Smart contracts are self-executing programs stored on a blockchain that automatically enforce agreement terms when predetermined conditions are met. Written in languages like Solidity (for Ethereum), they eliminate the need for intermediaries by executing transactions automatically when specific criteria are satisfied. Once deployed, smart contracts are immutable and transparent, though this also means bugs cannot be easily fixed.
Example:
A smart contract for a token sale might specify: "If address X sends 1 ETH, automatically send 1,000 tokens back." When a buyer sends exactly 1 ETH, the contract instantly transfers 1,000 tokens to their wallet without requiring manual approval, payment processing, or human intervention. Plut it's all verified and recorded on the blockchain.