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What Is A Smart Contract and How Does It Work?

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Smart contracts are used to automate the contracts where the terms of the agreement between two parties are embedded in code on a blockchain. The smart contract will immediately verify, control, and self-execute an agreement if both parties meet the predetermined terms without any intermediary’s involvement or time loss. 

In a centralized world, two parties would meet, sign a physical contract and a third party would enforce the terms of the contract. In Defi, these contracts can occur among anonymous parties and are enforced automatically without the involvement of any third party.