Wallets are the new OS. The browser was the portal to Web2; the smart wallet (like Safe, Rabby, or Privy) is the portal to Web3. All user intent and transaction flow now originates here, not a website.
wallet-wars-smart-accounts-vs-embedded-wallets
Blog
Why the Wallet is the New Browser (And What That Means for L2s)
The chain-centric model is dying. Wallets like Rabby, MetaMask, and smart account SDKs are becoming the primary discovery layer, forcing L2s to compete for integration, not just users. This is the great inversion.
introduction
THE USER INTERFACE SHIFT
Introduction
The wallet has replaced the browser as the primary user interface for onchain activity, forcing L2s to compete on user experience, not just throughput.
This inverts L2 competition. Networks like Arbitrum and Optimism no longer compete on raw TPS, which is commoditized. They compete on wallet integration, gas sponsorship, and native account abstraction features.
Evidence: Over 90% of DeFi volume flows through wallet-embedded swap interfaces. Protocols like Uniswap and Aave are now distribution channels, while wallets control the user session and fee economics.
key-trends
WHY THE WALLET IS THE NEW BROWSER
Executive Summary: The Three Shifts
The user interface for crypto is shifting from the browser tab to the wallet, forcing L2s to compete on a new axis: the user's pocket.
01
The Problem: L2s as Commoditized Tubes
L2s have optimized for cheap, fast transactions, creating a race to the bottom where the only differentiator is price. This ignores the user's holistic journey across chains.
- User Experience Fragmentation: Each L2 is a silo, forcing users to manage separate balances and bridge assets manually.
- Zero Brand Loyalty: Users chase the lowest gas fee, treating L2s like interchangeable utilities, not platforms.
<$0.01
Avg. L2 Tx Cost
~15
Major L2s
02
The Solution: Wallets as the Aggregation Layer
Smart wallets (ERC-4337) and intent-based architectures turn the wallet into an OS that abstracts chain complexity. The winning L2 will be the one best integrated into this layer.
- Intent-Driven Execution: Users state a goal ("swap X for Y"), and the wallet's solver network (like UniswapX or CowSwap) routes across the optimal L2/chain.
- Unified Liquidity & State: The wallet, not the chain, becomes the primary interface, aggregating balances and activity from Arbitrum, Optimism, Base, etc.
4337
Account Standard
10M+
Smart Wallets
03
The Shift: From Chain-Centric to User-Centric Stacks
Infrastructure value accrual is moving from the execution layer (L2) to the aggregation and session key layers that sit in the wallet.
- Session Keys & Privacy: Projects like Privy enable seamless, secure app interactions without constant signing, a feature L2s must natively support.
- The New Moats: L2 success will be defined by SDK adoption, wallet partnerships, and ability to serve as a preferred backend for intent solvers like Across and Socket.
0-Click
Future UX
L2-as-a-Backend
New Model
thesis-statement
THE NEW FRONTIER
The Core Inversion: From Chain-Centric to Wallet-Centric
The user's wallet is becoming the primary execution environment, relegating individual blockchains to a utility layer.
The wallet is the new browser. It aggregates liquidity, routes transactions, and manages identity, making the underlying chain a commodity. This mirrors the web's shift from server-centric to client-centric models.
L2s become interchangeable backends. Users execute intents via wallets like Rainbow or Rabby, which route to the optimal chain via UniswapX or Across. Chain loyalty evaporates.
The competition shifts to RPCs and bundlers. Providers like Alchemy and Blocknative compete on speed and reliability of simulating and submitting these complex, cross-chain user intents.
Evidence: Over 60% of DEX volume on Arbitrum and Optimism flows through intent-based aggregators, demonstrating user preference for wallet-centric execution over direct chain interaction.
market-context
THE NEW FRONTIER
The Battlefield: Smart Accounts vs. Embedded Wallets
The wallet is becoming the primary user interface for web3, forcing L2s to compete on user onboarding and transaction abstraction.
Smart accounts are the strategic endgame. ERC-4337 account abstraction shifts the transaction model from EOA signatures to programmable logic. This enables sponsored gas, session keys, and social recovery, which are prerequisites for mass adoption. L2s like Starknet and zkSync have native AA support to attract developers building these experiences.
Embedded wallets are the pragmatic on-ramp. Platforms like Privy and Dynamic provide custodial-like UX with non-custodial security, abstracting seed phrases and gas fees. This is the dominant model for web2-native apps entering web3, creating a parallel ecosystem that bypasses traditional wallet downloads.
The conflict defines L2 competition. L2s must now provide native AA infrastructure (like Arbitrum's new Stylus feature) or optimize for embedded SDKs (like Base with Farcaster frames). The chain that best abstracts wallet complexity wins the next billion users, not the one with the cheapest gas.
WALLET AS THE PRIMARY INTERFACE
L2 Metrics in a Wallet-Centric World
Comparison of how leading L2s perform on key metrics that matter when user interaction is mediated by smart wallets like Safe, Argent, and Rabby.
| Core Wallet-Centric Metric | Arbitrum | Optimism | zkSync Era | Base |
|---|---|---|---|---|
Avg. Time to Wallet UX Finality | < 1 sec | < 1 sec | ~15 min | < 1 sec |
Account Abstraction (AA) Native Support | ||||
Bundler Infrastructure Maturity | High (4337 ecosystem) | High (4337 ecosystem) | Medium (native paymaster) | Medium (growing) |
Single Tx Cost for AA Operation | $0.10-0.25 | $0.12-0.30 | $0.08-0.20 | $0.15-0.35 |
Pre-Confirmation Support | Yes (via Caldera, Espresso) | Yes (via OP Stack) | No | Limited |
Avg. L1 Finality Time | ~1 week | ~1 week | ~24 hours | ~1 week |
Native Cross-L2 Wallet Messaging | Via Arbitrum Nitro | Via OP Stack | Via Hyperchains | Via OP Stack |
deep-dive
THE USER INTERFACE
The New L2 Playbook: Integrate or Die
L2s that fail to integrate with smart wallets and account abstraction will lose the user acquisition battle.
The wallet is the browser. It is the primary interface for on-chain interaction, controlling user flow, session management, and fee payment. L2s that treat it as a passive key manager will be abstracted away.
Smart wallets change everything. ERC-4337 account abstraction shifts power from chain-level infrastructure to the wallet layer. Users now choose chains based on which wallet offers the best bundled experience, not raw TPS.
Integration is the new moat. L2s must embed native account abstraction and partner with Stack, Biconomy, or ZeroDev for gas sponsorship and batched transactions. This is the cost of user acquisition.
Evidence: The Arbitrum Stylus and Optimism Superchain initiatives prioritize developer tooling, but the real battle is at the wallet SDK level, where Coinbase Smart Wallet and Safe{Core} are setting the standard.
risk-analysis
WHY THE WALLET IS THE NEW BROWSER
The Bear Case: Centralization & Stagnation
Smart contract wallets and intent-based architectures are shifting power from L2s to the user's client, threatening the current rollup-centric model.
01
The Problem: L2s as Walled Gardens
Rollups compete for liquidity and users by subsidizing gas and offering points. This creates fragmented liquidity and vendor lock-in, where user assets are trapped by economic incentives rather than technical merit.
- TVL Silos: Billions locked in isolated ecosystems.
- User Friction: Bridging is slow, expensive, and insecure.
- Innovation Tax: Apps must deploy on every chain to capture users.
$10B+
Fragmented TVL
~7 Days
Withdrawal Delay
02
The Solution: Intent-Based Abstraction
Smart wallets like Safe{Wallet} and intents protocols like UniswapX and CowSwap let users declare what they want, not how to do it. Solvers compete across chains to fulfill the intent, making the underlying L2 a commodity.
- Chain Agnostic: User gets best execution across Ethereum, Arbitrum, Optimism.
- MEV Protection: Solvers internalize value for users.
- Unified Liquidity: Aggregates fragmented pools.
-90%
Slippage
~500ms
Solver Latency
03
The Consequence: L2 Stagnation
If the wallet/solver stack abstracts the chain, L2 differentiation collapses to cost per compute unit. This triggers a race to the bottom on fees, squeezing sequencer revenue and stifling R&D.
- Commoditization: No premium for "Ethereum security".
- Revenue Erosion: ~$50M+ annual sequencer fees at risk.
- Stalled Roadmaps: Innovation shifts to application-layer intent systems.
<$0.001
Target Tx Cost
-70%
Fee Revenue Risk
04
The Counter-Play: L2s as Intent Hubs
Forward-thinking L2s like Taiko (based on Ethereum) are building native intent infrastructure. By becoming the preferred settlement layer for solvers, they capture value from the abstraction layer instead of being disintermediated by it.
- Solver Orchestration: Provide fast pre-confirmations and data.
- Shared Sequencing: Enable cross-intent atomicity.
- Modular Advantage: Specialize as the execution core for Across, Socket.
10x
Solver Throughput
~100ms
Pre-confirmation
future-outlook
THE ARCHITECTURAL SHIFT
The 24-Month Horizon: Wallets as OS, Chains as APIs
The wallet is becoming the user's operating system, abstracting away the underlying blockchain, which reduces L2s to interchangeable APIs.
Wallets abstract chain complexity. Users will interact with a unified interface like Rabby or Zerion, which routes transactions to the optimal chain based on cost, speed, or liquidity. The user's chain choice becomes a background detail.
L2s become commodity APIs. This flips the competitive dynamic from user acquisition to developer integration. An L2's success depends on its ZK-prover performance and fee market, not its branded wallet.
Intent-based architecture wins. Wallets like Ambient or UniswapX will execute complex cross-chain swaps via Across or LayerZero without user-specified steps. The wallet OS finds the path.
Evidence: The rise of ERC-4337 Account Abstraction and EIP-6963 multi-injector standard proves the wallet's role is expanding from key storage to transaction orchestration, decoupling the frontend from any single chain.
takeaways
THE WALLET AS A PLATFORM
TL;DR for Builders and Investors
The browser was the portal to Web2. The smart wallet is becoming the OS for Web3, fundamentally reshaping user acquisition and infrastructure demands.
01
The Problem: L2s are Commoditized
Rollups compete on cost and speed, but these are temporary advantages. The real moat is user experience and distribution.
- User acquisition cost is the new primary metric.
- Fragmented liquidity across chains hurts UX and capital efficiency.
- Native L2 wallets are a dead end; users won't install 10 apps.
~$150
Avg. DApp CAC
100+
Active L2s
02
The Solution: Smart Wallets as Aggregators
Wallets like Rainbow, Coinbase Wallet, and Safe abstract the chain. They route user intents to the optimal chain or liquidity source.
- Session keys enable gasless, batched transactions.
- Account abstraction (ERC-4337) makes onboarding seamless.
- The wallet becomes the default homepage, not the DApp.
10x
Onboarding Speed
$0
User Gas Cost
03
The Implication: L2s Become Backend Utilities
L2s must compete to be the default settlement layer inside the wallet's routing logic, not for direct user attention.
- Integration with intent-based infra (UniswapX, Across, Socket) is critical.
- Custom gas sponsorship models will attract wallet partnerships.
- Performance is measured in reliability for bots, not just TPS.
-90%
Front-End Complexity
~500ms
SLA for Routing
04
The New Stack: Modular Wallet Infrastructure
Building a competitive wallet requires a modular stack, not a monolith.
- Signer Management: MPC providers like Privy, Web3Auth.
- Intent Orchestration: Solvers from CowSwap, UniswapX.
- Chain Abstraction: RPC & bridging from Polygon AggLayer, LayerZero.
$1B+
Market Cap
5+
Core Modules
05
The Investment Thesis: Own the Interface
In Web2, value accrued to browsers (Chrome) and app stores. In Web3, it will accrue to the smart wallet and its key infrastructure providers.
- Vertical integration wins (e.g., Coinbase Wallet + Base L2).
- Wallet-as-a-Service (WaaS) is a high-margin B2B play.
- The battle is for the default transaction flow.
10x
Sticky User Value
>70%
Tx Flow Capture
06
The Risk: Centralization & Censorship
A few dominant wallet providers could become the new chokepoints, replicating Web2's platform risks.
- RPC centralization gives wallets power over transaction ordering.
- Compliance-driven blacklisting could be enforced at the wallet level.
- Open source and permissionless relayers are non-negotiable for credible neutrality.
3-4
Dominant Wallets
Critical
Relayer Risk
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