> I don't see how they can exist without a judicial system.
Smart contracts don't have to exist outside the judicial system. Smart contracts are simply a way to automate transactions in a way that's efficient, transparent, and credibly neutral. Yes, we may still have to invoke courts for the 0.01% of transactions that are clear exploits. But the other 99.99% of the time, it's a much more efficient system than using written contracts to handle normal, everyday outcomes.
Even without blockchains or smart contracts, we already have automated systems that execute transactions based on algorithmic rules. If you blatantly exploit a vulnerability in those systems, then courts will generally punish you. That doesn't mean that automated systems are pointless, because 99.9% of the transactions aren't exploits. That's still a huge win, because it means we don't have to have our lawyers email redlines back and forth every time we want to trade an S&P index futures contract. (Near) fully automated transactions are 1) orders of magnitude more efficient, 2) expose general purpose composability where one automated system can be predictably inter-connected with another.
When you put an automated transaction system on-chain, you drastically increase the advantages of both, because you're embedded in an open application network with credible neutrality. A smart contract exchange like Uniswap can process about the same amount of volume as a centralized exchange like Coinbase, but the difference is that Uniswap only needs about 50 employees, whereas Coinbase needs 5000. That's primarily because Coinbase runs inside a silo'd network. That entails replicating many functions like user account management, that aren't necessary for an application like Uniswap that piggybacks off the credible neutrality of a decentralized consensus layer like Ethereum.