Smart Contract

Definition

A smart contract is program logic that enforces specified conditions within a blockchain environment. On Ethereum, contracts can hold state, receive transactions, and interact with other contracts to implement applications such as exchanges or token systems. Bitcoin supports a different and more constrained scripting model for defining spending conditions, including signatures, hash conditions, and timelocks. The word contract does not by itself mean the code forms an enforceable legal agreement. Nor does smart imply that the program can judge fairness, verify arbitrary real-world facts, or correct its own mistakes. Execution follows the implemented rules, including any vulnerabilities or administrator powers. External information may require an oracle, and upgrades may depend on privileged keys or governance procedures. Reviewing a smart contract therefore involves understanding its code, permissions, dependencies, and economic behavior rather than assuming that automated execution makes the arrangement trustworthy or risk-free.