SMART CONTRACTS IN DECENTRALIZED SYSTEMS WITH CRYPTOGRAPHIC SECURITY AND THE TRANSFORMATION OF CONTRACT LAW

Abstract

This report examines smart contracts as a key element in the development of decentralized systems and as a factor for a profound transformation of traditional contract law.The analysis focuses on the essence of smart contracts, their technological mechanism of action and the role of cryptography in ensuring trust and security without the need for a central intermediary.Particular attention is paid to the way in which program code begins to perform functions traditionally inherent in legal norms and institutions.Smart contracts are not just a technical tool, but a new socioeconomic mechanism for regulating relations between entities in a digital environment.The report also examines the concept of "Code is Law" as a philosophical and practical framework that questions the classical legal principles of interpretation, flexibility and judicial review.Both the potential benefits of this paradigm and the risks arising from full automation are analyzed.Additionally, the main vulnerabilities of smart contracts that arise as a result of human errors when writing the code and the irreversibility of actions in a blockchain environment are examined.These risks show that technological security does not always mean legal justice.Finally, the legal status of smart contracts in Bulgaria and the European Union is examined.