A smart contract is a self-executing digital contract stored on a blockchain, where the terms are written in code. When predetermined conditions are met, the contract automatically performs the specified actions without needing intermediaries. Smart contracts are used in DeFi, NFTs, supply chains, and token issuance. Benefits include transparency, trustlessness, and reduced costs. However, once deployed, smart contracts are immutable and vulnerable to coding errors or exploits. Thorough testing and audits are critical before launch.
Example:
A trader programs a smart contract to automatically buy EUR/USD at 1.0800 and sell it at 1.0900. When the price hits 1.0800, the trade opens automatically. When it reaches 1.0900, the contract closes the position and locks in profit.
