> For the complete documentation index, see [llms.txt](https://adamdavidlong.gitbook.io/lawsnap-guide-to-smart-contracts/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://adamdavidlong.gitbook.io/lawsnap-guide-to-smart-contracts/introducing-smart-contracts.md).

# Introducing Smart Contracts

## What Exactly Is a "Smart Contract"?

![](/files/-MjHbeRIk_o9eeGTQBjF)

A "smart contract" is a new way to use software to set up and manage a deal or transaction. 

The idea is that each party to the deal entrusts an independent software program, called  the smart contract, and the smart contract manages or controls some or all of the deal. 

{% hint style="success" %}
**Example:** 

* Brian the Buyer wants to buy an electric guitar from Sarah the Seller
* Brian worries that Sarah will take his money but then won't deliver the guitar as promised
* Sarah worries that Brian will take her guitar but then not pay
* With a smart contract, the steps would be
* Brian pays his money directly to the.Smart Contract, the software program, and the Smart Contract holds the money
* Sarah delivers the guitar to Brian
*  Once the Smart Contract verifies delivery, then it turns over the money to Sarah
* Brian is happy because he got his guitar
* Sarah is happy because she get her money
  {% endhint %}

If you are brand new to Smart Contracts, please check out our short video here that walks through how Smart Contracts work

{% embed url="<https://www.youtube.com/watch?v=Db_uzbfBF44>" %}

and check out this article, "[Getting Smart About Smart Contracts](https://www.lawpracticetoday.org/article/getting-smart-smart-contracts/)" (written by yours truly) published by the American Bar Association's Law Practice Today. &#x20;

## What is the point of using a Smart Contract?

The advantage of using a Smart Contract is that, by using software, each side to a bargain can ensure that they get what they bargained for. They don't have to trust each other, in fact they don't even have to know each other, so long as they trust the Smart Contract.&#x20;

Business in many industries, including [Insurance](/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/insurance.md), [Finance](/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/stock-exchanges.md), and [Derivatives](broken://pages/-MgcylxSfP7hmmOEGt-u), are exploring using Smart Contracts to&#x20;

1. Cut costs
2. Increase efficiency
3. Reduce mistakes

## Further Reading

[A Primer on Smart Contracts](https://www.cftc.gov/LabCFTC/News-Events/labcftcprimersmartcontract112718) from the United States CFTC (Commodity Futures Trading Commission)