The video explains how formal verification functions and its application to Soroban smart contracts through Certora’s Sunbeam. Formal verification, historically considered theoretical, proves essential in software like decentralized finance applications and smart contracts. It should be initiated early in the development pipeline to simplify designs and prevent bugs. Sunbeam translates code and specifications into mathematical formulas to verify program behavior, using SMT solvers. It targets Soroban smart contracts, compiling Rust-written code into WebAssembly to analyze for violations. Sunbeam aids Stellar’s ecosystem by providing verified, reliable smart contracts, reducing potential deployment risks significantly.