How Can a Smart Contract Automate Dividend Payments to Token Holders?

A smart contract automates dividend payments by executing a pre-programmed function. The issuer sends the total dividend amount (in cryptocurrency or a stablecoin) to the smart contract's address.

The smart contract then automatically reads the blockchain to identify all current token holders and their respective balances at a specific time (the "snapshot" date). It calculates each holder's pro-rata share and distributes the funds directly to their digital wallets, all without the need for a manual transfer agent.