A smart contract is a self-executing computer program that operates on a decentralized blockchain network, such as Ethereum or Ontology. These contracts contain the terms of an agreement between parties, coded directly into lines of code. When specific conditions outlined in the code are met, the smart contract automatically executes the predefined actions, and this execution is irreversible and tamper-proof.
Smart contracts facilitate trustless transactions and agreements among multiple parties that may not trust each other, eliminating the need for intermediaries, legal systems, or external authorities. They are analogous to vending machines, allowing parties to transact without direct interaction, just like inserting coins into a vending machine to receive a selected item. This characteristic of smart contracts enhances security and instills confidence in users, making them increasingly adopted in businesses and systems.
Smart contracts are a fundamental component of blockchain technology and play a pivotal role in enabling decentralized applications (DApps) and automating various processes across different industries.