What is a smart contract?

A smart contract is a software component that automates the execution of agreements between parties, leveraging blockchain technology to ensure transparency, security, and trust. It operates under predefined conditions, which are programmed into the contract, meaning that once the conditions are met, the contract self-executes without the need for intermediaries. This automation reduces errors and increases efficiency in transactions by ensuring that all parties adhere to the agreed terms without manual intervention.

The nature of smart contracts allows them to facilitate, verify, or enforce the negotiation and performance of a contract, making processes smoother and more reliable. Their capacity to operate in a decentralized environment, such as a blockchain, further enhances their trustworthiness since the execution and records are immutable and readily accessible.

Other options do not accurately define smart contracts: referring to them as a blockchain currency or a transaction simplifies their role significantly, while calling them a manual agreement contradicts the inherent automation and programmability characteristic of smart contracts.