A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions.
Vending machines are mentioned as the oldest piece of technology equivalent to smart contract implementation. 2014’s white paper about the cryptocurrency Ethereum describes the Bitcoin protocol as a weak version of the smart contract concept as defined by computer scientist, lawyer and cryptographer Nick Szabo. Since Bitcoin, various cryptocurrencies support scripting languages which allow for more advanced smart contracts between untrusted parties. Smart contracts should be distinguished from smart legal contracts. The latter refers to a traditional natural language legally-binding agreement which has certain terms expressed and implemented in machine-readable code.