Valued at $28.93billion in 2024 and set to hit $49.18billion in 2025, according to The Business Research Company, the blockchain market is thriving. While this growth is in part due to the success of the crypto industry, the blockchain industry is not dependent on crypto. In light of this, this May we are looking to spotlight blockchain’s use cases and where the tech is going next.
Having explored how the smart contract market can reach a $2billion valuation by 2034, we now turn our attention to some of the challenges the market is facing.
Smart contracts do not cater for party relationship evolution
Likening the development of smart contracts to the automobile industry, as cars moved from being made by hand to being made by robots, Kiley Tan, consultant lawyer at The Legal Director, the legal consultancy, explains how smart contracts are very linear, hindering an evolution between parties.
“Smart contracts work on the blockchain. It allows the execution (ie. performance) of contracts. It is ‘self-executing’ without human intervention. It is similar to the electronic contracts above. One of the main differences is that it is on the blockchain and is therefore immutable.
“Once it happens, it is recorded and cannot be changed. In an electronic contract, you could ‘technically’ remove the record of the transaction as there is only ONE ledger/spreadsheet. The fact that it is self-executing is also interesting as most contracts are carried out by humans. In the financial world, someone still approves a transaction. There is oversight. In smart contracts, it is completely automated. This is moving from assembling cars by humans to assembling cars by robots.
“There are pros and cons. Contracts are written in a particular way to provide for a range of possibilities. This enables the contract to be resilient to changes in the real world. Sometimes, contracts are intentionally ambiguous to allow for potential evolution of the relationship between parties. It is difficult to do that with smart contracts, it is very finite; usually binary.
“For example, if the code is where A = B then C must be done, and the programmer must code what happens if A =, B, C, D, E … Z. If not, the smart contract fails to operate if A = is other possibility.
“Building smart contracts is not simply a computer science, it is also a legal one. Without understanding the psychology of why contracts are written (as I alluded to above), these smart contracts could create unintended consequences which may lead to very bad outcomes. If the smart contracts are for transactional executions, it is easy to see how it could work very efficiently. But beyond that, it becomes a legal issue.”
Legal frameworks are needed
Jean-Marc Bourreau, co-founder, The Afrik Foundation, a digital asset designed to unlock Africa’s true economic potential explains how smart contracts’ lack of legal frameworks is holding back the market.
“Three major roadblocks remain: legal uncertainty, development complexity and limited internet infrastructure. In many developing countries, there’s still no legal framework recognising smart contracts as enforceable agreements. Meanwhile, project leaders and funders often lack the technical knowledge to implement or audit smart contracts securely.
“Lastly, spotty internet access can hinder the decentralised infrastructure required to power these systems.
“Despite these challenges, platforms like Afrik are working to bridge the gap, combining local knowledge with emerging technologies to unlock smarter, fairer funding models.”
Understanding smart contracts’ usage
For Yumin Xia, chief technology officer for Web3 growth platform Galxe, the web3 growth engine, the development of smart contracts must be put into perspective by looking at their usage in DApps. Here, he highlights how onboarding can be challenging. He says: “In reality, there is no real ‘smart contract market’.
“Smart contracts are just code. Code can be copied with zero cost. Their scarcity is none, so the valuation is also zero. Smart contracts themselves are nothing. No user will use smart contracts directly, unless they are engineers. The right term is probably “DApp”, which is smart contracts plus the app (web or native mobile app), plus some necessary backend service, plus the brand.
“The issues holding DApps back include the fact that not every application needs to be one. For those that do, like payment and finance-related apps, there is good momentum. But it will take time. The onboarding user experience remains a challenge, particularly user management of secret keys, as does preventing ‘sybil’ attacks on poorly constructed smart contracts.”
Human challenges
From a technical standpoint, smart contracts are sound, explains Michal “Mehow” Pospieszalski, CEO and founder at MatterFI, the security infrastructure provider. However, it faces human challenges, like hackers, usability and interoperability.
“The biggest challenges aren’t just technical — they’re human. First, most smart contracts today are vulnerable by design. Once deployed, they are open for inspection and exploit, making them a hacker’s dream.
“Second, there’s a massive usability gap. Average users have no idea what they’re signing when they interact with a contract, which is why phishing and wallet-draining scams are still rampant.
“The third challenge is interoperability — contracts live in silos on their own chains. Without common standards or universal access points, we’ll never see the kind of compound innovation that drove the rise of the web.”
Ecosystem trust
Smart contracts are only as strong as the data they use explains Scott Stuart, co-founder and CEO at Kava Labs, the decentralised blockchain platform. Therefore, he highlights, that security mechanisms need to be top-tier.
“The biggest challenge is trust — not in the code, but in the ecosystem around it. Smart contracts are only as reliable as the data they use and the governance behind them. Without high-quality oracles, audits, and transparent upgrade mechanisms, even the most elegant contract can become a liability. On the user side, complexity is still a huge hurdle.
“From clunky interfaces to unfamiliar terminology, most people don’t know how to engage with smart contracts safely. To truly unlock their potential, we need to make smart contracts safer, simpler, and more accountable — especially as they start handling more valuable and automated processes in DeFi, AI, and beyond.
Trusted, repeatable models needed
Atena Reyhani, chief product officer at ContractPodAi, an AI-powered platform for end-to-end contract lifecycle management, notes that currently smart contracts are being found in isolation, making them difficult to implement on a greater scale across business protocols.
“While agent-to-agent collaboration and communication protocols are beginning to emerge in the market to help standardise interactions, widespread adoption still depends on establishing legal and business protocols within enterprise environments and across organisations.
“Without a shared operational playbook, agents executing smart contracts can operate in silos, creating inconsistencies, redundancies, or risk. Enterprises need governance frameworks that define how autonomous agents trigger, validate, and enforce contract terms across systems, and when they engage human experts.
“Legal enforceability, auditability, and accountability are still maturing, and many organisations lack the cross-functional alignment required for operationalising smart contracts at scale. Overcoming these challenges means creating trusted, repeatable models for agent-driven contract execution, supported by both technical protocols and enterprise-ready rules of engagement.”
Different rules for different places
Without a unified way to regulate smart contracts, and an easy way to implement them, it will be very challenging for their usage to increase explains Sergiy Fitsak, managing director at Softjourn, a full-cycle software development and consulting company.
“Despite their potential, smart contracts face several challenges. First, there’s the issue of regulatory uncertainty, as governments are still determining how to regulate blockchain technologies. Legal recognition of smart contracts remains inconsistent across jurisdictions.
“Second, scalability is a major barrier: many blockchain platforms struggle to handle large volumes of transactions efficiently.
“Third, the complexity of developing secure smart contracts can deter businesses from adoption, as they require significant technical expertise to avoid vulnerabilities. Finally, trust in blockchain technology itself must be reinforced before businesses are willing to fully embrace smart contracts in mission-critical applications.”
A matter of time
Rob Daykin, co-founder at Realize, an asset tokenisation platform, lists a variety of challenges facing the smart contract ecosystem, however, he notes that they will be overcome in time due to a greater adoption of blockchain and DeFi technologies, however, they remain hurdles for the time being.
“Smart contracts are an incredible tool that can automate a number of processes without the need for centralised players, creating a more efficient, transparent, and trusted process. However, smart contracts are not without their flaws and risks, and for the industry to develop, key challenges need to be overcome, such as:
- Improved security and auditing – if the contracts are vulnerable to attack, no one will trust them
- Scalable blockchains – transaction costs have to compete with Web2 and be quick
- Improved UI/UX – the Web3 ecosystem is still within its infancy and must mature and provide improved interfaces and tools for users
- Developer tools – improved developer tools and languages that developers can easily build on top of
- Regulatory clarity – clarity which helps support an emerging decentralised ecosystem with rules fit for purpose
- Educational awareness – educate users on the opportunities and efficiencies as well as risks of smart contracts and a web3 ecosystem
“These challenges will be overcome, especially with the emergence of the tokenisation of real-world assets on chain and the backing of large institutional players such as BlackRock, amongst others, pushing for enhanced infrastructure and regulatory certainty.”
