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Smart contracts in blockchain technology are defined as self-executing contracts where the terms of the agreement are directly written into lines of code. This means that once the predetermined conditions outlined in the contract are met, the contract automatically executes the agreed-upon actions without the need for intermediaries. The execution is enforced by the blockchain’s network, ensuring security and transparency.

This automated execution process enhances efficiency and reduces the potential for disputes, as all parties can trust the code's execution without relying on a third party. Additionally, smart contracts reduce costs associated with traditional contract management by eliminating administrative overhead.

In contrast to the other options, smart contracts do not require manual execution, are typically stored on the blockchain (not off-chain), and do not need notarization since their validity comes from the network consensus rather than a legal authority. This functionality establishes smart contracts as a pivotal component of decentralized applications and represents a significant innovation in contractual agreements.