Smart contracts help parties exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.
A way to describe smart contracts is to compare the technology to a vending machine. Ordinarily, you would go to a lawyer or a notary, pay them, and wait for a contract to be written. With smart contracts, you simply drop a bitcoin into the "vending machine" (i.e. ledger), and your escrow, document, or whatever you are buying drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforces those obligations.
Here’s what smart contracts give you:
Autonomy – You’re the one making the agreement; there’s no need to rely on a broker, lawyer or other intermediaries to confirm.
Trust – Your documents are encrypted on a shared ledger. There’s no way that someone can say they lost it.
Backup – Imagine if your bank lost your savings account. On the blockchain, each and every one of your friends has your back. Your documents are duplicated many times over.
Safety – Cryptography, the encryption of websites, keeps your documents safe. There is no hacking as it would take significant resources to crack the code and infiltrate.
Speed – You’d ordinarily have to spend chunks of time and paperwork to manually process documents. Smart contracts use software code to automate tasks, thereby shaving days/hours off a range of business processes.
Savings – Smart contracts save you money since they knock out the presence of an intermediary. You would, for instance, have to pay a notary to witness your transaction.
Accuracy – Automated contracts are not only faster and cheaper but also avoid the errors that come from manually filling out heaps of forms.