Smart Contract Fund

Definition ∞ A smart contract fund is an investment vehicle managed and operated by a set of self-executing rules encoded on a blockchain. Unlike traditional funds managed by human administrators, a smart contract fund’s operations, such as asset allocation, rebalancing, and investor distributions, are autonomously governed by its underlying code. This structure provides transparency and immutability, as all fund activities are verifiable on the blockchain. Investors interact directly with the smart contract, eliminating the need for intermediaries and potentially reducing fees.
Context ∞ Smart contract funds represent a novel application of decentralized finance (DeFi), often featured in crypto news as part of the broader trend towards automated and transparent investment mechanisms. Discussions revolve around their potential to democratize access to investment strategies, the security implications of their code, and the regulatory challenges associated with autonomous financial instruments. The auditability and deterministic execution of these funds are key advantages over traditional structures.