Sequencer revenue is user revenue. Today, wallets like MetaMask and Phantom capture zero value from the billions in transaction fees they generate for L2s like Arbitrum and Optimism. Shared sequencers from Espresso Systems or Astria will capture this value and redistribute it.
wallet-wars-smart-accounts-vs-embedded-wallets
Blog
Why Shared Sequencer Profits Will Redefine Wallet Loyalty
The next wallet war won't be won by UX alone. This analysis argues that wallets which capture and redistribute shared sequencer revenue and MEV will forge unbreakable economic bonds with users, creating a new paradigm for loyalty and retention.
introduction
THE INCENTIVE SHIFT
Introduction
Shared sequencer revenue models will fundamentally alter user loyalty by redirecting economic flows from applications to infrastructure.
Loyalty follows the profit share. Wallets will integrate with the sequencer offering the highest revenue share, not the one with the best UX. This creates a direct financial incentive for wallets to become sequencer distribution channels, similar to how validators choose MEV-boost relays.
Application loyalty becomes secondary. A user's primary financial relationship shifts from dApps like Uniswap or Aave to their wallet-sequencer bundle. The wallet that pays you to transact will command more loyalty than the dApp that charges you fees.
Evidence: The 2023 MEV-Boost relay wars show infrastructure profit-sharing dictates validator alignment. Shared sequencers will replicate this dynamic at the user level, with protocols like Succinct and AltLayer competing on wallet rebate programs.
key-insights
THE NEW LOYALTY PROGRAM
Executive Summary
Shared sequencers will commoditize block production, forcing them to compete for user flow by sharing profits directly with wallets.
01
The Problem: Sequencers as Silent Tax Collectors
Today's rollup sequencers capture 100% of MEV and transaction fees from users. This creates a misalignment where the entity ordering your transactions profits from your activity, while you pay the gas bill.\n- $1B+ in annual MEV extracted from users\n- Zero economic incentive for wallet or user loyalty\n- Creates extractive, rent-seeking infrastructure
100%
Fee Capture
$1B+
Annual MEV
02
The Solution: Profit-Sharing as a Service (PSaaS)
Shared sequencers like Astria, Espresso, and Radius will compete on economic terms, not just latency. The winning strategy: rebate a portion of sequencer profits (MEV + fees) back to the wallet or user that sourced the transaction.\n- Turns wallets into profit centers, not cost centers\n- Creates direct user-aligned economic flywheels\n- Enables wallets like MetaMask, Rainbow to monetize flow without selling data
80/20
Potential Split
10x
Loyalty Boost
03
The Catalyst: The Shared Sequencer Wars of 2025
Commoditized sequencing hardware leads to a race for transaction flow. The only durable moat is user loyalty, purchased via profit-sharing. This will redefine wallet KPIs from Monthly Active Wallets (MAWs) to Monthly Active Profit (MAP).\n- Espresso integrating with Celestia and Arbitrum for market share\n- Across Protocol's intent-based model as a precursor\n- VCs will fund sequencers that can lock in the most valuable user flow
2025
Inflection Point
MAP > MAW
New KPI
thesis-statement
THE INCENTIVE MISMATCH
The Core Thesis: Loyalty is an Economic Problem
Wallet loyalty is a function of economic incentives, not brand affinity, and shared sequencers will monetize transaction flow to realign those incentives.
Wallet loyalty is illusory because users follow the cheapest fees and best UX, not a brand. MetaMask's dominance is a historical artifact of first-mover advantage, not sustainable user lock-in.
Shared sequencers capture economic value by owning the transaction ordering layer. Projects like Espresso Systems and Astria enable rollups to outsource sequencing, creating a new profit pool from MEV and fees.
This profit pool funds loyalty. A portion of shared sequencer revenue will flow back to wallets and dApps that drive volume, directly paying for user attention through mechanisms like fee rebates or token rewards.
Evidence: The $600M+ in MEV extracted on Ethereum annually demonstrates the latent value in transaction flow. Shared sequencers formalize this extraction and redistribute it to acquire users.
market-context
THE INCENTIVE MISMATCH
The Current Wallet War is a Feature Checklist
Wallet competition is currently a race for feature parity, but shared sequencer revenue will shift the battleground to direct user incentives.
Wallet loyalty is transactional. Users switch for a better gas abstraction feature or a slicker NFT gallery, creating zero-switching costs for protocols.
Shared sequencers change the unit economics. Wallets like Rabby or MetaMask that integrate with networks like Espresso or Astria capture a portion of transaction ordering revenue.
Revenue sharing redefines loyalty. This creates a direct financial incentive for wallets to promote specific L2s and for users to stay within a profitable ecosystem.
Evidence: The $50M+ in MEV revenue extracted monthly on Ethereum demonstrates the value of ordering rights, which shared sequencers will democratize and redistribute.
key-trends
WHY SHARED SEQUENCER PROFITS WILL REDEFINE WALLET LOYALTY
Three Trends Converging
The economic model of shared sequencers like Espresso, Astria, and Radius is creating a new battleground for user acquisition.
01
The Problem: Wallet as a Cost Center
Today, wallets like MetaMask and Phantom are free-to-use interfaces that generate no direct protocol revenue, relying on opaque referral fees and token swaps. Their business model is misaligned with user savings.
- Cost Burden: Users pay all gas fees, with the wallet taking a cut on swaps via integrators like LI.FI.
- Zero Stake: Wallets have no skin in the game on L2 performance or cost; they are neutral routers.
- Commoditization Risk: With ~80% of DeFi volume flowing through a few major wallets, competition is based on features, not economics.
0%
Direct Revenue
~80%
Volume Share
02
The Solution: Profit-Sharing as a Protocol
Shared sequencers capture MEV and transaction ordering fees, creating a sustainable revenue pool. Wallets that integrate as preferred partners can receive a share, turning them into profit centers aligned with user success.
- Revenue Alignment: Wallet profitability is tied to user transaction volume and savings via better execution (e.g., intents via UniswapX, Across).
- Staked Interest: Wallets can use their share to subsidize gas or offer cashback, directly competing on price.
- New Battleground: Loyalty shifts from UX to economics, with wallets like Rabby and Rainbow potentially bidding for exclusive bundling rights.
>30%
Potential Fee Share
Direct
Alignment
03
The Catalyst: Intents & Cross-Chain Volume
The rise of intent-based architectures and cross-chain systems like LayerZero and Chainlink CCIP demands sophisticated transaction routing. The entity controlling the sequencer becomes the natural economic hub for this flow.
- Routing Premium: Shared sequencers like Espresso can offer optimal cross-domain bundles, capturing value from CowSwap, UniswapX flows.
- Data Advantage: Sequencing provides a real-time view of cross-chain liquidity and intent fulfillment, a monetizable data feed.
- Scale Incentive: As cross-chain volume grows (projected $10B+ daily), the profit pool for distribution to wallet partners becomes material, forcing wallet consolidation around the most profitable sequencer alliances.
$10B+
Daily Volume
Hub
Economic Hub
deep-dive
THE INCENTIVE SHIFT
The Mechanics of Wallet-Led Value Capture
Shared sequencers will redirect MEV and fee revenue directly to user wallets, fundamentally altering the wallet's role from a passive key manager to an active profit center.
Wallets become profit centers. Today, wallets like MetaMask and Phantom are free utilities that capture no value from the transactions they enable. Shared sequencers like Espresso and Astria create a direct revenue stream by sharing sequencer profits—MEV and fees—with the wallet that submitted the user's transaction bundle.
Loyalty shifts from chains to wallets. User loyalty is currently tied to the L2 or app offering the lowest fees. With profit-sharing, the economic incentive flips: users will prioritize the wallet offering the highest rebate, making the wallet the primary relationship layer, not the underlying chain like Arbitrum or Optimism.
This enables permissionless bundling. Wallets will compete to offer the best execution via services like UniswapX or 1inch Fusion, bundling user intents and selling them to the highest-bidding sequencer. The wallet's cut becomes its core business model, funded by the shared sequencer's auction.
Evidence: The 0x-based DEX aggregator already demonstrates this model, where integrators earn a fee share. Shared sequencers scale this to all on-chain actions, turning every wallet into a potential DEX aggregator for its own user flow.
SHARED SEQUENCER PROFIT SHARING
Wallet Value Capture: A Comparative Matrix
How different wallet models capture and redistribute value from shared sequencer MEV and fees, redefining user loyalty.
| Value Capture Mechanism | Traditional Wallet (e.g., MetaMask) | Smart Wallet w/ Bundling (e.g., Safe, Biconomy) | Intent-Centric Wallet w/ Shared Sequencer (e.g., Essential, Rhinestone) |
|---|---|---|---|
Primary Revenue Source | Token swaps via embedded aggregator | Gas sponsorship & account abstraction services | Shared sequencer profit sharing (MEV + fees) |
User Rebate on Tx Fees | Gas credits (conditional) | Up to 90% of sequencer profit per tx | |
MEV Capture & Redistribution | None (user is MEV prey) | Limited (via private mempools) | Active (via shared sequencer, redistributed to user) |
Loyalty Model | Brand inertia & convenience | Utility (gasless UX, modularity) | Direct economic alignment (profit share) |
Avg. User Earning per $100 in Gas | $0 | $0-2 (via credits) | $5-15 (via rebates) |
Integration with Intent Standards | Partial (ERC-4337) | ||
Dependency on L1/L2 Base Fees | Direct (user pays) | Abstracted (sponsor pays) | Decoupled (sequencer profit is separate stream) |
Protocol Example Partners | Uniswap, 1inch | Gelato, Pimlico | Eclipse, Astria, Espresso Systems |
counter-argument
THE INCENTIVE MISMATCH
The Counter-Argument: Why This Won't Work
Profit-sharing sequencers will fail because they create an irreconcilable conflict between protocol revenue and user security.
Sequencer profits are negligible. The primary revenue for a rollup is from L1 data posting fees, not transaction ordering. Sharing these thin margins dilutes the sequencer's incentive to invest in robust, low-latency infrastructure, directly degrading the user experience they claim to enhance.
Wallet loyalty is a myth. Users follow liquidity and low fees, not brand allegiance. A wallet offering a fractional rebate cannot compete with the liquidity aggregation of Uniswap or the intent-based routing of CowSwap, which already optimize for best execution across all chains.
Security becomes a marketing budget. Redirecting sequencer revenue to user rebates starves the protocol's security budget for fraud proofs or validator staking. This turns a critical security function into a customer acquisition cost, creating systemic risk for marginal engagement gains.
Evidence: Base's sequencer, which shares profits with Coinbase, processes orders of magnitude more volume than any standalone wallet. Its success stems from centralized exchange integration and liquidity, not the profit-share mechanism, proving distribution and utility dominate loyalty.
risk-analysis
WHY SHARED SEQUENCER PROFITS WILL REDEFINE WALLET LOYETY
The Bear Case: Risks and Vulnerabilities
Shared sequencers promise scale and atomic composability, but their profit models create new, perverse incentives that will fracture user experience and loyalty.
01
The MEV Redistribution Problem
Shared sequencers like Espresso and Astria capture cross-rollup MEV, but their profit-sharing models will force wallets to pick sides. Your wallet's default transaction routing will become a revenue stream for the sequencer it's integrated with, not for you.
- Wallet-as-Affiliate: Wallets become conduits for sequencer profit, not user agents.
- Fragmented Liquidity: Best execution for users is secondary to the wallet's partnership deals.
- Regulatory Risk: This is a new, opaque form of payment for order flow (PFOF).
$1B+
Annual MEV Pool
0%
User Cut
02
The Protocol Loyalty Schism
Layer 2s like Arbitrum, Optimism, and zkSync will face a brutal choice: cede sovereignty and revenue to a neutral shared sequencer, or fork their own to retain control. This creates a balkanized sequencing layer.
- Sovereignty Tax: L2s lose a key monetization lever (sequencer fees/MEV).
- Two-Tier System: Premium L2s run proprietary sequencers; smaller ones commoditize on shared infra.
- User Confusion: Atomic composability breaks across sequencer domains, undermining the core value prop.
>50%
L2 Revenue at Risk
Fragmented
Cross-Chain UX
03
The Centralization Death Spiral
To win the shared sequencer war, providers will offer unsustainable economic subsidies to wallets and L2s, replicating the CEX liquidity wars. The winner takes the most order flow, not the best technology.
- Economic Capture: The sequencer with the deepest pockets (e.g., VC-backed) buys integration dominance.
- Single Point of Failure: A $10B+ TVL ecosystem becomes dependent on one for-profit entity's uptime and integrity.
- Cartel Behavior: The dominant sequencer and its partner wallets can implicitly censor or tax transactions.
1-2
Winning Players
VC-Subsidized
Initial Growth
04
Intent-Based Systems as the Antidote
Projects like UniswapX, CowSwap, and Across demonstrate the end-state: users express a desired outcome, and a solver network competes to fulfill it. This bypasses the sequencer-as-middleman entirely.
- User Sovereignty: The wallet submits an intent, not a transaction to be reordered.
- Sequencer Disintermediation: Profit flows to solvers fulfilling the intent, not to the block builder.
- Natural Evolution: Shared sequencers are a stepping stone to a fully intent-centric stack.
100%
Execution Competition
Inevitable
Architectural Shift
takeaways
WALLET LOYALTY REDEFINED
TL;DR: Strategic Implications
Shared sequencers will shift wallet loyalty from brand to profit share, turning users into yield-seeking mercenaries.
01
The Problem: Wallet as a Cost Center
Today's wallets like MetaMask and Phantom are UX aggregators, not profit centers. They monetize via swaps and staking, but users see zero direct value from the underlying L2 infrastructure they use.
- User Incentive: Zero. Loyalty is based on habit and UI polish.
- Protocol Incentive: Wallets fight for swap fees, not sequencer revenue.
- Result: A fragile ecosystem where the most critical user touchpoint is economically misaligned.
$0
User Sequencer Cut
30M+
Active Wallets
02
The Solution: Profit-Sharing Wallets (e.g., Rainbow, Rabby)
Forward-thinking wallets will integrate with shared sequencers like Astria or Espresso to capture and redistribute MEV/sequencing fees.
- Direct Revenue Share: Users earn a % of fees from transactions routed through their wallet.
- Loyalty via Yield: Wallet choice becomes a yield optimization problem.
- Protocol Alignment: Wallets compete on profit-sharing terms, not just features, creating a positive-sum flywheel for the underlying rollup stack.
10-30%
Potential User Rebate
>50%
Wallet Switch Rate
03
The New Battleground: Onboarding & Abstraction
The fight moves from features to seamless onboarding and profit abstraction. Winners will be wallets that make profit-sharing feel automatic.
- Account Abstraction is Key: Smart accounts enable automated fee routing and yield claiming.
- Cross-Chain Aggregation: Wallets will route to the most profitable shared sequencer network across Ethereum, Arbitrum, Optimism.
- VC Play: Investment will flood into wallets that can aggregate the most sequencer-eligible volume, not just users.
$10B+
TVL at Stake
~0 Clicks
Ideal User Action
04
The Endgame: Wallets as L2s
The logical conclusion: major wallets launch their own app-chains or L2s with embedded shared sequencers, capturing 100% of the value stack.
- Vertical Integration: See Coinbase's Base model, but for wallet-native chains.
- Monetization Flip: Revenue shifts from third-party DEX fees to native chain fees.
- Existential Threat: Generic wallets become commodity front-ends; the value accrues to the wallet-chain infrastructure.
100%
Fee Capture
1-Click
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