Smart contracts are self-executing programs deployed on a blockchain that run deterministically without any central authority. In gaming, they can handle everything from ownership verification and payment splitting to game state validation and item trading. The key property is trustlessness: neither the developer nor the player needs to trust the other, because the contract enforces the rules automatically. When a player buys a game through a smart contract, the payment splits instantly according to coded percentages. When an item is traded, ownership transfers atomically. When a tournament pays out, the prize distribution executes exactly as defined. No disputes, no chargebacks, no payment processing delays. The tradeoff is that onchain computation is expensive and slow compared to traditional servers, so the art lies in deciding what logic belongs onchain (ownership, payments, verification) versus offchain (real-time gameplay, rendering, physics).