Smart contracts are essentially logical statements, agreements or instructions on the blockchain, which may output data in response to user inputs. While they can be used to mint cryptocurrency or NFTs, they are far more versatile than smart property and can operate independently without any human controller, according to their pre-defined rules. The concept was originally invented by Nick Szabo, but most of the initial work on their development was done by the Ethereum team.
Smart contracts are useful whenever information is likely to have its validity disputed or be fought over for control. The terms of financial contracts (loans, wills) are the most prominent example, from which they get their name; however, other examples include voting in elections, health and criminal records, or the results of competitive contests (including video games). Since they can execute results based on user inputs, they reduce the need for escrow agents, election monitors, and various manual court processes.
On a Turing complete blockchain, smart contracts can technically be used to replicate any computer program, making them extremely useful for decentralized MMOs. In practice, this is prohibitively expensive due to transaction fees, which must be paid proportionately to the amount of computation required. Proponents believe this problem will be resolved with new scalability solutions.