Cloudflare recently announced Coinbase has launched its new monetization platform. x402 Standard for machine payments. The AI-pilled are gaining interest in x402, a system that lets AI agents buy data online using crypto. It unlocks better agent interaction with the web.
Cloudflare is a company that was established in 2009 as a DDoS mitigation service and delivering content network.
Cloudflare, which was launched in 2010 with the goal of making web security and performance accessible to all, not only large corporations, had a mission. Cloudflare is responsible for approximately 20-23% all global websites. handles tens of millions of HTTP requests per second across 330+ cities in over 100 countriesIt is a major part of the global Internet traffic.
CloudFlare’s integration of x402 has been a significant development in the Internet structure as a result their acceptance and security offerings to a large portion of the open web. CloudFlare’s integration of x402 is a major development for the structure of the internet. Websites, which are becoming increasingly difficult to access due to AI data requests that require massive amounts of data, can now offer that data as crypto to AI agents. CloudFlare only supports Stablecoins like USDC and the Open USD Standard, however, it also integrates Lightning Network integration.
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Kevin Leffew, co-author of the x402 protocol and AI GTM at Coinbase, told Bitcoin Magazine there’s a major user experience issue in the way AI currently interacts with the open web and x402 — which is now under the control of the Linux Foundation — is trying to solve it. “Every api call requires an api key, which in turn requires a human, and adds unnecessary friction,” Leffew explained, adding, “our goal is to kill the api key”.
OpenClaw and other popular AI agents require API keys in order to be able to search the web with the same ease as a normal human. Popular browsers and engines like offer services of this type. Brave.com The following are some examples of how to get started: Perplexity. However, who wants to spend money on a monthly service in addition to the cost of internet and computer access plus AI tokens just to use Google? A human must also sign up using a credit-card for a subscription. They pay for access which might otherwise be blocked via websites that hold valuable data. There is a need for an alternative solution.
The AI agent must have the ability to consider money and resources costs. They also need a way of making payments that is computer-friendly for data. A recent X account named “An example of this use-case was demonstrated.” “Lightning Mode AI,” This wrapper was built over ESPN FIFA and used an AI agent pay for it Bitcoin. The Agent could then quickly bet on the outcome of markets, such as Polymarket. They were able to potentially earn money for their owners during World Cup soccer.
Lightning Mode AI’s example uses an older version of the concept behind x402 known as L402Lightning Labs has developed the protocol to allow bitcoin payment for third party websites.
The machine-native currency system on the internet could be a solution to Denial of Service (DOS). These DOS attacks exploit the vulnerability of bandwidth and computing cost to respond to a user’s question. When a user requests to see a webpage, the server of the site must calculate, resolve, and return the data to the user. This has material costs when scaled up. DOS attacks target server resources by sending massive numbers of requests. These are often sent via malware-infected network of machines. Theoretically, this type of attack could be prevented by asking the victim to pay before using the server resources to answer the query. Payments must also be quick and efficient to meet the demands of digital technology.
Protocols like L402 and x402 let websites pay for valuable data access, while AI agents are taught how to do it. No credit cards needed, no user data explicitly shared with payment networks, no ‘are you a bot’ captchas, no annoying account registrations you never use again, no subscription service for web search api key. You only pay for what you use.
Micro Transactions and their Economics
It isn’t a brand-new idea. It was theorized and criticized by Cypherpunk luminaries like Nick Szabo. Szabo argued The cognitive costs of micro-transactions are the main problem, not the payment technology.
Each time an individual makes a purchase, the brain must decide if it’s worth it. It also costs them calories. Sometimes, paying a couple pennies to get data may not be worth it. Theoretically, AI agents can change the equation.
The cognitive cost of weighing the value of data at pennies or even less than a penny could be removed if AI is adopted as a way to allow users to engage with open source.
The bot can be given a spending policy and a budget, then left to do what it does best. AI agents may not be able to protect user money, but certain experiments show that they are capable of doing so. Take Freysa AIFor example, an AI agent from 2024 that resisted 48,000 rapid engineering attempts. Users pay to persuade the bot to give them funds from a smart-contract treasury. If the bot refuses, it keeps the money and adds it to the treasury. Eventually, someone managed to fool the botAfter $50,000 in attempts, the AI finally gave up its lunch money. It is unlikely that an AI could be induced to give away its money by imposing spending limitations.
It is already possible to scale privacy-preserving payments digitally in a decentralized and censorship resistant way. Leffew claims that blockchains such as Solana are capable of processing payments down to a thousandth cent, and settling them in milliseconds. Bitcoin Lightning’s network is also able to compete on the micro-transaction level, as can other Bitcoin protocol like the e-cash The speed of the variants is comparable to that of an internet packet. This would likely beat a blockchain system with a high degree centralized like Solana.
Viktor Ihnatiuk, co-founder of UTEXOBitcoin Magazine reported that is actively working with x402 developers to implement Bitcoin’s layer-two protocols through RGB. RGB integration could unlock Bitcoin layer 2 payments and USDT settlements. According to Leffew the x402 is intended to be neutral in terms of payment rails. It can even be extended to fiat rails. However, it will likely be dominated by stablecoins and cryptocurrencies for the near future.
CloudFlare should accept Bitcoin
CloudFlare’s pilot program x402 is a big step forward in realizing this vision. It will be a long time before cryptographic money becomes the currency for the internet. The initial focus of stablecoins is understandable given its strong brand, and the adoption of the US dollar which simplifies accounting. Bitcoin is a better solution to the underlying problems that stablecoins present today.
The majority of stablecoin transactions are made on Ethereum Virtual Machines (EVM), which have a public address account model. These addresses are reused and create long histories, with detailed financial information, for every user. The privacy of users is severely compromised. VPNs and other tools that obscure user flows are rare on EVM-style blockchains.
AI agents, and the users of these AI agents, actively leak data, which exposes them, among other things, to cybercrime organized by targeted attackers.
Bitcoin on the other, is based on a UTXO-model, which encourages people to use a unique address to receive each payment. As a result, payment trail can be harder to follow. Bitcoin’s faster payment protocols such as Lightning or Ark can also provide greater privacy to its users, by moving their value away from the blockchain via smart contracts.
Not least but certainly not the least, stablecoins have a fundamental connection to the U.S. currency and foreign policy. CloudFlare will need to take a neutral position on money if it wants to remain a viable choice in a multipolar world. While the dollar is still the currency of choice, it’s not the only one. is starting to lose ground to rising powers in the eastBitcoin, a geopolitically unaligned currency, continues to gain in popularity. Bitcoin could help CloudFlare to maintain, or grow even further its role as a critical internet infrastructure within a multipolar world.
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Source: bitcoinmagazine.com
