Self-Enforcing Contracts

Definition ∞ Self-Enforcing Contracts are agreements whose terms are automatically executed and verified by code, typically on a blockchain, without the need for intermediaries or external enforcement. These smart contracts automatically trigger actions, such as asset transfers or penalty applications, when predefined conditions are met. They remove reliance on trust between parties. This offers verifiable and immutable execution. They provide programmatic assurance.
Context ∞ Self-enforcing contracts are the basis of decentralized finance (DeFi) and other blockchain applications, automating agreements ranging from lending protocols to insurance. Discussions often concern the security of smart contract code, the potential for unforeseen vulnerabilities, and the legal recognition of these automated agreements. Auditing and formal verification methods are crucial for their reliability. Their proper design is paramount for system integrity.