Allow External Wallets as Primary Privy Wallets

[SarahSync]

User Story
As a Web3 user with an existing wallet,
I want to use my external wallet (e.g., MetaMask, Rainbow) as my primary Privy wallet during signup,
So that I can skip the embedded wallet creation process while still benefiting from Privy-managed features like sponsored transactions.

Acceptance Criteria
Scenario 1: External Wallet Signup
GIVEN a new user chooses to sign up using an external wallet provider
WHEN the connection is successful
THEN the system should designate this external wallet as the "Privy Wallet" for the session.
AND the system must skip the automatic creation of a new embedded wallet.

Tech Details
Privvy docs - (https://docs.privy.io/wallets/connectors/usage/connect-or-create)

Open Questions

• Gas Limits: Does the external wallet provider (e.g., MetaMask) require specific permissions to allow Privy to "sponsor" the transaction, or is this handled entirely via the Paymaster?
• Session Persistence: If a user disconnects their external wallet, does the Privy session remain active, or are they logged out immediately?

Dependencies

• Privy SDK Version: Verify we are on the latest version that supports leveraging external wallets for sponsored transactions.
• Contract/Paymaster: Ensure our Gas Tank is funded to handle transactions initiated by external addresses.

[SarahSync]

@onahprosper Please add Tech details

[Dprof-in-tech]

@onahprosper please you needed to explain something about this for me.

[Dprof-in-tech]

Goal: When a user connects to Privy with an external wallet (MetaMask, Rainbow, etc.), treat it the same as the
?injected=true flow — their external wallet becomes the primary wallet.

Key insight: With createOnLogin: "users-without-wallets", these users have no embedded wallet (walletClientType ===
"privy"). We can detect this: authenticated user + external wallet in useWallets() + no embedded wallet = treat as
injected.

---

Changes

1. app/context/InjectedWalletContext.tsx — the main change

• Import usePrivy and useWallets from @privy-io/react-auth
• Add a second useEffect that watches for Privy external-wallet-only users:
  • User is authenticated (ready && user)
  • wallets has an entry where walletClientType !== "privy" (external wallet)
  • wallets has NO entry where walletClientType === "privy" (no embedded wallet)
  • URL param ?injected=true is NOT already active (avoid double-init)
• When detected, call wallet.getEthereumProvider() on the external wallet, then set isInjectedWallet=true,
  injectedAddress, injectedProvider, and injectedReady=true

2. No other files need changes.

Since the entire system already branches on isInjectedWallet from the context (BalanceContext, Navbar,
TransactionForm, TransactionPreview, WalletDetails, useSwapButton, NetworksContext, etc.), flipping that flag
automatically routes everything through the external wallet path — balance fetching, transaction signing, UI display,
network filtering (Celo inclusion), migration modal suppression, etc.

[onahprosper]

@Dprof-in-tech should we not allow existing users to also use their wallet by requesting them to withdraw their funds from the embedded wallet as discussed?
cc: @SarahSync

[Dprof-in-tech]

uhmmmm, to be fair, we can ask them to just transfer it out before this change is rolled out