Smart contract

A smart contract is a program stored on a blockchain that runs automatically when set conditions are met. It carries out the terms written into its code without a bank, broker, or other intermediary approving each step. Once deployed, it executes the same way for everyone who interacts with it.

Smart contracts hold and move digital assets according to their rules. A lending application, for example, can use a contract to accept deposits, track balances, and release funds when a loan is repaid. This automatic behavior powers most decentralized finance, or DeFi, applications.

Because the code decides the outcome, a flaw in the code can lead to lost or stuck funds, and contracts on public blockchains are usually hard to change once live. Many teams publish their code and have it independently audited, but an audit reduces risk rather than removing it. Smart-contract risk remains present in any on-chain application.