WHAT IS SMART CONTRACT?

" Imagine the ideal protocol. It would have the most trustworthy third party imaginable -- a diety who is on everybody's side. All the parties would send their inputs to God. God would reliably determine the results and return the outputs. God being the ultimate in confessional discretion, no party would learn anything more about the other parties' inputs than they could learn from their own inputs and the output.

Alas, in the our temporal world we deal with humans rather than deities. Yet, too often we are forced to treat people in a nearly theological manner, because our infrastructure lacks the security needed to protect ourselves. " - Nick Szabo

Smart contracts are digital contracts that can self-manage/conclude itself. These digital contracts that can be used on blockchain, are the programs which are controlled by the network formed by all computers that joined to the blockchain system.

Smart contracts can be used to trade without any third party. Smart contracts start with the mutual agreement of the terms and coding it to the system. If the mutually agreed conditions which are included in the smart contract are met, the contract starts and ends automatically.

We can think vending machines as primitive smart contracts. For example, you want to buy a drink from a vending machine, here comes our smart contract: If you put the right amount of money in it, machine will allow you to enter the code of your drink. If you enter the right code, you are going to get your drink, otherwise it won't happen and you will get your refund.

Smart contracts will be a key factor for the future and the more sector meets with it, the less third party will be in almost every sector and that can completely change the world's business.

Sources:

https://nakamotoinstitute.org/the-god-protocols/

https://blockgeeks.com/guides/smart-contracts/