# Smart Contracts ⎊ Area ⎊ Resource 16

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## What is the Code of Smart Contracts?

Smart contracts are self-executing agreements where the terms of the contract are directly encoded into lines of code on a blockchain. This code defines the rules and logic for financial operations, eliminating the need for intermediaries to enforce agreements. The immutability of the code ensures that the contract executes exactly as programmed.

## What is the Execution of Smart Contracts?

The execution of smart contracts automates complex financial processes, including the creation and settlement of derivatives, the management of collateralized loans, and the distribution of interest payments. When specific conditions defined in the code are met, the contract automatically executes the corresponding actions without human intervention. This deterministic execution is fundamental to decentralized finance.

## What is the Application of Smart Contracts?

In the context of derivatives, smart contracts serve as the foundation for decentralized exchanges and lending protocols. They enable the creation of trustless options and futures markets where margin requirements and liquidation logic are enforced automatically. The application of smart contracts reduces counterparty risk and increases transparency in financial transactions.


---

## [Synthetic Asset Creation](https://term.greeks.live/term/synthetic-asset-creation/)

## [Automated Liquidity Provision](https://term.greeks.live/term/automated-liquidity-provision/)

## [Convergence](https://term.greeks.live/definition/convergence/)

## [Option Pricing Convexity Bias](https://term.greeks.live/term/option-pricing-convexity-bias/)

## [Decentralized Margin Trading](https://term.greeks.live/term/decentralized-margin-trading/)

---

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**Original URL:** https://term.greeks.live/area/smart-contracts/resource/16/