The ancient Greeks feared the Oracle of Delphi because its words were infallible and therefore, inescapable. They believed that asking the Oracle a question was to surrender to a destiny already written. Little did they know humanity would deliberately build new oracles, but as lines of code. They are called smart contracts. In the new digital agora, there are no priests, no juries, no trembling voices awaiting divine verdicts. Instead, there is execution, instant, silent, and absolute. How did we get there? Well, that’s precisely the story for today. Firstly, you should know that it was all born of cryptocurrency, a movement that debuted as a financial rebellion but evolved into a philosophy that promises liberation through logic. Can you discern how well a top cryptocurrency is truly performing? Say thank you to smart contracts and goodbye to banks, intermediaries, and gatekeepers. Your time has ended.
Smart contracts sit at the heart of this revolution, as they are the silent legislators of blockchain economies, automating decisions that were once made by people. They trigger payments, transfer ownership, govern decentralized applications, and uphold digital promises, with the mention that, once deployed, they cannot be appealed to or persuaded. They do not consider context, emotion, or ethics. In fact, these traits are complete strangers to smart contracts.
To many, this sounds like progress, and it is only natural. After all, we are talking about an incorruptible world where agreements execute themselves, immune to deceit or delay. To others, however, it sounds eerily like the return of the Oracle, approaching this system as something one could never get along with. In June 2016, this faith in code was put to the test. Of course, it is a hacker’s hand that we are talking about. Furthermore, the hacker exploited a loophole in a smart contract known as The DAO, draining $50 million in Ether (ETH) by simply following the system’s rules to their logical conclusion. The blockchain confirmed his every move, as by its own standards, he had done nothing wrong.
It was that very moment when humanity discovered that when morality is codified, conscience becomes irrelevant. Or perhaps conscience does not vanish entirely, but it is certainly called into question, leaving us to wonder how much of it remains.
Smart Contracts As “Automated Morality”
Smart contracts are self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predefined conditions are met. Practical examples that emphasize the way in which smart contracts replace human enforcement with algorithmic certainty within the cryptocurrency ecosystem include:
- Automatic lending, borrowing, and interest payments in what concerns Decentralized Finance (DeFi).
- Artists receive a fixed percentage every time their work is resold, which is a key aspect of NFT royalties.
- Decisions in decentralized organizations, including voting and fund allocation, are made automatically based on consensus among token holders.
Nevertheless, we couldn’t help but wonder…Can an algorithm understand fairness, context, or intent, or is it prone to data, model, and measurement bias? Does automated enforcement remove ethical nuance? Are we morally accountable if a smart contract executes an outcome that harms someone, even if it strictly follows its code?
Case Studies Emphasizing The Tension Between Human Judgment and Algorithmic Logic
The DAO Hack
In the summer of 2016, Ethereum became a stage for ambition and trust. The DAO, a decentralized autonomous organization, raised over $150 million in a single token sale. We have already discussed this in the first part of the article, but it is still worth elaborating. So, people believed in it, not just in the technology, but in the promise that code could remove human error and bias from financial systems. And then it happened. A vulnerability, a reentrancy flaw, was exploited. Roughly $50 million worth of Ether disappeared almost instantly. The code performed exactly as intended. Perfectly. And yet, perfectly wrong for everyone involved. Investors watched helplessly as logic, untempered by judgment or empathy, led to real-world losses.
Flash Loan Exploits in DeFi
Decentralized finance promised freedom and innovation, and flash loans seemed like the perfect embodiment of this promise. Borrow enormous sums with no collateral; if you pay it back within one transaction block, everything is fine. On paper, it’s brilliant. In practice, it has been weaponized. Traders manipulate prices, exploit tiny inefficiencies across exchanges, and profit from distortions that the system itself cannot see as wrong. The contracts execute flawlessly. The market bends and stretches, fairness erodes, and the people caught in the middle are left wondering if efficiency was ever worth the cost.
Legal Grey Zones And Responsibility
When a contract does not fail at functioning exactly as coded but still produces harmful or unintended outcomes, the question of responsibility becomes a labyrinth. From the following options, choose the one you interpret as accountable:
- The developer who wrote the code.
- The user who deployed it.
- The decentralized network that validated it.
This is a hard one, right? Now, just imagine what it means for legal frameworks.
Traditional legal frameworks struggle to address these questions because they were built for human agents, not autonomous lines of code. Courts are increasingly confronted with cases where millions of dollars vanish or disputes arise, yet there is no singular entity to summon or judge. Consider failed decentralized finance (DeFi) projects where users lost funds due to vulnerabilities or logic errors. Developers often claim, “It’s just code,” absolving themselves of liability. Consequently, regulators are left grappling with how to define negligence or intent in a world where governance is distributed across anonymous participants and immutable algorithms. Similarly, NFT marketplaces have faced legal ambiguities when royalties embedded in smart contracts fail to execute, leaving creators uncompensated.
These instances highlight a profound tension: while algorithmic determinism ensures consistency and transparency, it also diffuses accountability, creating ethical blind spots. Persuasive evidence suggests that if society is to trust these systems, new legal paradigms must emerge, ones that assign responsibility in proportion to both human and algorithmic agency. Without such frameworks, we risk a future where execution is flawless, yet justice and accountability remain impossible.
