What is a smart contract?

A smart contract is defined as a self-executing contract with the terms directly written into code that is stored and executed on a blockchain. This means that once the conditions outlined in the smart contract are met, the contract automatically executes the actions defined without the need for intermediaries. The decentralization and immutability of the blockchain ensure that these contracts are tamper-proof and enforceable as programmed.

Smart contracts enhance efficiency and trust by eliminating the need for a trusted third party to facilitate the agreement and ensuring that all conditions must be satisfied before any action is taken. They represent a significant advancement in how contractual agreements can be managed, combining legal, technological, and cryptographic elements to create reliable and transparent interactions.

This definition distinguishes smart contracts from traditional contracts, which may require a notary for validation, rely on verbal agreements, or permit modifications by parties involved, showcasing the innovative legal framework enabled by blockchain technology.