Embedded Wallets: Bringing Web3 Services with the Familiarity of Web2

[TL;DR]

• Embedded wallets are integrated within existing apps or services, providing Web3 functionality without requiring separate installations or complex setups, gradually onboarding users based on their experience level.
• Users can manage and trade digital assets naturally, similar to a regular app, without needing to understand blockchain technology. Complex processes like gas fee calculation and network selection are automated, offering an experience similar to Web2.
• Practical business models utilizing embedded wallets are emerging in various fields, such as NFT transactions in gaming, real-time revenue distribution in streaming, instant cash conversion of membership points, and transparent reselling of tickets, proving the real value of Web3.

1. Understanding Embedded Wallets

1.1 Definition and Features of Embedded Wallets

In the Web3 ecosystem, an embedded wallet refers to a wallet integrated within an existing app or service. This approach eliminates the need for users to install separate wallet applications or go through complex setup processes, making it an extremely simple and user-friendly solution.

The key feature of an embedded wallet is that it provides Web3 functionalities without disrupting the user experience of existing services. Complex processes like private key management and transaction signing are handled in the backend, allowing users to interact with Web3 services through a familiar interface.

Additionally, embedded wallets serve as a bridge between centralized services and the decentralized blockchain world. Users do not need to understand blockchain technology, while service providers take responsibility for crucial security aspects. This drastically lowers the entry barriers for Web3 services while enabling companies to adopt blockchain technology more easily.
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1.2 Differences from Traditional External Wallets

Traditional external wallets and embedded wallets differ fundamentally in several aspects. The most significant difference is the onboarding process. External wallets like MetaMask require separate installations, seed phrase backups, and network configurations, whereas embedded wallets are naturally created and managed within an app.

From a security standpoint, embedded wallets operate within the security infrastructure of the existing app while maintaining a self-custodial model, where users retain full control over their private keys. This innovative approach combines the convenience of centralized services with the core value of decentralization—asset sovereignty.

In terms of usability, embedded wallets minimize the learning curve by leveraging the UX/UI of existing apps. Users can manage and transact digital assets through a familiar interface without needing to understand complex blockchain terms or concepts. Processes like key management and transaction signing are seamlessly integrated within the app, enabling a more intuitive Web3 experience.

Furthermore, embedded wallets ensure smooth user experiences by integrating directly with existing app functionalities. For example, users can trade in-game items or purchase NFTs without needing to connect an external wallet.
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1.3 Importance in Web3 User Experience

Embedded wallets are becoming a key component in the mainstream adoption of Web3. While early Web3 services were limited to tech-savvy early adopters due to high entry barriers, embedded wallets now allow general users to access Web3 services effortlessly. Beyond convenience, this also promotes the core Web3 values of decentralization and self-sovereign asset management to a broader audience.

For instance, in GameFi and decentralized social networks, users can own and trade digital assets without even realizing they are using blockchain technology. This seamless integration significantly expands real-world applications of Web3 and validates the practical value of blockchain technology.

Moreover, embedded wallets act as a catalyst for businesses adopting Web3. Companies looking to integrate blockchain features into their services can do so without compromising user experience. This, in turn, fosters the growth and expansion of the Web3 ecosystem.

A particularly noteworthy aspect is the continuity of the user experience provided by embedded wallets. Users can access Web3 functionalities within familiar apps and services, significantly increasing Web3 adoption. This seamless integration is expected to play a crucial role in the broader acceptance of Web3 in the future.
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2. Embedded Wallets Offering a Web2-Like UX

2.1 One-Click Account Creation

One of the most significant features of embedded wallets is that users can access Web3 services instantly without understanding blockchain technology. Blockchain wallets are automatically created using existing email or social logins, eliminating technical jargon and complicated procedures.

A key advantage here is the progressive onboarding approach. Embedded wallets start with minimal information requirements and gradually enhance security levels based on user activity. For example, an initial login generates a basic wallet, users are prompted to back up their wallet upon acquiring their first asset, and additional security settings are suggested for high-value transactions.
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2.2 Seamless Transaction Experience

Embedded wallets transform complex blockchain transactions into everyday digital experiences. Users do not need to worry about gas fees or network fees, as transactions are processed similarly to in-app purchases. Gas fees are automatically optimized, and transaction progress is conveyed through real-time notifications for an intuitive user experience.

Even more complex transactions, such as bridging assets across different networks, are automated in the backend. Users only need to select the desired outcome, while any errors are addressed with practical solutions instead of technical explanations.
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2.3 Natural Integration with Web2

The true value of embedded wallets lies in maintaining the user experience of Web2 services while providing Web3 functionalities. Users can own and trade digital assets without realizing they are using blockchain technology. By preserving the UI/UX of existing apps, Web3 capabilities are seamlessly integrated within familiar environments.
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To facilitate this, embedded wallets replace technical jargon with user-friendly terms. For example, instead of "wallet," the term "account" might be used, and "gas fee" could be referred to as "network fee" for better clarity. Additionally, seamless integration with existing payment systems ensures that users experience Web3 transactions similarly to Web2 payments.
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2.4 Future UX Enhancements

The UX of embedded wallets is continuously evolving. Innovations such as AI-driven transaction optimization, adaptive security systems, and integration with social features are being explored. A significant focus is on providing a consistent cross-platform experience and a personalized asset management interface.

These advancements will play a crucial role in Web3's evolution as the next stage of the internet. Embedded wallets will act as a bridge, enabling users to benefit from Web3 effortlessly.
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3. Business Applications of Embedded Wallets

3.1 Use in Blockchain Gaming

A gaming company introducing NFTs faced high drop-off rates due to complex wallet integrations. After implementing embedded wallets, players could trade NFTs directly within the game without dealing with gas fees or network selections. This resulted in an 85% reduction in user drop-off rates during onboarding.
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3.2 Streaming Services

A streaming platform used embedded wallets to enable automatic revenue distribution based on actual watch time. Micro-payments were processed automatically, allowing creators to receive earnings in real-time instead of waiting for periodic settlements.
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3.3 Retail Membership Points

A retail company implemented embedded wallets to issue instant tokenized rewards, allowing users to convert points into cash or other services seamlessly. This improved point liquidity and interoperability across brands.
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3.4 Digital Ticketing Innovation

A ticketing platform leveraged embedded wallets to issue NFT-based tickets, enabling secure reselling with automated revenue distribution via smart contracts. This prevented ticket scalping while ensuring transparent revenue sharing.
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4. Conclusion

Embedded wallets are revolutionizing Web3 adoption by making blockchain technology invisible to users while delivering its benefits seamlessly. Just as the internet evolved from technical protocols to intuitive experiences, Web3 is undergoing a similar transformation.

For businesses, embedded wallets present new opportunities to integrate blockchain without disrupting user experiences. As a result, Web3 is shifting from experimental technology to real-world value creation.

Ultimately, embedded wallets are making Web3 an everyday tool rather than a complex technology. The success of Web3 services will now depend on how practical and valuable they are for users rather than their technical complexity.