Smart Contract
Self-executing code on a blockchain that runs exactly as written when its conditions are met, with no party able to intervene.
A smart contract is a program stored on a blockchain. It holds funds and rules and runs automatically when triggered, whether to release a payment once a deadline passes or to swap one token for another. Once deployed, it usually cannot be changed.
Ethereum popularized them in 2015. The strength is that no one can renege; the code enforces the deal. The weakness is the same. Bugs are permanent and exploitable. The 2016 DAO hack drained roughly $60 million through a flaw in code that otherwise worked as written.
Related terms
Financial services run by code on public blockchains, letting people trade or borrow without a bank.
DApp (Decentralized Application)An application whose backend logic runs on a blockchain through smart contracts rather than a company's private servers.
EVM (Ethereum Virtual Machine)The runtime that executes smart contracts on Ethereum and many other chains, defining how their code runs.
OracleA service that feeds outside data, like asset prices, into smart contracts, which otherwise cannot see anything beyond their own blockchain.