Smart Contract

A smart contract is a self-executing program stored on a blockchain that automatically executes, controls, or documents events and actions according to the terms of a contract or agreement. The concept was first proposed by cryptographer Nick Szabo in 1994, but became practical with the launch of Ethereum in 2015. Smart contracts eliminate the need for trusted intermediaries by making agreements enforceable through code rather than legal systems. Once deployed, a smart contract's code is immutable (cannot be changed) and its execution is deterministic (the same input always produces the same output). Smart contracts power virtually all DeFi applications: lending protocols use them to manage collateral and interest rates, decentralized exchanges use them to execute trades, and DAOs use them to govern treasuries. The key security consideration: smart contracts are only as secure as their code. Bugs or vulnerabilities in a smart contract can be exploited to drain funds, and because the code is immutable, fixes require deploying an entirely new contract. As of 2026, smart contract security auditing is a multi-billion dollar industry, and formal verification tools are becoming standard for high-value protocols.