What are Embedded Wallets?

Why Businesses Use Embedded Wallets

An embedded wallet is a blockchain wallet built directly into a web or mobile app, so users can hold and spend digital assets without installing separate wallet software.

More and more businesses are starting to accept stablecoin payments. Stablecoins allow them to receive payments from customers around the world, settle transactions quickly, and avoid some of the cost and complexity of traditional payment systems.

But customers need a blockchain wallet to receive, hold, or spend stablecoins. Requiring them to leave the business's application, download separate software, create a wallet, and learn how to use it creates substantial friction. As a result, many customers will abandon the process before completing a transaction.

An embedded wallet solves this problem by building the wallet directly into the business's web or mobile application. Customers can receive and use stablecoins without downloading separate software or dealing with recovery phrases, blockchain addresses, and other unfamiliar concepts.

To the customer, the wallet appears as an ordinary account or balance within the application. The business controls the customer experience, while a third-party provider supplies the underlying wallet infrastructure.

Different types of wallets serve different purposes. Consumer embedded wallets are designed for individual users and are perfect for fintech and neobank onboarding as well as gaming and dApps. Business wallets support multiple users, roles, and approval processes and are appropriate for managing funds within the context of internal business operations. Treasury wallets provide stronger security controls for holding larger amounts and making fewer transactions and are intended to be used by DAOs, stablecoin issuers, and licensed custodial services.

How Most Embedded Wallets Work

Most established embedded-wallet providers use a similar architecture.

The provider stores or manages the wallet's cryptographic keys using a trusted platform module, or TPM, infrastructure or multi-party computation, or MPC. This infrastructure is usually hosted by a large cloud provider.

The business integrates the wallet provider's APIs into its product. When an authenticated customer requests a transaction, the application sends that request to the wallet provider. The provider then uses its key infrastructure to authorize and sign the blockchain transaction.

The business pays the provider for each wallet it creates and for each signing action. These fees cover the provider's cloud infrastructure and generate a profit for the provider.

The Tradeoffs

This model creates a simple user experience, but it also introduces several important limitations.

First, it fragments users and their assets across applications. If Alice receives stablecoins through one application, that wallet does not automatically follow her to another application. She can end up with separate wallets, balances, and identities across many services.

Second, the user depends on the wallet provider. These wallets are often described as non-custodial because the provider does not directly own or control the user's funds. But the provider still controls the infrastructure required to access and use the wallet.

The provider can restrict or deny access. If it shuts down, stops supporting the product, or loses access to critical infrastructure, recovering the user's wallet can become extremely difficult or impossible.

Third, the user is not given a direct relationship with the wallet provider. The embedded wallet is presented only through the host application, and the user might not know which company manages the underlying keys or what will happen if that company fails.

Finally, most existing embedded wallets introduce centralized points of control and failure. They depend on the wallet provider, its cloud infrastructure, and its account-recovery systems. These are precisely the kinds of centralized dependencies that blockchain technology was designed to reduce.

Provider-assisted security and account recovery make embedded wallets easier for ordinary users. But that convenience comes with a tradeoff: the user must rely on third parties to maintain the keys, authorize access, and remain available over time.

The key questions are therefore not simply whether an embedded wallet is called custodial or non-custodial. The important questions are who controls the keys, who controls access, whether the wallet works outside the host application, and how the user recovers the wallet if one of the providers disappears.

A Permissionless Embedded Wallet

1Shot takes a radically different approach to the embedded wallet product category. 1Shot separates the user's keys from the wallet service provider. Keys are controlled by the user and exist client-side in their device's hardware security module rather than as an account inside a proprietary wallet platform. This is possible thanks to the recent widespread adoption of the WebAuthn PRF extension for passkeys. Passkeys provide a familiar login experience without requiring seed phrases or separate wallet software while enabling full self-custody on any blockchain network. The wallet UI/UX is served as a simple, customizable iframe that can be embedded as-is in any web application without the need for API keys or business subscriptions.

As a result, an outage, account suspension, or shutdown of the wallet provider does not strand the user's assets. The keys continue to exist on the user's device, and the user can recover control and access it through another compatible interface. This gives businesses the convenience of an embedded wallet without making continued access dependent on a single provider's infrastructure.

Programmable permissions preserve the convenience and safety of an embedded experience. Users can authorize an application or agent to perform narrowly defined actions, with limits on assets, counterparties, transaction amounts, frequency, and duration. The application receives only the authority it needs, rather than control over the wallet itself.

The Consumer Wallet Endgame

1Shot preserves the simplicity and utility of an embedded wallet while replacing dependence on a centralized key provider with open, permissionless, value-aligned infrastructure. Businesses still receive the seamless user experience that makes embedded wallets useful, while users retain control, portability, and a path to recovery that does not depend on one wallet company remaining online. This closes the gap between the convenience of embedded wallets and the permissionless architecture that gives blockchain technology its value. You can add an embedded wallet to your app in a few minutes with the 1Shot embedded wallet quickstart.

Frequently Asked Questions

What is an embedded wallet?

An embedded wallet is a blockchain wallet built directly into a web or mobile app, so users can hold and spend digital assets without installing separate wallet software. To the customer, it appears as an ordinary account or balance within the application, while a provider or the app itself supplies the underlying wallet infrastructure.

How do embedded wallets work?

Most embedded wallet providers store or manage cryptographic keys using TPM or MPC infrastructure hosted in the cloud. The business integrates the provider's APIs into its product. When an authenticated customer requests a transaction, the application sends that request to the wallet provider, which uses its key infrastructure to authorize and sign the blockchain transaction. The business typically pays the provider for each wallet it creates and for each signing action.

Are embedded wallets custodial?

The custodial label alone is misleading. Many embedded wallets are described as non-custodial because the provider does not directly own or control the user's funds — but the provider still controls the infrastructure required to access and use the wallet. The provider can restrict access, and recovery can become difficult if it shuts down. The important questions are who controls the keys, who controls access, whether the wallet works outside the host application, and how the user recovers if a provider disappears.

What's the difference between an embedded wallet and MetaMask?

MetaMask is a browser extension wallet that users install separately and connect to many websites via the standard EIP-1193 interface. An embedded wallet is built directly into a single application's UI — users never download separate wallet software or manage recovery phrases in the traditional sense. Extension wallets prioritize portability across the open web; embedded wallets prioritize low-friction onboarding within one product.

What is the difference between 1Shot and Privy, Dynamic, etc.?

Privy, Dynamic, Thirdweb, Turnkey, and similar vendors are hosted embedded wallet platforms: they store or manage keys in TPM/MPC cloud infrastructure, require API keys and vendor contracts, and typically charge per user or per signature. Accounts are often siloed per application. 1Shot takes a permissionless approach — keys are derived client-side from a passkey via WebAuthn PRF and live on the user's device, not inside a proprietary wallet platform. You embed the wallet as an iframe with no API key or subscription, users keep portable cross-app identity, and an outage or shutdown of the wallet provider does not strand their assets.