Smart contracts operate on blockchain platforms as self-executing contracts with terms directly coded into software. They automate and enforce agreements without the need for intermediaries, thus increasing efficiency and reducing costs. Upon fulfilling predefined conditions, smart contracts execute transactions or trigger actions automatically. They are tamper-proof and maintain transparency since all participants can view the original contract on the blockchain ledger. Common applications include financial services, supply chain management, and decentralized applications (dApps). Their trustless nature reduces the risk of fraud, enhancing transaction legitimacy.