Smart contracts are self-executing contracts with the terms directly written into code on a blockchain. They automatically execute when predefined conditions are met, ensuring transparency and trust without the need for intermediaries. This technology streamlines processes across various industries by automating transactions and reducing the risk of fraud. For example, a smart contract could facilitate real estate transactions by automatically transferring ownership once payment is confirmed. Their function allows for increased efficiency, reduced costs, and greater security in contractual agreements by using blockchain's inherent properties.