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Smart Contract

A smart contract is a contract made with computer code which digitally ensures, enforces, or verifies that the contract executes correctly to the terms of the contract. The code that seals the agreement exists across the blockchain, and both parties must agree to the contract before it is made final. Smart contract transactions are traceable, transparent and irreversible. 

Smart contracts allow for Bitcoin transactions to exist with anonymity. They allow trustless transactions to exist between peers by shifting the trust into the inherent code that makes up the transaction, the smart contract.

Bitcoin on-chain transactions, Lightning Network, and layer 2 solutions, all run on the premise of smart contracts as a type 2 of 2 multi-signature wallet.