.go b/vm/common.go
index 6ac0f6bbb..85d4966aa 100644
--- a/vm/common.go
+++ b/vm/common.go
@@ -4,24 +4,6 @@ import (
 	"encoding/binary"
 )
 
-var (
-	Zero = Word{0}
-	One  = Word{1}
-)
-
-type Word [32]byte
-
-func (w Word) String() string { return string(w[:]) }
-func (w Word) Copy() Word     { return w }
-func (w Word) Bytes() []byte  { return w[:] } // copied.
-func (w Word) IsZero() bool {
-	accum := byte(0)
-	for _, byt := range w {
-		accum |= byt
-	}
-	return accum == 0
-}
-
 func Uint64ToWord(i uint64) Word {
 	word := Word{}
 	PutUint64(word[:], i)
@@ -44,8 +26,6 @@ func RightPadWord(bz []byte) (word Word) {
 	return
 }
 
-//-----------------------------------------------------------------------------
-
 func GetUint64(word Word) uint64 {
 	return binary.LittleEndian.Uint64(word[:])
 }
diff --git a/vm/test/fake_app_state.go b/vm/test/fake_app_state.go
index 71b124cce..16d69572e 100644
--- a/vm/test/fake_app_state.go
+++ b/vm/test/fake_app_state.go
@@ -15,7 +15,7 @@ type FakeAppState struct {
 
 func (fas *FakeAppState) GetAccount(addr Word) (*Account, error) {
 	account := fas.accounts[addr.String()]
-	if account == nil {
+	if account != nil {
 		return account, nil
 	} else {
 		return nil, Errorf("Invalid account addr: %v", addr)
@@ -43,15 +43,15 @@ func (fas *FakeAppState) DeleteAccount(account *Account) error {
 	}
 }
 
-func (fas *FakeAppState) CreateAccount(addr Word, balance uint64) (*Account, error) {
+func (fas *FakeAppState) CreateAccount(addr Word) (*Account, error) {
 	account := fas.accounts[addr.String()]
 	if account == nil {
 		return &Account{
-			Address:   addr,
-			Balance:   balance,
-			Code:      nil,
-			Nonce:     0,
-			StateRoot: Zero,
+			Address:     addr,
+			Balance:     0,
+			Code:        nil,
+			Nonce:       0,
+			StorageRoot: Zero,
 		}, nil
 	} else {
 		return nil, Errorf("Invalid account addr: %v", addr)
@@ -83,16 +83,6 @@ func (fas *FakeAppState) SetStorage(addr Word, key Word, value Word) (bool, erro
 	return ok, nil
 }
 
-func (fas *FakeAppState) RemoveStorage(addr Word, key Word) error {
-	_, ok := fas.accounts[addr.String()]
-	if !ok {
-		return Errorf("Invalid account addr: %v", addr)
-	}
-
-	delete(fas.storage, addr.String()+key.String())
-	return nil
-}
-
 func (fas *FakeAppState) AddLog(log *Log) {
 	fas.logs = append(fas.logs, log)
 }
@@ -103,20 +93,20 @@ func main() {
 		storage:  make(map[string]Word),
 		logs:     nil,
 	}
-	params := VMParams{
+	params := Params{
 		BlockHeight: 0,
 		BlockHash:   Zero,
 		BlockTime:   0,
 		GasLimit:    0,
 	}
-	ourVm := NewVM(appState, params)
+	ourVm := NewVM(appState, params, Zero)
 
 	// Create accounts
-	account1, err := appState.CreateAccount(Uint64ToWord(100), 0)
+	account1, err := appState.CreateAccount(Uint64ToWord(100))
 	if err != nil {
 		panic(err)
 	}
-	account2, err := appState.CreateAccount(Uint64ToWord(101), 0)
+	account2, err := appState.CreateAccount(Uint64ToWord(101))
 	if err != nil {
 		panic(err)
 	}
diff --git a/vm/types.go b/vm/types.go
index dbe55137f..49a23b98f 100644
--- a/vm/types.go
+++ b/vm/types.go
@@ -6,12 +6,33 @@ const (
 	defaultDataStackCapacity = 10
 )
 
+var (
+	Zero = Word{0}
+	One  = Word{1}
+)
+
+type Word [32]byte
+
+func (w Word) String() string  { return string(w[:]) }
+func (w Word) Copy() Word      { return w }
+func (w Word) Bytes() []byte   { return w[:] } // copied.
+func (w Word) Address() []byte { return w[:20] }
+func (w Word) IsZero() bool {
+	accum := byte(0)
+	for _, byt := range w {
+		accum |= byt
+	}
+	return accum == 0
+}
+
+//-----------------------------------------------------------------------------
+
 type Account struct {
-	Address   Word
-	Balance   uint64
-	Code      []byte
-	Nonce     uint64
-	StateRoot Word
+	Address     Word
+	Balance     uint64
+	Code        []byte
+	Nonce       uint64
+	StorageRoot Word
 }
 
 type Log struct {
@@ -27,13 +48,19 @@ type AppState interface {
 	GetAccount(addr Word) (*Account, error)
 	UpdateAccount(*Account) error
 	DeleteAccount(*Account) error
-	CreateAccount(addr Word, balance uint64) (*Account, error)
+	CreateAccount(addr Word) (*Account, error)
 
 	// Storage
 	GetStorage(Word, Word) (Word, error)
-	SetStorage(Word, Word, Word) (bool, error)
-	RemoveStorage(Word, Word) error
+	SetStorage(Word, Word, Word) (bool, error) // Setting to Zero is deleting.
 
 	// Logs
 	AddLog(*Log)
 }
+
+type Params struct {
+	BlockHeight uint64
+	BlockHash   Word
+	BlockTime   int64
+	GasLimit    uint64
+}
diff --git a/vm/vm.go b/vm/vm.go
index 116ad1ecb..a18f153e5 100644
--- a/vm/vm.go
+++ b/vm/vm.go
@@ -31,40 +31,25 @@ const (
 
 type VM struct {
 	appState AppState
-	params   VMParams
+	params   Params
+	origin   Word
 
 	callDepth int
 }
 
-type VMParams struct {
-	BlockHeight    uint64
-	BlockHash      Word
-	BlockTime      int64
-	GasLimit       uint64
-	CallStackLimit uint64
-	Origin         Word
-}
-
-func NewVM(appState AppState, params VMParams) *VM {
+func NewVM(appState AppState, params Params, origin Word) *VM {
 	return &VM{
 		appState:  appState,
 		params:    params,
+		origin:    origin,
 		callDepth: 0,
 	}
 }
 
-/*
-	// When running a transaction, the caller the pays for the fees.
-
-	// Check caller's account balance vs feeLimit and value
-	if caller.Balance < (feeLimit + value) {
-		return nil, ErrInsufficientBalance
-	}
-	caller.Balance -= (feeLimit + value)
-
-*/
-
-// gas: the maximum gas that will be run.
+// value: The value transfered from caller to callee.
+// NOTE: The value should already have been transferred to the callee.
+// NOTE: When Call() fails, the value should be returned to the caller.
+// gas: The maximum gas that will be run.
 // When the function returns, *gas will be the amount of remaining gas.
 func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, gas *uint64) (output []byte, err error) {
 
@@ -282,17 +267,16 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 				return nil, firstErr(err, ErrInsufficientGas)
 			}
 			account, err_ := vm.appState.GetAccount(addr) // TODO ensure that 20byte lengths are supported.
-			if err = firstErr(err, err_); err != nil {
-				return nil, err
+			if err_ != nil {
+				return nil, firstErr(err, err_)
 			}
 			balance := account.Balance
 			stack.Push64(balance)
 			fmt.Printf(" => %v (%X)\n", balance, addr)
 
 		case ORIGIN: // 0x32
-			origin := vm.params.Origin
-			stack.Push(origin)
-			fmt.Printf(" => %X\n", origin)
+			stack.Push(vm.origin)
+			fmt.Printf(" => %X\n", vm.origin)
 
 		case CALLER: // 0x33
 			stack.Push(caller.Address)
@@ -360,8 +344,8 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 				return nil, firstErr(err, ErrInsufficientGas)
 			}
 			account, err_ := vm.appState.GetAccount(addr)
-			if err = firstErr(err, err_); err != nil {
-				return nil, err
+			if err_ != nil {
+				return nil, firstErr(err, err_)
 			}
 			code := account.Code
 			l := uint64(len(code))
@@ -374,8 +358,8 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 				return nil, firstErr(err, ErrInsufficientGas)
 			}
 			account, err_ := vm.appState.GetAccount(addr)
-			if err = firstErr(err, err_); err != nil {
-				return nil, err
+			if err_ != nil {
+				return nil, firstErr(err, err_)
 			}
 			code := account.Code
 			memOff := stack.Pop64()
@@ -383,11 +367,11 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			length := stack.Pop64()
 			data, ok := subslice(code, codeOff, length)
 			if !ok {
-				return nil, ErrCodeOutOfBounds
+				return nil, firstErr(err, ErrCodeOutOfBounds)
 			}
 			dest, ok := subslice(memory, memOff, length)
 			if !ok {
-				return nil, ErrMemoryOutOfBounds
+				return nil, firstErr(err, ErrMemoryOutOfBounds)
 			}
 			copy(dest, data)
 			fmt.Printf(" => [%v, %v, %v] %X\n", memOff, codeOff, length, data)
@@ -422,7 +406,7 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			offset := stack.Pop64()
 			data, ok := subslice(memory, offset, 32)
 			if !ok {
-				return nil, ErrMemoryOutOfBounds
+				return nil, firstErr(err, ErrMemoryOutOfBounds)
 			}
 			stack.Push(RightPadWord(data))
 			fmt.Printf(" => 0x%X\n", data)
@@ -431,7 +415,7 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			offset, data := stack.Pop64(), stack.Pop()
 			dest, ok := subslice(memory, offset, 32)
 			if !ok {
-				return nil, ErrMemoryOutOfBounds
+				return nil, firstErr(err, ErrMemoryOutOfBounds)
 			}
 			copy(dest, data[:])
 			fmt.Printf(" => 0x%X\n", data)
@@ -439,7 +423,7 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 		case MSTORE8: // 0x53
 			offset, val := stack.Pop64(), byte(stack.Pop64()&0xFF)
 			if len(memory) <= int(offset) {
-				return nil, ErrMemoryOutOfBounds
+				return nil, firstErr(err, ErrMemoryOutOfBounds)
 			}
 			memory[offset] = val
 			fmt.Printf(" => [%v] 0x%X\n", offset, val)
@@ -540,8 +524,6 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			// Check balance
 			if caller.Balance < value {
 				return nil, firstErr(err, ErrInsufficientBalance)
-			} else {
-				caller.Balance -= value
 			}
 
 			// Create a new address
@@ -551,13 +533,17 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 
 			// TODO charge for gas to create account _ the code length * GasCreateByte
 
-			newAccount, err := vm.appState.CreateAccount(addr, value)
+			newAccount, err := vm.appState.CreateAccount(addr)
 			if err != nil {
 				stack.Push(Zero)
 				fmt.Printf(" (*) 0x0 %v\n", err)
 			} else {
+				if err_ := transfer(callee, newAccount, value); err_ != nil {
+					return nil, err_ // prob never happens...
+				}
 				// Run the input to get the contract code.
 				// The code as well as the input to the code are the same.
+				// Will it halt?  Yes.
 				ret, err_ := vm.Call(callee, newAccount, input, input, value, gas)
 				if err_ != nil {
 					caller.Balance += value // Return the balance
@@ -592,11 +578,11 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			// Begin execution
 			var ret []byte
 			var err error
-
-			// If addr is in nativeContracts
 			if nativeContract := nativeContracts[addr]; nativeContract != nil {
+				// Native contract
 				ret, err = nativeContract(args, &gasLimit)
 			} else {
+				// EVM contract
 				if ok = useGas(gas, GasGetAccount); !ok {
 					return nil, firstErr(err, ErrInsufficientGas)
 				}
@@ -607,6 +593,9 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 				if op == CALLCODE {
 					ret, err = vm.Call(callee, callee, account.Code, args, value, gas)
 				} else {
+					if err := transfer(callee, account, value); err != nil {
+						return nil, err
+					}
 					ret, err = vm.Call(callee, account, account.Code, args, value, gas)
 				}
 			}
@@ -642,6 +631,7 @@ func (vm *VM) Call(caller, callee *Account, code, input []byte, value uint64, ga
 			if ok = useGas(gas, GasGetAccount); !ok {
 				return nil, firstErr(err, ErrInsufficientGas)
 			}
+			// TODO if the receiver is Zero, then make it the fee.
 			receiver, err_ := vm.appState.GetAccount(addr)
 			if err = firstErr(err, err_); err != nil {
 				return nil, err
@@ -719,3 +709,13 @@ func createAddress(creatorAddr Word, nonce uint64) Word {
 	PutUint64(temp[32:], nonce)
 	return RightPadWord(sha3.Sha3(temp)[:20])
 }
+
+func transfer(from, to *Account, amount uint64) error {
+	if from.Balance < amount {
+		return ErrInsufficientBalance
+	} else {
+		from.Balance -= amount
+		to.Balance += amount
+		return nil
+	}
+}