A smart contract, like any contract, establishes the terms of an agreement. But unlike a traditional contract, a smart contract’s terms are executed as code running on a blockchain like Ethereum. Smart contracts allow developers to build apps that take advantage of blockchain security, reliability, and accessibility while offering sophisticated peer-to-peer functionality — everything from loans and insurance to logistics and gaming.

The simplest example of a smart contract is a transaction between a consumer and a business, where a sale is made. The smart contract executes the customer's payment and the business's shipment or transfer of ownership.

Smart contracts are apps on a blockchain that make each side of a transaction complete its part.