What defines a smart contract?

A smart contract is defined as a blockchain-based agreement that executes automatically. This definition captures the essence of what makes smart contracts unique and distinct from traditional contracts. Smart contracts use code to define the terms and conditions of the agreement and are stored on a blockchain, allowing them to execute transactions or enforce conditions automatically without requiring human intervention.

This automatic execution is a key feature that enhances efficiency and reduces the need for intermediaries, such as lawyers or brokers, often necessary in traditional contracts. The self-executing nature of smart contracts ensures that all parties have confidence in the performance of the agreement once the predetermined conditions are met, thus minimizing the potential for disputes.

In contrast, traditional written contracts, oral agreements, and contracts that require manual execution do not leverage blockchain technology or automation, thus lacking the distinct characteristics and advantages associated with smart contracts. These traditional forms of agreements rely on external enforcement mechanisms and do not provide the same level of trust and efficiency inherent in blockchain technology.