Which statement best describes a smart contract?

A smart contract is best described as a self-executing contract with terms coded into software. This concept comes from blockchain technology, where smart contracts automatically execute, control, and document legally relevant events according to the terms of the agreement programmed into the code.

The smart contract functions by using predefined rules and conditions which facilitate, verify, or enforce the negotiation or performance of the contract without the need for a third party. This ability to automate processes makes them efficient and less prone to human error, as the execution relies on the programming rather than manual intervention.

By their nature, smart contracts operate on decentralized networks, allowing for trustless transactions where all parties can be confident in the agreement's execution due to the transparency and immutability of blockchain technology. This stands in contrast to traditional contracts, which often require manual processes, legal enforcement, or confidentiality agreements, none of which align with the defining features of a smart contract as outlined.