Smart Contracts and Legal Implications Security Vulnerabilities and Regulatory Challenges in Blockchain-based Systems

Abstract

The emergence of blockchain technology has led to the development of smart contracts, which are considered the most significant due to their ability to support automated agreements within the system without the need for third parties. Although it might have its advantages, smart contracts do not address all the issues as they face various security vulnerabilities and legal issues and regulatory conditions. The study explores the current role of smart contracts by examining the vulnerability that threaten the integrity of these contracts like programming errors along with reentrancy hacking and architectural flaws of the blockchain systems. In this paper, the relationship between enforceability and jurisdictional issues and fault-based issues that pose legal challenges to smart contracts will be examined. The paper explores system regulations which arise out of these systems through evaluation of legal frameworks which are aimed at providing blockchain security within the existing legal economic frameworks. Studies on comprehensive smart contract risk have made researchers come up with recommendations that enhance security by way of blockchain system controls.