Smart contracts are self-executing agreements that specify the terms and conditions of a peer-to-peer deal. The agreement’s terms and conditions are stated in code. The technology behind smart contracts was pioneered by Ethereum, and has since been expanded upon by other blockchains like Solana, Polkadot and Cosmos.
When two parties sign a contract, they traditionally enlist the help of a trustworthy third party to carry it out. Smart contracts and related technologies, on the other hand, are automating what was once a time-consuming manual procedure.
For example, a lending smart contract could collect funds from borrowers, lend that money out and distribute the interest payments back to the lenders in proportion to their contributions, all without any human involvement.