First proposed by Nick Szabo in 1996; smart contracts are self-executing contracts with the terms of the agreement between buyer and seller is directly written into lines of code. The best way to describe smart contracts is to compare the technology to a vending machine.
If you put a coin in the vending machine and press the “CocaCola” button you get a drink within seconds. Basically the “contract” you made with the machine self-executed. Smart contracts work the same way.
It’s a code that says “If this, then that”. They can be used to manage the workflow of approvals and automatically transfer payment upon all signatures being collected eliminating the need for escrow. Transactions using smart contracts are transparent, traceable and irreversible and happen without the need for any central authority or external enforcement.