What Are Embedded Wallets?

Every year, blockchain technology takes major leaps forward, yet user experience remains one of its biggest hurdles. One of the main challenges is how traditional cryptocurrency wallets work—setting them up is often complicated, requiring users to manage seed phrases, install additional apps, and navigate unfamiliar security measures. At every step, potential new users drop off due to these complexities.

Embedded wallets offer a way to make blockchain interactions more seamless and intuitive. Instead of requiring external wallet extensions or standalone apps, they integrate directly into applications, allowing users to sign in, manage digital assets, and authenticate transactions—all within a single platform.

How Embedded Wallets Work

An embedded wallet is a digital wallet that is built directly into an application, such as a gaming platform, DeFi service, or digital identity system. Since the wallet is built into the app, the application directly generates and stores cryptographic keys, allowing users to sign blockchain transactions without leaving the app.

By simplifying and hiding much of the complexity behind cryptocurrency transactions (a process you'll often hear referred to as "abstraction"), embedded wallets make blockchain technology more accessible to a wider audience.

Key Functionalities

• Authentication Methods. Embedded wallets abstract key management by linking authentication credentials (e.g.,passkeys or social logins) to a cryptographic wallet, allowing users to sign in without manually handling private keys.
• Key Management. Depending on the implementation, cryptographic keys can either be stored directly on the user’s device or secured using multi-party computation (MPC). MPC improves security by distributing private key fragments across multiple locations, reducing single points of failure and making it significantly harder for attackers to compromise the wallet
• Blockchain Transactions. Users can send and receive digital assets, sign smart contract transactions, and interact with blockchain applications without navigating away from the platform.

Benefits of Embedded Wallets

Frictionless onboarding. Embedded wallets eliminate intimidating steps like installing apps or writing down and safely storing long lists of meaningless words. You can start interacting with blockchain applications immediately after signing up.

Security & convenience. Embedded wallets reduce the risk of lost keys by using secure authentication methods such as passkeys, social logins, or cryptographic key-sharing mechanisms (MPC).

Bridging Web2 and Web3 with seamless integration. Embedded wallets remove the need to switch between apps or manage external wallet software. Since they are built directly into applications, users can sign in, store digital assets, and approve transactions without ever leaving the platform - an experience that makes Web3 interactions feel as intuitive as traditional online services.

Challenges of Embedded Wallets

One of the main concerns with embedded wallets is the balance between security and custodianship. Custodial models simplify onboarding but rely on a trusted third party to manage keys, which may introduce counterparty risk. Non-custodial implementations, on the other hand, offer users full control over their assets but require them to manage their own key recovery, which can be challenging for less experienced users.

Another thing is that as simple as the process is, users must still understand key management basics to avoid potential security risks, such as phishing attacks or compromised credential.

Use Cases

Embedded wallets are being integrated into a wide range of applications, making digital asset management easier across different industries.

Gaming & the metaverse. Blockchain-based games and virtual worlds often involve in-game currencies, NFT assets, and digital collectibles. Embedded wallets allow players to earn, trade, and spend assets without installing a separate crypto wallet.

Decentralized finance (DeFi). Many users avoid DeFi platforms due to the complexity of connecting and managing wallets. Embedded wallets simplify access to lending, borrowing, and staking services as users can interact with these features directly from within the platform.

NFTs & digital collectibles. Purchasing and managing NFTs can be cumbersome for users unfamiliar with crypto wallets. Embedded wallets streamline the process by enabling one-click purchases, storage, and transfers directly within the marketplace.

Social & community applications. Embedded wallets can make tipping, gated access, and identity verification much easier in social platforms and online communities. It can also help prevent bot activity and fake accounts.

Identity & access management. Blockchain-based identity solutions use embedded wallets to verify user uniqueness while preserving privacy. This is particularly useful for age verification, gated content access, and proof-of-personhood applications.

E-commerce. Embedded wallets can facilitate seamless cryptocurrency payments directly on e-commerce platforms. This could simplify the checkout process, reduce transaction fees, and even increase transaction speeds. 

The Future of Embedded Wallets

Embedded wallets could become the default way users interact with decentralized applications. The list of security innovations will likely grow beyond the current multi-party computation (MPC) and hardware-secured key storage. Future developments will likely focus on improving key security (e.g., hardware-backed authentication) and regulatory compliance to enhance user protection and trust.

As adoption grows, embedded wallets will almost certainly extend beyond crypto-native applications. Industries like e-commerce and financial services are already exploring their potential for secure transactions and digital identity verification. Over time, they could bridge the gap between traditional digital experiences and blockchain-powered applications.