Smart contracts can be very difficult to understand, so we will simplify them as much as possible!
A smart contract is software that acts just like a traditional, offline contract. The only difference is that it functions in an online environment. Just as one can expect a traditional contract to be legally binding, smart contracts are binding as per blockchain protocol.
The following utilize smart contracts:
- Ethereum (ETH)
- OmiseGO (OMG)
- Golem (GNT)
- Augur (REP)
- Other ERC-20 tokens
ShapeShift does not work with Ethereum smart contract addresses, but it does work with ERC-20 tokens' contract addresses!
Once you understand the basic concept of smart contracts, you can learn more about them here.