A Binary Smart Contract is a specific type of smart contract designed to handle binary outcomes, typically in the context of financial transactions or bets. It operates on a straightforward premise where the result can only be one of two options: a win or a loss. These contracts facilitate automated execution without the need for intermediaries.

They are programmed to trigger actions based on predefined conditions. For example, a binary smart contract could be set up to pay out a certain amount if a specific event occurs—like a stock price reaching a certain level—within a defined time frame. Because of their simplicity and efficiency, binary smart contracts are increasingly used in prediction markets and betting applications.

This allows participants to engage in risk assessments and financial speculation in a transparent and secure manner. Overall, they enhance trust and reduce the risk of disputes, making transactions more efficient.