In 2021, Axie Infinity peaked at 2.7 million daily active users.

In 2022, OpenSea processed over $5 billion in monthly NFT transactions.

In 2023, Uniswap surpassed $1.5 trillion in all-time trading volume.

Yet for every success story, we've seen hundreds of Web3 projects die due to a single, fundamental barrier: onboarding friction.

When mainstream users face seed phrases, gas fees, and browser extensions, 95% abandon the experience. This isn't a UX problem - it's an architectural one. The wallet infrastructure that underpins all of Web3 was designed for developers and early adopters, not mainstream users or enterprise adoption.

AA (Account Abstraction) rewrites this foundation. It transforms wallets from simple key containers into programmable execution environments with Web2-level usability. And this isn't incremental improvement - it's the operating system Web3 has been missing.

1/ From Wallets to Smart Accounts: Three Generations of Crypto Wallet UX

2/ What Account Abstraction Enables — And Why It's a Breakthrough

A. Web2 UX in Web3

• Familiar authentication: Log in with FaceID or passkeys - no seed phrases

• Invisible payments: Gasless transactions sponsored by apps or wallets

• Simplified interactions: Batching: approve + swap + stake in one click

• User safety: Recovery via social circles or hardware devices

• Delegation: Session keys for limited, delegated access (essential for embedded wallets or bots)

These capabilities raise the UX bar from "tolerable" to "invisible" - and unlock true embedded wallets in consumer apps.

B. Infrastructure for Autonomous Agents

• Value containers: AI agents need wallets to store value, pay for compute, and act on-chain

• Programmable identity: Smart accounts enable non-custodial identity with delegated permissions

• Micro-economics: Micropayments (as low as $0.0001), pay-as-you-go logic, and continuous execution make AA the native wallet format for AI use cases

• On-chain verification: "Know Your Agent" infrastructure is emerging - identity, signing, payments, and reputation converge in the wallet

"Smart accounts are to Web3 what containers were to cloud computing—the abstraction layer that enables true programmability and scale." - Jason Yanowitz, Blockworks

C. Composable Developer Runtime

• Programmable core: Account abstraction makes the wallet programmable - not just pluggable

• Modular systems: Developers can compose modules for auth, security, automation, and compliance

• Platform shift: Transforms wallets from key containers to customizable runtimes for application logic

Real-World Impact: Case Studies

Case Study: Coinbase's Base Onboarding

Base has onboarded over 25 million unique addresses since launch, with smart account integration enabling one-click wallet creation directly from Coinbase's app. Users transact without seed phrases or gas complexity, reducing onboarding abandonment compared to traditional wallet flows.

According to Jesse Pollak, Base's lead: "Account abstraction has been fundamental to our user growth strategy. It removes the single biggest barrier to mainstream adoption."

Case Study: Gaming's Web3 Breakthrough

Privy’s embedded wallet infrastructure lets developers integrate wallet creation directly into standard account flows, enabling seamless onboarding with familiar logins like email or social accounts. This removes the friction of traditional wallet prompts (such as MetaMask), making Web3 apps more accessible and significantly improving conversion rates.

Case Study: Enterprise Adoption through Compliance Modules

J.P. Morgan's Onyx platform implemented smart accounts with built-in compliance modules that enforce transaction limits, whitelist verification, and regulatory reporting. This approach reduced compliance overhead while maintaining full regulatory conformance, enabling enterprise treasury management with crypto assets.

3/ Strategic Fork: Owning the Stack vs. Powering the Stack

The ecosystem is evolving into two distinct strategic approaches:

A. Full-Stack Modular (e.g. Rhinestone, Alchemy)

• Offer an integrated, modular SDK for smart accounts: auth, session keys, gas abstraction, account logic, and OS-level controls

• These players aim to own the wallet OS, much like Stripe owns payments or Vercel owns frontend deployment

• Market advantage: Developer experience and vertical integration

• Key risk: Potential lock-in and ecosystem resistance

B. Composable Infra Blocks (e.g. Pimlico, Biconomy)

• Build powerful infrastructure primitives—bundlers, paymasters, relayers—but rely on other vendors (e.g. Privy, Turnkey) for critical modules like authentication

• Developer must assemble and maintain the stack—more flexibility, but more effort

• Market advantage: Specialization and ecosystem fit

• Key risk: Integration complexity and fragmentation

Implication: This is not modular vs. monolithic. It's integrated modularity vs. composable modularity. One stack wins on developer UX and vertical cohesion. The other wins on flexibility and ecosystem fit.

Market Size and Opportunity

While EOAs still represent 95% of all Ethereum wallets, smart account adoption is growing exponentially, with monthly deployments increasing 43% quarter-over-quarter in 2024 according to Dune Analytics. If current trends continue, we project smart accounts will represent 30-40% of all new wallet creation by 2027, representing a $1.5-2B infrastructure opportunity.

More importantly, the broader implications extend beyond wallet infrastructure:

• DeFi UX expansion: Increase in retail DeFi participation with simplified interfaces

• Enterprise blockchain adoption: Potentially enabling enterprise blockchain applications through compliant wallet infrastructure ($10sBn market)

• AI agent economy: Unlocking a >10x market for autonomous agent services by 2030

4/ The Belief Stack: What Needs to Be True for AA to Win

5/ Key Challenges to Overcome and our view of the future ahead

Despite the promising trajectory, significant barriers remain:

• Standard Fragmentation: Multiple competing AA standards (ERC-4337, ERC-7579, etc.) create ecosystem confusion. Convergence is needed for optimal developer and user experience.

• Gas Economics: Deploying smart contracts for wallets remains significantly more expensive than EOAs. While L2 scaling helps, deployment costs need further optimization through counterfactual deployment and batching innovations.

• Centralization Risks: Reliance on bundlers and paymasters introduces new trust assumptions. Decentralized bundler networks and auditable paymasters are essential for preserving Web3's core values.

• Security Complexity: Increased surface area for exploits with more complex wallet logic. This necessitates rigorous standards for audits and formal verification of smart account implementations.

• User Education: While AA improves UX, users still need to understand the security model of their wallets. New metaphors and educational approaches are required.

A/ Why Now: The Convergence of Critical Factors

Account Abstraction is reaching its inflection point in 2025 for five convergent reasons:

1. L2 Maturity: Ethereum L2s have reached 15M+ daily transactions (Etherscan, 2024), providing the scale and low fees needed for AA adoption

2. ERC-4337 Stability: With over 3M wallets deployed and critical security audits complete, the standard has proven robust in production environments

3. Integration by Incumbents: MetaMask, Coinbase, and other major players have begun AA integration, signaling mainstream acceptance

4. Competition from Alternative L1s: Solana's 83% developer growth in the past year (Electric Capital, 2024) is pressuring Ethereum to improve wallet UX

5. AI Agent Economy Emergence: The nascent AI agent economy requires programmable wallet infrastructure, with over $1.2B invested in AI agent startups in the past 18 months, according to Pitchbook data

Where Category-Defining Companies Will Emerge

1. Wallet OS Layer: Comprehensive solutions for smart account infrastructure 

   • Full-stack wallet infrastructure platforms

   • Cross-chain smart account standards and implementations

   • Enterprise-grade wallet management systems

2. Auth & Recovery Modules: Specialized modules for authentication and wallet recovery

   • Passkey and biometric integration services

   • Social recovery networks

   • Institutional key management solutions

3. Gas Abstraction Networks: Infrastructure for sponsoring transactions and custom fee tokens 

   • Decentralized bundler networks

   • Paymaster as a service platforms

   • Fee market abstraction layers

4. Developer Tools: SDKs and APIs that make AA implementation seamless 

   • Drop-in wallet solutions for applications

   • Testing and simulation environments

   • Monitoring and analytics platforms

5. Enterprise & Regulatory Solutions: Compliance-focused AA implementations
   Institutional-grade wallet infrastructure

   • Compliance and monitoring modules

   • Integration with traditional finance systems

B/ Our Investment Thesis and Call to Action

We believe Account Abstraction represents a significant infrastructure opportunity. The companies that own critical layers of this stack will capture enormous value as Web3 finally achieves mainstream adoption.

Our investment strategy focuses on three key segments:

1. Full-stack modular infrastructure that can become the Android/iOS of Web3

2. Specialized modules solving critical pain points in authentication, recovery, and compliance

3. Developer adoption platforms that accelerate AA integration for existing Web3 applications

Web3 apps could scale with EOAs but will never reach product parity with Web2 apps - limiting their relevance beyond crypto-native users. Ethereum's developer momentum is under pressure as alternative chains offer smoother, embedded wallet UX out of the box.

Smart accounts are the enabler - the programmable runtime that unlocks the next generation of on-chain experiences: embedded wallets, AI agents, delegated execution, and fully modular UX. It's how crypto becomes usable. It's how developers finally get a real stack. And it's how the next 100M users - or machines - join Web3.


We would love to hear from people building in this space. We are here to support, partner or just to chat. If what you’ve read resonates with you, reach out to tom@ eqtventures.com, kaushik@ eqtventures.com or alex@ eqtventures.com.