How does smart contract functionality enhance blockchain applications?

Smart contract functionality enhances blockchain applications primarily by enabling the automatic execution of contract terms. This means that once predefined conditions within a smart contract are met, the contract self-executes, executing the agreed-upon actions without the need for intermediaries or manual intervention. This automation significantly increases efficiency, reduces the potential for human error, and accelerates the transaction process.

The implementation of smart contracts also contributes to trust and transparency within blockchain systems. Since the terms are coded directly into the blockchain, all parties can verify their reliability and accuracy without needing to rely on a third party. This can lead to more streamlined operations across various use cases, such as supply chain management, financial transactions, and legal agreements.

The other choices do not accurately reflect the role of smart contracts in blockchain technology. For instance, the notion of processing transactions manually contradicts the very purpose of smart contracts, which is to automate processes. Increasing network latency is detrimental and not a feature associated with the efficiency of smart contracts, while limiting the use of digital currencies does not pertain to smart contracts' functionality but rather to broader aspects of blockchain applications.