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Published On Jul 14, 2025
Updated On Jul 14, 2025
Wallets are the foundation of Web3 infrastructure.
They secure assets, manage identity, and power every on-chain interaction. But the legacy model, like seed phrases, rigid account structures, and limited recovery, wasn’t built for scale or usability.
As Web3 adoption grows, so does the need for better Web3 wallet infrastructure. From account abstraction to seedless recovery, we’re entering a new phase of wallet development, one that prioritises flexibility, security, and user experience.
In this blog, we explore what’s changing, why it matters, and what developers need to know to build the next generation of smart wallets.
Let’s get started.
Nearly 40% of new users drop off at the wallet onboarding stage. Others lose assets due to simple mistakes like misplacing a seed phrase or signing a malicious transaction.
These are not isolated incidents. They highlight deeper flaws in how most wallets are designed. Users are expected to manage keys, navigate chain mechanics, and approve actions with little context.
This approach may have worked for early adopters, but it creates significant friction for the next wave of users and builders.
Together, these challenges show why today’s wallets are not ready for the next billion users. What comes next is a shift in architecture that can support more intuitive, flexible, and resilient experiences for both users and developers.
Most wallets today are based on Externally Owned Accounts (EOAs). These accounts are controlled by a single private key, with no flexibility or fallback mechanism. While simple, this model introduces significant limitations:
This structure puts both risk and responsibility entirely on the user, making it unsuitable for a broader user base.
The solution lies in rethinking the underlying web3 wallet architecture through account abstraction, enabling more flexible, secure, and user-friendly wallet logic.
Account abstraction moves the logic of wallet behaviour into smart contracts. Instead of being tied to a key, smart wallets can define their own rules for signing, access control, recovery, and gas management.
One of the most advanced proposals here is EIP-4337, which introduces a new transaction flow:
Smart wallets powered by account abstraction bring flexibility, safety, and programmability to everyday wallet interactions. They turn the wallet from a rigid tool into a dynamic user interface with real logic behind it.
Some of the core benefits include:
Users can pay transaction fees using stablecoins or have them sponsored by the dApp itself. This removes the need to hold native tokens just to use an application.
Ready (formerly Argent) was one of the early adopters of gasless UX, allowing users to interact with DeFi protocols without worrying about ETH balances.
Multiple actions such as approve, swap, and stake can be grouped into a single transaction. This simplifies complex workflows and reduces the number of approvals a user needs to sign.
Safe wallets already support batching for multisig DAOs and treasuries, allowing teams to execute proposals and treasury actions with fewer steps.
Instead of relying on a seed phrase, smart wallets can include built-in recovery options like social verification, biometric authentication, or trusted device networks.
Both Safe and Argent offer social recovery mechanisms that reduce the risk of total account loss while keeping users in control.
Developers can embed logic such as daily transaction limits, contract allowlists, or session approvals directly into the wallet.
This is already being used by treasury managers and DAOs to prevent unauthorised or accidental fund transfers.
To enable these features, developers work with new wallet infrastructure components:
These systems can be customised depending on the use case, user type, or ecosystem.
On Layer 2 networks like Optimism and Arbitrum, the cost and speed advantages make smart wallets even more powerful. In particular, Arbitrum Stylus offers the ability to write smart wallet logic in languages like Rust or C++, making it easier for teams with non-Solidity backgrounds to build robust wallet systems.
Traditional models rely on storing a seed phrase, an unforgiving mechanism that, if lost or exposed, can result in permanent loss of access.
For everyday users, this is more than just inconvenient. It creates a barrier that prevents them from trusting or using Web3 products.
Seedless recovery refers to wallet recovery methods that do not depend on seed phrases. Instead of placing the entire responsibility on the user to store a sensitive string of words, seedless recovery uses mechanisms like social verification, biometrics, and linked devices.
These approaches are often embedded directly into the wallet’s logic, making recovery safer and more adaptable.
They maintain the principles of self-custody while reducing the risks of human error.
The seed phrase model assumes users will act like security experts. In practice:
This results in a fragile experience that cannot scale to a global user base.
Smart wallet architecture enables recovery methods that are more secure and easier to use. These methods include:
These models are customisable, resilient, and built for real-world users who expect modern recovery experiences.
The next wave of development is exploring how wallets integrate seamlessly into applications, operate across chains, and meet evolving trust and compliance requirements.
Wallets are becoming an embedded infrastructure that shapes how users onboard, interact and transact across the Web3 stack.
As technical capabilities mature, the next wave of wallet design will focus on invisibility, interoperability, and security at scale.
Embedded wallets are built directly into applications, eliminating the need for separate extensions, downloads, or complex setup flows.
This is particularly effective in gaming, social, and consumer-facing products where conversion rates are highly sensitive to UX friction.
Solutions like Magic Labs, Privy, and Web3Auth are leading this trend. This model makes Web3 feel invisible, an important step toward reaching non-technical audiences.
Users often face confusing network switches, gas token mismatches, and duplicated interfaces across chains.
Wallet design is now shifting toward an intent-based model, where users express what they want to do and the wallet or protocol determines how to do it, regardless of the underlying chain.
Key developments driving this evolution:
These patterns reduce complexity and let users interact with Web3 in a way that feels more goal-oriented and fluid, critical for both power users and newcomers.
Smart contract logic can have bugs, upgrade mechanisms can be misused, and griefing attacks can exploit wallet-level permissions. As wallet infrastructure matures, security and compliance will be built in, not added on.
This balance of innovation and trust will define which wallet architectures succeed in regulated environments and which are relegated to niche experimentation.
Wallets are no longer just key managers; they are becoming programmable, recoverable, and deeply integrated into the apps users rely on.
As account abstraction, seedless recovery, and cross-chain UX mature, the wallet will shape how Web3 reaches real-world users.
For developers, this is the moment to design with flexibility, security, and usability at the core. The next generation of wallets is already here. The future is about making it invisible, interoperable, and trusted.
Growth Lead
FAQs
Account abstraction allows wallets to use smart contracts for transaction logic, enabling flexible features like gasless transactions, social recovery, and custom security rules. It’s a key step toward more user-friendly and secure Web3 wallets.
Smart wallets offer built-in recovery, gas sponsorship, and transaction bundling. These features simplify onboarding, reduce friction, and make blockchain apps more accessible to everyday users.
Seedless recovery reduces the risk of asset loss due to human error. Methods like social recovery, biometrics, and multi-device verification offer secure, user-friendly alternatives to traditional seed phrases.
Embedded wallets are integrated directly into apps, removing the need for browser extensions or complex setups. They enable seamless onboarding, especially in gaming, social, and consumer apps.
Yes, modern smart wallets include built-in security policies, support regular audits, and offer compliance features like KYT modules. These tools help wallets meet both technical and regulatory standards at scale.
