What are Smart Contracts?
A smart contract is a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract. The aim of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. It helps to exchange money, property, shares, etc in a conflict-free way while avoiding the services of a middleman.
The best way to describe smart contracts is to compare the technology to a vending machine. Ordinarily, you would go to a lawyer or a notary, pay them, and wait while you get the document. With smart contracts, you simply drop a bitcoin into the vending machine (i.e. ledger), and your escrow, driver’s license, or whatever drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations.