It is largely same as a regular contract. It is written on blockchain network by the coder instead of paper by the lawyer.

It is a “piece of Code” which lists down the agreed conditions between the two or more parties.

Because it is a piece of code, so there is no requirement for someone to enforce the contract (like Courts or Police). Once the conditions mentioned in the smart contract are completed then code in the smart contract automatically ensure that other linked actions are completed.

Example – If you want to buy Coins of XYZ company from me, but you are not sure if I will give those coins after you have made the payment to me.

We can get into a smart contract which will record that when you pay me for the coins, smart contract will automatically transfer the coins from my account to your account.

This can only work efficiently when the complete transaction happens on the Crypto networks. In above example, if you pay me in USDC/ USDT (Crypto version of USD) then smart contract can read that there is incoming payment from your account and will ensure that coins from my account are paid to you in exchange.

Interesting aspect of the Smart contract is that once it is deployed then it cannot be changed i.e. even you have entered wrong information in the contract then you cannot make any changes to it.