INSIGHTSSmart contracts are programmable scripts that run on blockchain networks, enabling automated and deterministic execution of contractual agreements. Unlike traditional contracts, which require intermediaries to enforce terms, smart contracts operate on a decentralized infrastructure, significantly reducing the need for third-party oversight. When specific conditions are met, smart contracts execute predefined actions, such as transferring assets or triggering functions.
For example, in a supply chain scenario, a smart contract may automatically release payment to a supplier once goods are delivered and verified. This automation enhances efficiency and reduces the potential for disputes. Smart contracts are commonly associated with cryptocurrencies, such as Ethereum, which natively support their implementation.
Related concepts include decentralized finance (DeFi), which leverages smart contracts to create financial instruments without traditional banks and institutions, and blockchain technology, which serves as the foundation for smart contract execution and security.