The Data Protection Issues of Smart Contracts as Possible Tools for Automated Decision-Making

Eszteri, Dániel (2025) The Data Protection Issues of Smart Contracts as Possible Tools for Automated Decision-Making. In: The Challenges of Artificial Intelligence for Law in Europe. Data Science, Machine Intelligence, and Law . Springer Cham, Cham, pp. 261-279. ISBN 9783031868139

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Abstract

In this chapter, some of the essential regulations of the European Union’s (EU) data protection law will be presented that can be applied to ‘smart contracts’ which are automated applications embedded into blockchain technology. Smart contracts are automatically fulfilled if their previously specified contractual conditions are met; therefore, the contract is unbreachable. The fulfilment, security and inviolability of the contractual terms are secured by the computer network in which the parties created the contract. The personal data of contracting parties, executed operations and other information relevant in the context of the contractual conditions are recorded and logged in the blockchain in an unchangeable way. The GDPR has special provision for solely automated data processing operations in its Article 22. This chapter intends to test these provisions against automated applications such as smart contracts embedded into blockchain technology. Basically, the commands automatically executed by smart contracts do not have the kind of complexity that can be considered ‘automatic decision-making’ under the terms of the GDPR. Therefore, the privacy risks they pose do not justify the application of the special provisions in Article 22 in most cases. However, it is also possible that automated contracting applications can be backed and optimised by machine learning based AI and these solutions can be suitable to develop robust yet effective automated decision-making systems falling under the special provisions of the EU regulation. Also, following a practical example of smart grids and smart metering, the chapter will attempt to separate the applicability of the rules of data protection law for simple and AI-backed smart contract types.

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