Smart Contracts in DeFi: Why They’re the Backbone

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute transactions and enforce agreements when predefined conditions are met, without the need for intermediaries.

Smart contracts enhance DeFi by enabling automated, trustless financial services. They remove the need for intermediaries like banks, reduce transaction times, and increase transparency and security in financial operations.

DeFi, or Decentralized Finance, refers to financial services and products built on blockchain technology that operate without traditional financial intermediaries. It offers services like lending, borrowing, and trading through decentralized platforms.

In DeFi, various types of smart contracts are used, including payment contracts for transactions, multi-signature contracts for enhanced security, and DAO contracts for decentralized governance and decision-making.

Smart contracts are considered revolutionary because they automate and secure financial transactions, reduce costs by eliminating intermediaries, and provide transparency and efficiency that traditional financial systems cannot match.