diff --git a/README.md b/README.md
index 0f0a33edb0..9d810643bf 100644
--- a/README.md
+++ b/README.md
@@ -6,7 +6,7 @@ Ethereum
 Ethereum Go Development package (C) Jeffrey Wilcke
 
 Ethereum is currently in its testing phase. The current state is "Proof
-of Concept 3.5". For build instructions see the [Wiki](https://github.com/ethereum/go-ethereum/wiki/Building-Ethereum(Go)).
+of Concept 5.0". For build instructions see the [Wiki](https://github.com/ethereum/go-ethereum/wiki/Building-Ethereum(Go)).
 
 Ethereum Go is split up in several sub packages Please refer to each
 individual package for more information.
diff --git a/ethchain/closure.go b/ethchain/closure.go
index f8135c5143..57abaa91eb 100644
--- a/ethchain/closure.go
+++ b/ethchain/closure.go
@@ -8,21 +8,24 @@ import (
 )
 
 type Callee interface {
-	ReturnGas(*big.Int, *big.Int, *State)
-	Address() []byte
 }
 
 type Reference interface {
 	Callee
-	ethutil.RlpEncodable
+}
+
+type ClosureRef interface {
+	ReturnGas(*big.Int, *big.Int, *State)
+	Address() []byte
 	GetMem(*big.Int) *ethutil.Value
 	SetMem(*big.Int, *ethutil.Value)
+	N() *big.Int
 }
 
 // Basic inline closure object which implement the 'closure' interface
 type Closure struct {
-	callee Callee
-	object Reference
+	callee ClosureRef
+	object ClosureRef
 	Script []byte
 	State  *State
 
@@ -34,7 +37,7 @@ type Closure struct {
 }
 
 // Create a new closure for the given data items
-func NewClosure(callee Callee, object Reference, script []byte, state *State, gas, price, val *big.Int) *Closure {
+func NewClosure(callee, object ClosureRef, script []byte, state *State, gas, price, val *big.Int) *Closure {
 	c := &Closure{callee: callee, object: object, Script: script, State: state, Args: nil}
 
 	// In most cases gas, price and value are pointers to transaction objects
@@ -105,10 +108,14 @@ func (c *Closure) ReturnGas(gas, price *big.Int, state *State) {
 	c.Gas.Add(c.Gas, gas)
 }
 
-func (c *Closure) Object() Reference {
+func (c *Closure) Object() ClosureRef {
 	return c.object
 }
 
-func (c *Closure) Callee() Callee {
+func (c *Closure) Callee() ClosureRef {
 	return c.callee
 }
+
+func (c *Closure) N() *big.Int {
+	return c.object.N()
+}
diff --git a/ethchain/stack.go b/ethchain/stack.go
index 2883600627..e9297b3246 100644
--- a/ethchain/stack.go
+++ b/ethchain/stack.go
@@ -67,6 +67,18 @@ func (st *Stack) Peekn() (*big.Int, *big.Int) {
 func (st *Stack) Push(d *big.Int) {
 	st.data = append(st.data, d)
 }
+
+func (st *Stack) Get(amount *big.Int) []*big.Int {
+	// offset + size <= len(data)
+	length := big.NewInt(int64(len(st.data)))
+	if amount.Cmp(length) <= 0 {
+		start := new(big.Int).Sub(length, amount)
+		return st.data[start.Int64():length.Int64()]
+	}
+
+	return nil
+}
+
 func (st *Stack) Print() {
 	fmt.Println("### stack ###")
 	if len(st.data) > 0 {
diff --git a/ethchain/state.go b/ethchain/state.go
index fa63accf8f..1b5655d4cd 100644
--- a/ethchain/state.go
+++ b/ethchain/state.go
@@ -47,6 +47,7 @@ func (s *State) Purge() int {
 	return s.trie.NewIterator().Purge()
 }
 
+// XXX Deprecated
 func (s *State) GetContract(addr []byte) *StateObject {
 	data := s.trie.Get(string(addr))
 	if data == "" {
@@ -68,6 +69,32 @@ func (s *State) GetContract(addr []byte) *StateObject {
 	return contract
 }
 
+func (s *State) GetStateObject(addr []byte) *StateObject {
+	data := s.trie.Get(string(addr))
+	if data == "" {
+		return nil
+	}
+
+	stateObject := NewStateObjectFromBytes(addr, []byte(data))
+
+	// Check if there's a cached state for this contract
+	cachedStateObject := s.states[string(addr)]
+	if cachedStateObject != nil {
+		stateObject.state = cachedStateObject
+	} else {
+		// If it isn't cached, cache the state
+		s.states[string(addr)] = stateObject.state
+	}
+
+	return stateObject
+}
+
+func (s *State) SetStateObject(stateObject *StateObject) {
+	s.states[string(stateObject.address)] = stateObject.state
+
+	s.UpdateStateObject(stateObject)
+}
+
 func (s *State) GetAccount(addr []byte) (account *StateObject) {
 	data := s.trie.Get(string(addr))
 	if data == "" {
@@ -97,6 +124,7 @@ const (
 	UnknownTy
 )
 
+/*
 // Returns the object stored at key and the type stored at key
 // Returns nil if nothing is stored
 func (s *State) GetStateObject(key []byte) (*ethutil.Value, ObjType) {
@@ -124,6 +152,7 @@ func (s *State) GetStateObject(key []byte) (*ethutil.Value, ObjType) {
 
 	return val, typ
 }
+*/
 
 // Updates any given state object
 func (s *State) UpdateStateObject(object *StateObject) {
diff --git a/ethchain/state_object.go b/ethchain/state_object.go
index 8d86ef44ee..8e921795d7 100644
--- a/ethchain/state_object.go
+++ b/ethchain/state_object.go
@@ -65,6 +65,10 @@ func (c *StateObject) State() *State {
 	return c.state
 }
 
+func (c *StateObject) N() *big.Int {
+	return big.NewInt(int64(c.Nonce))
+}
+
 func (c *StateObject) Addr(addr []byte) *ethutil.Value {
 	return ethutil.NewValueFromBytes([]byte(c.state.trie.Get(string(addr))))
 }
diff --git a/ethchain/vm.go b/ethchain/vm.go
index a4b4d351ba..b983e88ff1 100644
--- a/ethchain/vm.go
+++ b/ethchain/vm.go
@@ -20,6 +20,17 @@ var (
 	GasMemory  = big.NewInt(1)
 )
 
+func CalculateTxGas(initSize, scriptSize *big.Int) *big.Int {
+	totalGas := new(big.Int)
+	totalGas.Add(totalGas, GasCreate)
+
+	txTotalBytes := new(big.Int).Add(initSize, scriptSize)
+	txTotalBytes.Div(txTotalBytes, ethutil.Big32)
+	totalGas.Add(totalGas, new(big.Int).Mul(txTotalBytes, GasSStore))
+
+	return totalGas
+}
+
 type Vm struct {
 	txPool *TxPool
 	// Stack for processing contracts
@@ -125,7 +136,12 @@ func (vm *Vm) RunClosure(closure *Closure, hook DebugHook) (ret []byte, err erro
 		case oBALANCE:
 			useGas(GasBalance)
 		case oCREATE:
-			useGas(GasCreate)
+			require(3)
+
+			args := stack.Get(big.NewInt(3))
+			initSize := new(big.Int).Add(args[1], args[0])
+
+			useGas(CalculateTxGas(initSize, ethutil.Big0))
 		case oCALL:
 			useGas(GasCall)
 		case oMLOAD, oMSIZE, oMSTORE8, oMSTORE:
@@ -413,6 +429,39 @@ func (vm *Vm) RunClosure(closure *Closure, hook DebugHook) (ret []byte, err erro
 			stack.Push(big.NewInt(int64(mem.Len())))
 			// 0x60 range
 		case oCREATE:
+			require(3)
+
+			value := stack.Pop()
+			size, offset := stack.Popn()
+
+			// Generate a new address
+			addr := ethutil.CreateAddress(closure.callee.Address(), closure.callee.N())
+			// Create a new contract
+			contract := NewContract(addr, value, []byte(""))
+			// Set the init script
+			contract.initScript = mem.Get(offset.Int64(), size.Int64())
+			// Transfer all remaining gas to the new
+			// contract so it may run the init script
+			gas := new(big.Int).Set(closure.Gas)
+			closure.Gas.Sub(closure.Gas, gas)
+			// Create the closure
+			closure := NewClosure(closure.callee,
+				closure.Object(),
+				contract.initScript,
+				vm.state,
+				gas,
+				closure.Price,
+				value)
+			// Call the closure and set the return value as
+			// main script.
+			closure.Script, err = closure.Call(vm, nil, hook)
+			if err != nil {
+				stack.Push(ethutil.BigFalse)
+			} else {
+				stack.Push(ethutil.BigD(addr))
+
+				vm.state.SetStateObject(contract)
+			}
 		case oCALL:
 			require(7)
 			// Closure addr
@@ -438,7 +487,8 @@ func (vm *Vm) RunClosure(closure *Closure, hook DebugHook) (ret []byte, err erro
 				// Prepay for the gas
 				// If gas is set to 0 use all remaining gas for the next call
 				if gas.Cmp(big.NewInt(0)) == 0 {
-					gas = closure.Gas
+					// Copy
+					gas = new(big.Int).Set(closure.Gas)
 				}
 				closure.Gas.Sub(closure.Gas, gas)
 				// Create a new callable closure
diff --git a/ethutil/big.go b/ethutil/big.go
index 1a3902fa3e..c0488a71f8 100644
--- a/ethutil/big.go
+++ b/ethutil/big.go
@@ -50,3 +50,11 @@ func BigCopy(src *big.Int) (ret *big.Int) {
 
 	return
 }
+
+func BigMax(x, y *big.Int) *big.Int {
+	if x.Cmp(y) <= 0 {
+		return x
+	}
+
+	return y
+}
diff --git a/ethutil/common.go b/ethutil/common.go
index c63af29a69..d0ee7b5389 100644
--- a/ethutil/common.go
+++ b/ethutil/common.go
@@ -38,5 +38,12 @@ var (
 	Big1   = big.NewInt(1)
 	Big2   = big.NewInt(1)
 	Big0   = big.NewInt(0)
+	Big32  = big.NewInt(32)
 	Big256 = big.NewInt(0xff)
 )
+
+func CreateAddress(b []byte, nonce *big.Int) []byte {
+	addrBytes := append(b, nonce.Bytes()...)
+
+	return Sha3Bin(addrBytes)[12:]
+}
diff --git a/ethutil/config.go b/ethutil/config.go
index 54b066fb95..86c0a855d3 100644
--- a/ethutil/config.go
+++ b/ethutil/config.go
@@ -48,7 +48,7 @@ func ReadConfig(base string) *config {
 			}
 		}
 
-		Config = &config{ExecPath: path, Debug: true, Ver: "0.3.1"}
+		Config = &config{ExecPath: path, Debug: true, Ver: "0.5"}
 		Config.Log = NewLogger(LogFile|LogStd, LogLevelDebug)
 		Config.SetClientString("/Ethereum(G)")
 	}