The friction is intentional security. Web2 checkout forms with passwords, 2FA, and OTPs are a security perimeter for centralized databases. They protect the merchant's liability, not the user's assets. This creates a custodial bottleneck where every transaction requires a third-party's permission.
e-commerce-and-crypto-payments-future
Blog
Why Embedded Wallets Will Make Traditional Checkout Flows Obsolete
Traditional crypto checkout is broken. Embedded wallets, powered by Account Abstraction, eliminate extension downloads and seed phrases, creating a checkout experience that rivals Apple Pay. This is the endgame for Web3 payments.
introduction
THE UX PARADOX
The Friction is the Feature (Until It's Not)
Traditional web2 checkout flows are a security crutch that embedded wallets eliminate by making the user the payment rail.
Embedded wallets invert this model. The user's signing key becomes the checkout. Protocols like Privy and Dynamic abstract seed phrases into familiar web2 logins, but the user retains cryptographic control. The transaction flow shifts from 'ask for permission' to 'prove ownership'.
This eliminates settlement layers. A traditional Stripe payment involves 5+ intermediaries for authentication, clearing, and settlement. An embedded wallet transaction is a direct, signed message to a blockchain. The settlement is the authorization, collapsing the payment stack.
Evidence: Visa processes ~1,700 TPS globally. The Solana Virtual Machine, which powers many embedded wallet experiences, has a tested throughput of 65,000 TPS. The bottleneck moves from the payment network to the application logic itself.
key-trends
WHY EMBEDDED WMS WILL MAKE TRADITIONAL CHECKOUT FLOWS OBSOLETE
The Three Pillars of the Embedded Wallet Revolution
Traditional checkout is a conversion-killing relic. Embedded wallets like Privy, Dynamic, and Magic are the new infrastructure for seamless, secure, and programmable user onboarding.
01
The Problem: The 70% Cart Abandonment Rate
Traditional checkout is a conversion graveyard. Users face password fatigue, 2FA friction, and payment processor delays. The cognitive load is fatal.
- Key Benefit 1: ~70% reduction in drop-off by replacing sign-up forms with one-click social or passkey login.
- Key Benefit 2: ~500ms to authenticated, funded state versus ~30 seconds for traditional KYC/payment flow.
-70%
Drop-Off
~500ms
Auth Time
02
The Solution: Programmable Session Keys & Gas Abstraction
Wallets aren't just for holding assets; they're programmable identity layers. Session keys (via ERC-4337) and gas sponsorship turn complex blockchain interactions into silent backend processes.
- Key Benefit 1: Enable trustless, batched transactions for games and dApps without constant user signing.
- Key Benefit 2: Zero-gas user experience via meta-transactions and paymasters, abstracting the blockchain entirely from the end-user.
ERC-4337
Standard
$0
User Gas Cost
03
The Architecture: MPC vs Smart Account Wallets
The battle for the dominant abstraction layer is between MPC-TSS (Privy, Web3Auth) and Smart Contract Wallets (Safe, Biconomy, ZeroDev). The winner defines the security and feature model.
- Key Benefit 1: MPC Wallets: No seed phrases, cloud backup, ideal for mass-market apps with ~99.9% recovery success.
- Key Benefit 2: Smart Wallets: Native multi-sig, social recovery, and seamless integration with AAVE, Uniswap, Superfluid for embedded DeFi.
MPC vs SCW
Architecture
99.9%
Recovery Rate
THE END OF THE PASSWORD
Checkout Flow Friction: A Comparative Analysis
Comparing user experience, security, and cost metrics between traditional web2 checkout, standard web3 wallet connect, and embedded wallet solutions.
| Feature / Metric | Traditional Web2 Checkout | Standard Web3 Connect (e.g., MetaMask) | Embedded Wallet (e.g., Privy, Dynamic) |
|---|---|---|---|
Average User Action Steps to Purchase | 5-7 (Email, PW, 2FA, Address, Pay) | 3-4 (Select Wallet, Approve Tx, Sign Tx) | 1-2 (Social Sign-In, Approve Tx) |
Frictionless Sign-Up | |||
Average Transaction Time (On-Chain) | 30-90 seconds | < 5 seconds | |
Gas Abstraction / Sponsorship | |||
Recoverable / Non-Custodial Account | |||
Average Onboarding Drop-off Rate | ~70% | ~85% | ~25% |
Required User Tech Stack Knowledge | Email, Password, 2FA | Seed Phrases, Gas, Networks | Google/Apple/Discord Account |
Native Cross-Chain Capability |
deep-dive
THE USER ABSTRACTION
How Embedded Wallets Actually Work: ERC-4337 and the Silent Abstraction
ERC-4337 Account Abstraction removes the wallet as a user-facing concept, enabling seamless, gasless onboarding that outcompetes Web2.
Traditional checkout is a UX tax. Users must install a browser extension, manage seed phrases, and pre-fund wallets with native gas tokens. This multi-step friction kills conversion.
ERC-4337 abstracts the wallet. The user's 'account' becomes a smart contract, not an EOA. This enables sponsored transactions, social logins, and session keys.
The flow is silent. A user clicks 'Pay'. A Paymaster (like Biconomy or Stackup) sponsors the gas. A Bundler (like Pimlico or Alchemy) submits the transaction. The user sees a receipt.
Evidence: Platforms like Coinbase Smart Wallet and Privy demonstrate sub-30 second onboarding. This is faster than creating a Stripe account.
protocol-spotlight
THE END OF THE CHECKOUT FLOW
The Infrastructure Builders: Who's Abstracting the Wallet
Traditional web2 checkout is a UX dead-end. Embedded wallets, powered by MPC and account abstraction, are turning transactions into a single-click signature, not a multi-step ritual.
01
The Problem: The 7-Step Abandonment Funnel
Every step in a traditional web3 checkout is a leaky bucket. Users face wallet pop-ups, network switches, token approvals, and gas estimation, leading to >70% drop-off rates. The cognitive load kills conversion.
- Friction Points: Network switch prompts, approval txs, gas fees.
- Business Impact: Lost revenue from abandoned carts worth billions annually.
>70%
Drop-Off Rate
7+ Steps
To Complete Tx
02
The Solution: MPC & Session Keys (Privy, Dynamic)
Move the signing ceremony server-side. MPC (Multi-Party Computation) custodial wallets, like those from Privy and Dynamic, abstract seed phrases and enable gasless, one-click transactions via ephemeral session keys.
- User Experience: Social login, ~500ms transaction signing.
- Architecture: Non-custodial security model with key-splitting between user and service.
~500ms
Signing Speed
0-Click
Gas Experience
03
The Solution: ERC-4337 Smart Accounts (Safe, Biconomy)
Smart contract wallets make users programmable. Safe{Wallet} and Biconomy leverage ERC-4337 for batched transactions, gas sponsorship, and social recovery, turning wallets into feature-rich service layers.
- Key Benefit: Paymaster abstraction allows app-to-pay gas in any token.
- Developer Leverage: Build custom transaction flows with UserOperation bundlers.
1 Tx
Multi-Action Bundle
$0
User Gas Cost
04
The Enabler: Intent-Based Infra (UniswapX, Across)
The final abstraction: users declare what they want, not how to do it. Protocols like UniswapX and Across use solvers to find optimal execution paths, making the wallet a declarative interface.
- Mechanism: User signs an intent; off-chain solvers compete for best execution.
- Result: Better prices, MEV protection, and guaranteed settlement.
10-30 BPS
Price Improvement
MEV-Proof
Execution
05
The Metric: Conversion Rate as King
The ultimate KPI shifts from 'wallet connections' to 'transaction completion'. Embedded flows demonstrably increase conversion by 3-5x, making them non-negotiable for any serious dApp.
- Evidence: E-commerce platforms using embedded wallets see checkout completion rates rivaling Apple Pay.
- Bottom Line: UX abstraction directly translates to top-line revenue.
3-5x
Conversion Lift
>90%
Checkout Completion
06
The Future: Wallet as Invisible API
The end-state is no wallet UI at all. Signing becomes a background OS-level service, akin to 'Sign in with Google'. The infrastructure builders winning this race are those making the wallet completely disappear.
- Trend: Integration into mobile OS keystores and web browsers.
- Winners: Platforms that own the signing primitive, not the wallet app.
0 UI
Target State
OS-Level
Integration
counter-argument
THE USER EXPERIENCE TRAP
The Custodial Conundrum: Steelmanning the Skeptic
Traditional web2 checkout flows are a conversion-killing tax that embedded wallets eliminate by abstracting away private keys and gas fees.
The onboarding tax kills conversion. Every seed phrase, gas purchase, and network switch is a 30%+ drop-off point. Privy and Dynamic wallets prove users convert when wallets are invisible.
Custody is a feature, not a bug. The skeptic's core argument fails because smart account abstraction (ERC-4337) separates key management from transaction logic. Services like Safe{Wallet} provide enterprise-grade, non-custodial recovery.
Gas abstraction is non-negotiable. Users reject paying for gas. Paymasters from Stackup or Biconomy sponsor transactions, making web3 flows cheaper and more predictable than credit card processing fees.
Evidence: Coinbase's Smart Wallet saw a 90% reduction in failed transactions post-onboarding by eliminating gas complexities for users, directly increasing protocol revenue.
risk-analysis
CRITICAL VULNERABILITIES
The Bear Case: Where Embedded Wallets Could Fail
For all their promise, embedded wallets introduce novel attack vectors and systemic risks that could stall mainstream adoption.
01
The Centralized Custody Trap
Most embedded wallets rely on key custody by the application provider, creating a single point of failure. This reintroduces the very trust model crypto sought to dismantle.
- Regulatory Target: Providers become regulated financial entities, subject to KYC/AML, negating permissionless access.
- Censorship Vector: Providers can freeze or seize assets based on jurisdiction or terms of service.
- Honeypot for Hackers: A centralized key management service becomes a $1B+ target, as seen with exchange hacks.
1 Point
Of Failure
100%
Provider Control
02
The UX/Onboarding Illusion
The promise of 'email login' often masks a fragmented, high-friction reality for actual on-chain activity.
- Gas Abstraction Complexity: Paying for user transactions requires complex sponsorship mechanics or off-ramping to stablecoins, adding backend overhead.
- Chain Confusion: Users remain unaware of which network they're on, leading to permanent fund loss from wrong-chain transfers.
- Limited Composability: Walled-garden wallets break interoperability with the broader DeFi ecosystem (e.g., Uniswap, Aave).
~70%
Drop-off Rate
High
Support Cost
03
Economic Model Collapse
The 'gasless' experience for users shifts cost burden to dApp developers, creating an unsustainable business model.
- Customer Acquisition Cost (CAC) Explosion: Subsidizing $2-10 in gas per user action destroys unit economics for most applications.
- Relayer Centralization: To manage costs, developers rely on a few relayers (e.g., Biconomy, Gelato), recreating infrastructure centralization.
- Monetization Paradox: The wallet becomes a cost center with no clear revenue stream, unlike traditional payment processors that take a fee.
$2-10
Cost Per User
Negative
Unit Economics
04
Interoperability & Lock-In
Embedded wallets often create vendor lock-in, trapping user assets and identity within a single application's ecosystem.
- Non-Portable Keys: User assets and social graph are siloed; moving to a competitor requires a fresh onboarding.
- Fragmented Identity: A user's reputation and transaction history from Friend.tech don't follow them to Farcaster.
- Standardization War: Competing standards (e.g., ERC-4337, EIP-3074, vendor-specific) prevent a unified user-owned identity layer.
0
Portability
High
Switching Cost
future-outlook
THE UX EVENT HORIZON
The Checkout Singularity: What Happens When Payments Disappear
Embedded wallets eliminate the checkout flow by merging identity, authentication, and payment into a single cryptographic session.
The checkout flow is a UX bug. It exists because web2 separates identity (OAuth), authentication (password), and payment (Stripe). Embedded wallets like Privy or Dynamic unify these into a single cryptographic session key.
Session keys enable invisible transactions. A user signs one permission. The app's smart account, powered by Safe or Biconomy, then executes actions like swaps or transfers without further prompts. The payment step disappears.
This kills the conversion funnel. The current model has a 70% drop-off rate. The new model has zero steps. Protocols like UniswapX already abstract gas and slippage; embedded wallets abstract the entire user intent.
Evidence: Visa's web3 wallet uses embedded MPC technology, reducing transaction time from 45 seconds to under 2 seconds. This is the performance delta that makes checkout flows obsolete.
takeaways
THE CHECKOUT REVOLUTION
TL;DR for the Time-Poor CTO
Embedded wallets are not an incremental upgrade; they are a full-stack replacement for the traditional payment stack, from identity to settlement.
01
The Problem: The 7-Step Cart Abyss
Traditional checkout is a conversion killer. It's a multi-step, multi-app handoff where >70% of users abandon their carts. The process involves: email/password, 2FA, card details, 3DS, and OTPs. Each step is a point of failure and fraud.
>70%
Abandonment Rate
~120s
Checkout Time
02
The Solution: 1-Click, On-Chain Identity
Embedded wallets (like Privy, Dynamic, Magic) fuse authentication and payment into a single session. The user's wallet is their logged-in account. Transaction signing becomes the only required action, collapsing the entire flow into a single, secure intent.
- Zero onboarding friction for Web3-native users.
- Seamless cross-device & cross-dApp state.
- Native support for gas sponsorship & session keys.
~2s
Tx Time
1 Click
To Checkout
03
Killing the Payment Processor Tax
Stripe charges 2.9% + $0.30 per transaction for the privilege of moving digits in a database. Embedded wallets enable direct peer-to-peer settlement on L2s like Base or Arbitrum, reducing fees to <$0.01. The economic model shifts from rent-seeking to protocol utility.
- Eliminate interchange & network fees.
- Enable microtransactions & new business models.
- Revenue stays within the app's token ecosystem.
<$0.01
Settlement Cost
~2.9%
Stripe Fee
04
From Custodial Risk to User Sovereignty
Storing payment data is a massive liability (see: every PCI-DSS breach). Embedded wallets delegate custody and security to the user's device and the blockchain. The application never touches private keys or sensitive data, transforming security from a cost center to a native feature.
- No PCI-DSS compliance overhead.
- Shift liability for key management to the user.
- Inherent protection against credential stuffing & ATO.
$0
PCI-DSS Cost
100%
User Custody
05
The New Stack: AA, Paymasters, Bundlers
This isn't just a wallet SDK. It's a new infrastructure layer powered by Account Abstraction (ERC-4337). Paymasters (like Pimlico, Biconomy) sponsor gas, enabling fee-less UX. Bundlers process user operations. Smart accounts enable social recovery and automated rules. This stack is what makes it production-ready.
ERC-4337
Core Standard
$0 Gas
For User
06
The Endgame: Programmable Commerce
Traditional payments are dumb value transfers. Embedded wallets enable conditional, composable value flows. Imagine: 'Release payment upon delivery verification' (Escrow), 'Split revenue automatically among creators' (Superfluid), or 'Use this NFT as a subscription pass'. The checkout becomes a programmable hook into DeFi and on-chain logic.
100%
Programmable
DeFi Native
Composability
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