📝 Smart contract

A smart contract is a computer program on the blockchain that can self-execute when certain conditions are met. In this way, agreements between a buyer and seller (or token holder and protocol) are written directly into lines of code.

Smart contracts are the building blocks of DeFi “money lego” because they enable sophisticated interoperability between many different financial instruments without the need for third parties. In theory, once a smart contract is deployed to the blockchain, dapps (decentralized apps) can run themselves with little to no human intervention. For example, yearn.finance is a DeFi protocol that leverages smart contracts to maximize yield for liquidity providers and yield farmers.

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