How x402 Is Unlocking the Machine Payment Economy with Erik Reppel

Transcript

in the last few months is when I've really seen it take off. What was there any sort of inflection point or any one integration that really spurred a lot of momentum? Understanding that from the start it needed to be neutral. It couldn't just be like a base thing or a Salana thing. It needed to be agnostic to the underlying mechanism of of payment and be any blockchain should be able to be used. Any fiat method in future should be able to be used. >> Welcome back to the rule. This is your home to learn from the biggest guests, the brightest minds at the tip of innovation. >> Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its [music] echo chamber and taking it to the real world.

>> Sit back, relax, and enjoy it. [music] All right, GMGM. We are live with our friend Eric from Coinbase talking about the X42 revolution. Eric, this is our AI super cycle segment powered by Near. Recently, Near has partnered with Zcash. They're doing Near Intense and all of this is bringing more composability to the ecosystem. It's really, really cool to see. We're also looking for composability amongst the AI agents to really enable the agentic economy. So,

we've heard a lot about MCP. We've heard about agent interoperability. We've heard about agents paying one another to ultimately use uh their tools for the power of good. X42 is a payment standard in the agentic economy. It's been floating around a lot, but personally, I don't know what to believe and what not to believe. Is it the greatest thing since sliced bread or is this the reason AI is going to come and take over the world and kill us all? I don't know, but you're the expert. So, that's why you're here and we uh we really appreciate you taking the time to join us.

>> Of course. Excited to be here. Near is actually they're always ahead of the curve with the stuff. They were actually super early adopters of X42 and some of the uh most early people committing in the repo. >> That it's awesome. Yeah. Could could you and and you know what I like to think of as near as kind of like an AI company. The crypto was just something that and we had Ilia on and basically you know told the story invented the transformer and then it was like hey we need a way to facilitate payments between these machines. Blockchains are the best way to coordinate that. Um and so X42 is a repo near was an early contributor. Now Coinbase is picking up uh picking up some steam. Can you just can we just start broad and then maybe we'll hone in on on some more unique things or

specific things, but broad strokes, could you give us a an intro and explain it like I'm five here? >> For sure. Yeah. So, I I uh often call X42 the most standard that will ever most boring standard that will ever ever exist. Um the internet runs on standards that everyone agrees to just use. And so there's like HTTP and HTML and CSS and all these things that make it so we all speak a common language on the internet on like how to transmit data. So all X42 is is a standard for how to transmit payment intent between different computers and that's really it. It's a way for a

server to it's a way for a server to say like hey these are all the ways you can pay me and a client to say okay I'm going to pay you using this mechanism and So, it's super simple, but why it's powerful is because now there's a standard way for AI agents to pay each other or for your browser to pay a server and now an AI can pay for an API or pay for content or do anything on the internet. And it's it's often been said there's like a great Mark Andre quote that the original sin of the internet is that they couldn't build payments into the internet. And this was like a thing Mark Andre spent a bunch of time in the 80s and 90s trying to do, but the tech just wasn't there yet. And so now we actually have great tech. Like modern

blockchains are extremely performant. They're extremely good. Rails is for payment. And so now we need to kind of link it back into the rest of the internet and not make it so crypto is kind of this thing that's sits to the side and is kind of like its own little world near the internet, but make it so you can natively perform a payment in any internet request. Very cool. Very cool. I mean, look, you know, I go on Amazon, I put in my credit card details, I buy things on the internet, but it's not that deep, right? It's like them taking my credit card and running it through a system in order to charge it. And maybe if it's a credit card and not a debit card, right, settlement occurs a little bit later.

What What does X42 unlock? Is it fundamentally going to change the way that you and I buy things on Amazon, or is it not really meant for that? But it's meant for something more agentic than that. >> Well, I I'll give you the point in that the way that what is happening between your browser and Amazon servers is completely different than what happens when you buy something on Shopify and what happens on your browser with when it's interacting with Shopify servers. There's no like standards for like how these payments kind of actually move or declared. And so that means that it's really difficult for an AI to like buy something on Shopify and Amazon because as a developer you need to write an integration for Amazon and you need to write an integration for Shopify and you

need to write an integration for Etsy and there's just so many different ways and so you end up with this huge fragmentation. And so as a human like maybe you'll maybe it unlocks more places where you can pay with crypto but primarily it's about making it easier for computers to pay each other. And so an AI agent instead of having to have like all of these different integrations with each different vendor, each different payment provider, can just understand X42 and then pay for anything that accepts X42. >> Got it. Cuz from my perspective, it just looks like I'm entering some numbers into a text field, but it's not that simple.

>> Yeah. The text field is actually like hundreds if not thousands of lines of code that connect you to a server on Amazon's side that you know is is you know encrypting your credit card number and transmitting it to Amazon via some REST API and like it's that's you're just seeing like you know the uh the front of the internet but there's all the stuff behind the scenes all the stuff in the back of the internet that is fully hidden and is totally custom from one one website to the other >> but the way that you see it is like is the same like everyone agrees HTML CSS that's how you write websites. There's not like Amazon HTML and Google HTML and you have to download a specific browser to visit Amazon and different browser to visit Google. All the browsers agree on these standards and then that makes it

so we get this like beautiful composable open internet that anyone can launch a website and it'll work on any any human's browser which is kind of a miracle if you think about it. >> You so that we're trying to do that but for payments. >> Got it. Okay. Um, I mean, you've been tweeting a lot about X42. This is something that has really taken off in the last, you know, weeks to months. There's been other standards that have tried to link together these agents, but X42 seems like it's kind of the the leader right now. It's it's really pushing and it's got a lot of momentum behind it. What is unique about X42 relative to some of the other standards that are out there? it is it just it's deeper, it's more comprehensive. What is

what is the unique advantage that X42 gives us that something like MCP doesn't? >> Well, I think that's kind of the beauty of X42 is it complements all these other standards, >> right? And so, we're in this era where we we all know agents are going to become a bigger and bigger part of the internet and they're going to be this new like economic actor on the internet that needs to do stuff. And so, MCP is really a standard around tool use. It makes it so your AI can use tools correctly. Then you have things like A toa which means which standardizes how agents can communicate. And X42 is just a standard for how do you transmit money? How do you transmit value? And so you can actually use X42 alongside MCP or ADA. And as your agent is using a

tool, they can pay for access to that tool with X42. And uh as an agent is talking to another agent via A to A. We actually worked with Google and Lowe's on a on a showcase of this. You can actually have your agent pay another agent in a very standard way where all these agents understand, oh, we all just use X42 for the payment and you know, we may communicate via some other standard, but we we'll all just use X42 for the payment. And I think the reason for that is is X42 is actually just really simple. Like it doesn't solve every problem at once. It's really simple and uh tries to just be like a like the lowest layer of infrastructure and lets you add on more complexity as you need it versus forcing you to do something really complicated right up front. And

>> it it's not necessarily a crypto thing, right? It's is it is it because it's more than just crypto payments. Is that is that right? Or is it only stable coins? >> Right now it's only crypto payments and stable coins. Um, and that's because I think stable coins are the best way to move money on the planet right now. >> And but what we want is for X42 to really be like an open neutral standard. And that means that eventually I suspect we'll have fiat payments as part of X42. And you know what X42 really wants to do is create like a an open playing field for competition to occur. And if you as a consumer want to pay with stable coins, great. If you want to pay with fiat, great. If you as a merchant want to only accept stable coins, great.

Ultimately, it's it should be consumer choice that uh leads to these uh the emergence of how money actually moves. >> Very cool. Okay. Relay, low fees, lightning speed, and the power of multi-chain at [music] your fingertips. Instant multi-chain payments. Choose any token on any chain. 75 plus networks supported. More than 5 million users, 8 billion plus volume [music] processed, 70 million plus transactions, fast, reliable everywhere. Start swapping today only [music] on Relay. Habachi provable trade purps with speed and security. Earn rewards. Visit hibachi.xyz.

Trading on fire. Asset management redefined. [music] Built on ERC7621. standardize how you launch, manage, and trade onchain baskets. This is Alvara, the standard for onchain asset management. >> And so, how do you how do you anticipate that this is going to evolve and and ultimately get integrated into these systems? >> Yeah. Well, I think the first thing is that it's uh we're actively in the process of moving X42 into a foundation. >> Okay. [clears throat] >> It'll be like, you know, a very not cryptoy foundation. It'll be like, you know, much more akin to like how open- source projects uh are are foundations like PyTorch or the Linux kernel

>> or Kubernetes. These are examples of like foundations that govern software projects. Uh because if people are going to tie their hitch their horse to the wagon, they want like certain asurances. They want to know they're not going to get rugged if they adopt the technology. And uh from there, I think we're going to see just like an explosion of adoption both in the crypto world and in the web 2 world where I think I think X4 is probably going to be the first time a billion people use use crypto for something. >> Very cool, man. I mean, this is huge because you know this is an open standard. Um was this are you the founder of X42? Because it kind of has like Satoshi like beginnings. It feels like Immaculate Conception just kind of came from nowhere. But there was really

people that were early contributors. You were one of them. You mentioned Nero was one of them as well. Where did this thing ultimately come from? How did it go from like obviously we've all said and it's easier said than done. We've all said like look, we should all be able to coordinate agents and pay one another on the internet. But how does that actually come into a real thing? >> Yeah, I'm I'm the author. So I I designed X42. I wrote the initial SDK with some help from my team. Um, I designed the protocol. X42 started actually back in almost a year ago. I was before I rejoined Coinbase, I was thinking about, you know, what did I want to spend my time doing? And one of the things that occurred to me is like, oh, there's this is X42, by the way.

It's not the first attempt to create an internet native payment protocol. There's been a bunch of attempts. And I I had some time off and I was I did some research and went and read all of those protocols and I was like, "Oh, I actually like I have an alternative take to all these." I think each one of them does like some little part differently than I think it should be done. >> Um, and then I I was interviewing at Coinbase and I was talking to Brian Armstrong and I was like, "Hey, I think we should do this thing." And then Coinbase has this program internally called Next Bets that is like a a way for like people to surface ideas within Coinbase uh that should be worked on and then they can get funded. And uh Brian said, "Hey, like there's a team that had

pitched a next bet that sounds kind of similar to what you're talking about." And so when I when I joined, I kind of uh took over that next bet and then uh literally wrote the spec and first implementation of X42 in in a weekend based on kind of all this research I had done before rejoining Coinbase. And you know the team has helped me polish it up and build make the SDKs more robust. But X42 as it exists today is is fundamentally very similar to what I wrote in that weekend. Man, that's inc. And and so was when you're thinking about like the unique things like you said, these things have been tried before. They didn't really catch on.

What was it that you did in a weekend? Like there's a zero to one moment. It wasn't, you know, spending brute force a thousand hours doing the thing. No, it was just some light bulb moment that you had. What was what was the what made the difference? >> I Well, it's not just, you know, like a weekend, right? I find for me engineering is like I think about an idea and then it kind of percolates in the background for a couple months and then one day it's just ready to pop out, right? >> Um I think there's a lot of like little design decisions with X42. Like one using signatures and not requiring gas on the spender I think was a really big decision.

>> Uh understanding that from the start it needed to be neutral. It couldn't just be like a base thing or a Salana thing. It needed to be agnostic to the underlying mechanism of of payment and be any blockchain should be able to be used. Any fiat method in future should be able to be used. Understanding that there's different logical ways that you want to move money. If if money is truly digital, it's you want to be able to represent things that are more complex than hey, I'm just giving you $5. And so these I think these are like some of the decisions I made that >> have so far held up relatively well. But I think, you know, in full cander, it's it's x42 is not a new idea, right? It's it's an idea whose time has come, >> right?

>> It's we've been wanting to have internet native payments since the 90s. It's just >> there was no reason >> because, you know, once we got HTTPS, entering your credit card into a site and then having it save your credit card is like actually not the worst checkout experience for a human. >> It works relatively well. It's annoying the first time, >> right? Um, but now you have these AIs popping up that are it's like significantly a worse experience for them and you kind of need a 10x better solution to break kind of the entrenchment of how things like the internet that are at such scale work.

>> And so AI is this like force that ma makes it so that this is the right time to adopt this kind of standard and for something like this to actually get like used. >> Yeah. What what is your wildest dream about how this could manifest and ultimately evolve and become entrenched and ingrained in into our into our everyday lives or into our systems? >> I I tweeted the other I tweeted yesterday uh X42 number of transactions billion bald trillion tattoo. >> What does that mean?

>> Well, it's it means I'll shave my head if we get to once we get to a billion transactions and I'll get a tattoo once we get to a trillion transactions. Uh, >> how where are we now? >> Uh, about three and a half, four million. I haven't checked this morning, but that's up like that's up three million in like a week. >> Xbox has been out since like March, so you know, been there. >> Okay. So, now it's starting to pick up some traction. Okay. >> Yeah. Yeah. Yeah. >> Couple. So, so what has what in the last few months is when I've really seen it take off. What was there any sort of inflection point or any one integration that really spurred a lot of momentum?

It's it's interesting because we had this great like 30% week-over-week growth for like six months and I was like, "Wow, this is like a Y cominator startup and growth and then we hit this wall." >> I I'd like to think it's uh you just hit a critical mass of crypto Twitter noticing and then people just start building more stuff and then people see the people building stuff and then you get the snowballing effect. And so I think last week we saw someone build a token launcher on top of X42 and then the token went gigafiral and then all of crypto Twitter saw it. And then the thing that was really gratifying to me is that a bunch of people saw X42 and actually started building stuff and understood the technology and uh took the time to like build APIs that you could pay for with X42 or new clients.

And we didn't it didn't just turn into, you know, all token launcher meta. Like there was definitely some token launcher meta, but we saw like real interesting novel things being built using the technology that wouldn't have been possible prior to x42. >> The wait is [music] over. The Talis testnet is live. Be part of the revolution. Join now [music] at testnet.talis.network. Blockchain shortcuts, templates, and widgets [music] launch without friction for builders by builders. Visit enso.build.

>> Eric, when you hit and not if, when you hit a billion transactions, will you come on the show and we can shave your head live? [laughter] >> I uh I I'm going to have to check with my comm's team. I'm I'm sure they might have something they want to do there as well, but you know, maybe we can do kind of a like a co-produced thing. >> But I I think like genuinely I I think that within the next decade, there's going to be more economic transactions from AI than there are from humans per day. Are we already there or where where are we at on that? Because people have also said, you know, that we're that this is coming.

>> Yeah, we're definitely not there yet. We're definitely not there yet. Like the internet is so big. So so big. >> And the but the way we get there is through things like X42 that make it just so much easier for AI to pay for stuff. >> It's but it's inevitable, right? Like >> think about how many times computers send messages to computers that humans have no part of, >> right? That's that's just going to be that like for every request that you you make from a browser, I I'm willing to bet a thousand happen autonomously between computers, >> right? Right. So, >> sorry to one.

>> Yeah. >> Yeah. I think it's roughly in that range. Yeah. >> Okay. And right now they're sending messages back and forth. They're passing packets. They're doing this this thing. What changes once we add money to that stack? Once machines are paying one another, once they're exchanging money, but you know, machine to machine, how does how does that change things from your perspective? >> Everything that is like a composition of different services right now on the internet requires a human to be in the loop. So if you want your if you want to write a program and you want access to like let's say like a weather API, you as a human need to go and get an API key for that uh for that API or for that product and you need to manually integrate it into your program and then

finally it can access the weather. But if you can and why that is is because there's no good way to give the weather API value for the data that it's providing you >> right the API key is tied to your credit card and then they bill your credit card at the end of the month, >> right? And so all of that between all of that human stuff is actually just because we have lost a transmission of value. And if you make value transmission instant now you as an AI can just say I want weather data and just pay it a scent to get that weather data. There's no kind of like oh I must like go and get the API key and do the integration. I these AIs are really good at using APIs. And so >> if you give it the way to pay for an

API, now you get kind of a fully composable internet where anything that has value is inherently gated on the internet, whether it's content or tools or anything else. And so now AIs can just punch through those payw walls and punch through those gates and use those pieces of content or use those valuable tools without a human needing to get involved, which it makes the AI like way way better, way more useful, >> right? Yeah. there's no less uh less slippage if you will or like their their flywheels don't get slowed down. >> Yeah. Way less friction in the system and now you can have AIs that like dynamically do things that you didn't think they could.

>> Yeah. Okay, Eric. Um rapid fire, few last questions as we as we come to a close here. Um call to action. What are the applications that you would like to see built on X42? Oh, great question. X42 is really a double-sided market, right? Or a two-sided market. There's supply and demand. Supply are the people who are selling content or tools, and the demand are people who are using content and tools. >> Uh my my job with X42 is largely ping ponging back and forth between those two sides of the market and activating one or the other.

>> So, right now I'm in activate demand side of that pingpong. And so if you're a builder, if you're an engineer, if you're a product person, go vibe code, go engineer, go build something that is like a novel way for agents to use things that accept X42. >> Mhm. Okay. Um, and and the flip side of that, if you're a user, what is and and maybe broader than just X42, what are the AI tools out there you find most useful?

and and the everyday person can incorporate into their AI stack to become more productive or or you know a higher a higher uh powered human. >> So we launched this product called payment payments MCP a couple weeks ago and what it does is it's an MCP server that you can integrate into Claude and it gives Claude a wallet and it gives Claude access to the X42 discovery layer and it gives Claude the ability to pay for anything with X42. And this works with like a bunch of different LLM chat apps, not just Claude. Uh, and what it means is you can now have Claude pay to do stuff with X42 on your behalf. And so you can say, "Hey Claude, make a research report for me about a thing."

And it can, you know, search the internet. And then it can also pay for like bunch of financial data APIs that accept X42 payment. And that means that like the report it generates for you is is higher fidelity, better done because it has better data. And uh Claude gets its own isolated wallet. You can do spend controls. You can, you know, limit how much it'll spend for requests. Uh and it makes your makes your AI productivity productivity like noticeably better. >> So this is uh like I can say, "Hey Claude, go book me a flight." And it'll it can go do that.

>> Yeah. Yeah. There's actually I don't know if it's rolled out fully in the US, but there's actually a team that lets you purchase flights via Trip.com with x42. Wow. But I can also use this claw integration. >> I haven't tested that one specifically, but in theory. Yeah. >> Yeah. Okay. Um, man. Okay. Uh, oh, I had I had feel like I had more. Man, this has been a really fun chat, Eric. I think I'm all out of questions, but uh I would love to have you back on again sometime soon because it feels like X42 is moving so fast that three months from now we could have an entirely new conversation and it it can you know it can take a a you know bunch of wild

twists and turns. >> Absolutely. Yeah. More than happy to come back and it was great chatting. >> Yeah. Awesome man. Congrats on uh on a great build and uh keep up the good work. This is really really useful stuff and uh very very uh exciting to see X42 come to life and and start to enable the payments economy uh and the machine economy at large. So thanks Eric. Really appreciate it. >> Thank you Sarah.