A smart contract is a self-executing agreement that contains defined parameters involving the transaction of its participants and carry out specific functions on its own as soon as the agreed-upon standards or terms of a contract between interested parties are fulfilled. This ensures that transactions can happen without the need for an executor or third-party to facilitate them.
Smart contracts are also used to develop decentralized applications (dapps) since they can be coded to perform any action independently as long as the standards specified by developers are met. Today, they are already used to run decentralized exchanges, lending services, non-fungible tokens, and many more dapps.