Crypto giants Coinbase and Circle strongly believe that the involvement of AI agents in the automated crypto payment space is set to increase in the time to come. In order to be prepared for the future, the platforms have turned to x402 – a stablecoin payment protocol developed by Coinbase to facilitate autonomous machine-to-machine commerce. Essentially, the x402 protocol allows a server to respond with a machine-readable invoice to AI agents, eliminating traditional paywalls that mostly throw error messages to machine-initiated interactions.
Understanding Coinbase’s upgrade to x402
Coinbase on Tuesday, December 2 deployed a major upgrade to its x402 payment protocol. It basically teamed up with public Layer-1 blockchain, Concordium, to integrate its identity and age-verification system with x402.
This step is intended to let AI agents initiate payments for services like travel bookings, video games, and online content that typically throw up age restrictions. Concordium claims that it is among a handful of L1 blockchains that have a native identity layer with zero-knowledge protocols powering real-world use cases – that prompted Coinbase to strike a partnership with it.
As per Concordium CEO Boris Bohrer-Bilowitzki, it is important to know “what and you interact with” – which, he said, Concordium simplifies.
Coinbase’s x402 protocol has already seen popularity among members of the crypto circle. The protocol relies on blockchain and stablecoins like USDC to facilitate quick, low cost settlements – eliminating the need for credit cards, subscriptions, or account creations. Additionally, the transaction fees charged by x402 is “near zero” – which makes it appealing for processing micropayments, Coinbase has previously explained.
Now that the x402 is upgraded, it will let AI agents get a machine-readable invoice responding to a payment requirement. This will then let the client’s crypto wallet process the invoice, sign a cryptographic proof of payment, and retire the original request to curb duplication in transactions. The payment will then be verified by a facilitator service to enable smooth machine-to-machine commerce.
Here’s where Circle dives deeper into x402
Circle announced a partnership with AI-native software stack OpenMind on Tuesday to roll out x402 USDC microtransactions initiated by AI agents.
Under the partnership, AI agents created by OpenMind will be able to initiate and process small or big USDC payments using Coinbase’s X402 protocol.
In an official statement shared on X, Circle said, the partnership will entail the development of foundational standards for machine-to-machine payments. The stablecoin mammoth is looking to build a Gateway-based system for micropayments using x402.
“Circle expects that agentic payments using x402 will increase in popularity, and in particular that x402 may become an attractive protocol for high-throughput applications such as agents performing deep research tasks and paying for content as they go,” it said in its GitHub post.
Circle has invited community feedback on its plan, detailed on Github. It plans to roll out the testnet for its Gateway facilitator soon for the community to test and interact with.