The functionality of smart contracts is integral to blockchain technology, particularly in platforms like Ethereum. Smart contracts are self-executing contracts with terms of the agreement directly written into code, enabling trustless transactions without intermediaries. They automatically enforce and execute actions when predefined conditions are met, enhancing efficiency and reducing the likelihood of disputes. The decentralized nature of blockchain ensures that these contracts are tamper-proof and verifiable, allowing all parties to have confidence in the outcome without requiring third-party verification. This innovation has significant implications for areas like finance, real estate, and supply chains.