What they do
Smart contracts hold and move tokens by rules anyone can read. They power stablecoins, DEXs, lending markets, NFTs and DAOs. Ethereum made them popular; Solana, BNB Chain, Avalanche and others run them too.
The risk
Code is law cuts both ways: a bug can be exploited and funds drained, often with no way to reverse it. Reputable projects publish audits and run bug bounties, but audits reduce risk rather than remove it.