This can Bring Millions of Transactions to Cardano!

[00:00:00]Today, we're going to talk about the X402 standard. We're going to talk about the X402 foundation from Linux Foundation, which includes Google, MasterCard, Visa, Stripe, and many other major players. And now, Cardano Foundation has officially become part of it as an associate member, and the support for Cardano in the X402 standard has been officially added along with Marlowe smart contracts.

[00:00:24]Now, I'm going to explain in this video what X402 standard is, what X402 foundation is, what Cardano is contributing in this, how Cardano is going to benefit from this, and what edge does Cardano have that many other blockchains in this X402 standard don't.

[00:00:43]So, let's talk about this. So, X402 standard is a crucial component that will create the AI economy, the agentic economy. And I believe that it will be Cardano that will be leading this agentic economy because of what it offers that many other blockchains don't or they cannot. So, back in 1990, when they were, you know, the developers and engineers, they were creating the code and rulebook for the World Wide Web, uh specifically the HTTP HTTPS.

[00:01:19]As you At that point, it was it wasn't S, it was just HTTP.

[00:01:23]They added a bunch of status codes like 404, page not found, 500, server error. And just like this, there was a status code called 402, payment required.

[00:01:43]Now, back in 1990, there was no proper infrastructure, there was no proper system for this.

[00:01:50]So, the developers and engineers, they envisioned that in the future, there will be a system where there will be payments that can be made directly on the web to access a service, where a web page can request a payment, and it can be made. So, they envisioned that this will be possible in the future. So, they they just added the status code for it, but for 30 years, it was never used until now when Coinbase especially after they noticed all the AI boom and the AI agents coming into play and people using them, they developed the X402 standard.

[00:02:39]Obviously, it was created from this.

[00:02:43]This is a standard. It's It's a way for the It's a communication between AI agents and that can be other AI agents or web services or APIs or web resources.

[00:02:59]This X402 standard or X402 payment is basically a way for web resources, web pages, APIs to request a payment a tiny payment to access the data or service.

[00:03:17]And the agent will make that tiny payment to access the data or the service.

[00:03:24]And it will be made through X402 standard, and it will be made through blockchains in stablecoins, but Coinbase thought that since they developed it, other companies may not be inclined into using it because they would know that there's Coinbase, an individual company that is managing it, that is controlling it. So, maybe other companies may not use it because this is not a neutral standard.

[00:03:51]So, what Coinbase was they gave this standard or the control of it to Linux Foundation.

[00:04:04]Now, Linux Foundation is very well close to this topic and it's a neutral organization and Linux Foundation took over the X402 standard and they formed the X402 Foundation.

[00:04:24]Now, this X402 Foundation, it includes all the companies that are part of this standard that are developing it that are governing this standard, which includes Google, Amazon, MasterCard, Visa, Stripe, so on and now it includes Cardano Foundation. And it's not just that the Cardano Foundation has become part of this X402 Foundation, the X402 standard has added support for Cardano as a blockchain after Cardano Foundation and also Masumi, which is an independent project in Cardano that have developed their own Masumi smart contracts for the agent-to-agent, you know, economy. We're going to talk about this in detail. And the X402 Foundation and the X402 standard, they have included support or specification of Cardano as a blockchain and also Masumi smart contracts within the X402 standard.

[00:05:22]So, this is the background of the X402 Foundation or X402 standard, how it was, you know, how it developed from just a status code that was 30 years ago and now they have developed a proper standard for it, which is being led by X402 Foundation from Linux Foundation, which Cardano is now part of.

[00:05:41]So, let's move forward and discuss what it actually is. So, here's what it does.

[00:05:48]As of this moment, I'm just a content creator who wants to use AI to help with my research so I can make videos. But, there are a lot of, you know, information, a lot of data on the internet that is locked behind a paywall.

[00:06:05]So, we have a lot of articles, maybe from Washington Post or New York Post, that don't give access to their data for free. They ask you for a monthly subscription. So, if I want to use data from these, you know, Washington Post or New York Post, I can't use the AI. The AI will only access data that is freely available on the internet. So, what I have to do is I have to go to the Washington Post on on their website or New York Post, I have to create an account, I have to add my card credentials, I have to make a payment to, you know, get my monthly subscription, and then I can access their data, and I can use it for my videos. Now, this is a pretty lengthy process.

[00:06:49]Maybe I just want one article, but I have to But, I have to pay for the whole subscription.

[00:06:54]This changes with the X402 standard, where the AI agent will have the option to request access to that article. To this request, maybe the Washington Post will respond saying that pay this amount of stablecoin in this blockchain to this address, and I'll give you the access to this article. So, you don't need to log in, you don't need to create an account, you don't need to add any credit card, you don't need to, you know, get a monthly subscription, just pay this amount of small payment, and I'll give you the access to this article.

[00:07:30]The AI agent will make that payment and get the data and use it, you know, to help me with the video.

[00:07:39]Just like this, AI agents can request services from, you know, APIs. They can request data that is hidden or that is locked behind paywall. They can make tiny payments to get access to this.

[00:07:55]And that's essentially what X402 standard is. Now, this is the basic idea for the X402 standard. Uh and those, you know, web services, those APIs, they can request payment in multiple different stable coins in different blockchains. They can request payment in Solana and Ripple um or in any other chain and they can also request it on Cardano. So, what edge does Cardano have that is that makes it better for the agentic payments than all the other blockchains? Cardano uses the UTXO model, specifically the EUTXO model. While all the other blockchains, like Ethereum, Solana, Ripple, they use the account model. And there's a there's a major difference there.

[00:08:46]So, how both of these different blockchains operate when it comes to agentic payments is this.

[00:08:52]On other blockchains, an AI agent will approve a service to take payment from its wallet. It's like if you go to a shop, you put, you know, take something, and now it's time for you to pay for it. Instead of asking the amount of money that you need to pay for that particular product, what you do is you just open up your wallet, place it in front of the person, and the person can take, you know, as much amount that is required.

[00:09:24]And you would know how much you're charged once the transaction takes place. And the person can actually take more. So, it's a pretty risky uh transaction.

[00:09:35]That This is how the account model runs.

[00:09:38]AI agent will approve a service to take money from its wallet. But on Cardano because of UTXO, because of the determinism and the predictive fees, it's different. It's different in a way that on Cardano, the AI agent will create and it will sign transaction for the exact amount that is required for that service.

[00:10:02]So in that case, you take out your wallet, you ask the amount of money that you want you know that is you know that you have to pay for it for the service or for the product. You take the exact change from the wallet and gives it to the person.

[00:10:16]In both situation, I think any sane person would know which transaction is better, which transaction is less risky.

[00:10:25]Of course, in that case, Cardano wins.

[00:10:27]It's more fair. It's better. There's no chance for any exploit, for any bug, or overcharges. And this is because of Cardano's model.

[00:10:40]And since it is because of EUTXO model, it's not like other blockchains can change their model to provide a better service when it comes to agentic payments. So this is an edge that Cardano has over other blockchains.

[00:10:53]Now there are more benefits that Cardano offers when it comes to XF02 payments, but those benefits, they don't come because of Cardano or EUTXO. They come because of Masumi.

[00:11:07]Uh specifically their smart contracts.

[00:11:12]So Masumi is a it's a project on Cardano.

[00:11:18]And what they have created are these smart contracts. And these you know specifications for the smart contracts, it has actually been approved by the XF02 Foundation. Because of Masumi smart contracts, now with the agentic payments, you have other benefits. For example, you have identity. I'm going to explain all these in a bit.

[00:11:41]You have a record, an immutable record, actually.

[00:11:46]You can offer refunds.

[00:11:50]Um and I'm going to talk about the audit, which actually goes with the record as well.

[00:11:54]So, we have identity, we have record, we have refund, we have audit, we also have dispute resolution.

[00:12:04]And there will probably be a bunch of other benefits that comes with it. Now, here's the difference. Because of Marlowe, now the AI agents will have a proper identity and verification. Uh I think there will be these AI agents will be NFTs, which will have immutable record of their past performance.

[00:12:25]So, when people are deciding to use the, you know, which AI agent to use, they would know its past performance, what it has done in the past, were the operations successful, how many transactions did it fail, how did it perform. There will be proper scoring for these AI agents because they will have specific identities and individual identities.

[00:12:48]Moreover, like I said before, they will have an immutable record of their performance that can be tracked. And because of an immutable record, there will be a proper audit trail of what the AI agent does on the different payments that it has made.

[00:13:02]Uh there will be a whole record that can be audited. Moreover, because of Marlowe smart contracts, there will be refunds. So, if a transaction is is failed, it doesn't go through, there's a problem with it, you can have refunds, which is a really big benefit that come, you know, when it comes to agentic payments, which Cardano will offer through Marlowe smart contracts. And I think this will be pretty beneficial, um and it will give Cardano a massive edge to other blockchains when it comes to agentic payments. We will also have dispute resolution, you know, if there is any problem uh with the agentic payments.

[00:13:41]So, this this is the edge that Cardano has over all the other blockchains, the major edge when it comes to how secure the transaction will actually be. Uh that comes because of the Cardano EUTXO model and all the other benefits that comes because of Masternode smart contracts. So, in the X 42 Foundation, it will be optional for the transaction to just use the basic model for Cardano or to also use the Masternode smart contracts which offer all these different benefits. So, this is the edge that Cardano has over all the other blockchains. Because of this, if Cardano is able to become a major hub for these agentic payments, because it will be tiny, you know, tiny transactions, and now with layers, you know, the Cardano as a blockchain, it will be able to process more transactions because of UTXOs. We already have native parallelism in the transactions, uh and because of UTXOs, we have determinism, we have predictive fees, which again benefits with the agentic payments. So, we have a proper infrastructure for agentic payments.

[00:14:36]That is an edge that Cardano has that cannot be taken away from it.

[00:14:43]Now, because of this, the blockchain, Cardano's blockchain, it will get more usage, more transactions because it will be tiny transactions.

[00:14:51]They will be autonomous, it will be AI agents that will be making these payments. They can be small, but they can be, you know, many transactions. We could be talking about thousands of payments or maybe millions of payments.

[00:15:01]That will increase Cardano's usage, and that will be coming from real world. And with more network activity, more usage, more fees, I think that will be a breakthrough for Cardano.

[00:15:17]So, right now, everyone is talking about real world tokenizations.

[00:15:21]And the AI economy, the agentic payments, or the actual 402 standard is something that is not being talked about enough, but I think it is as big as the real-world tokenization. They will It will probably benefit blockchains more than the real-world tokenizations.

[00:15:38]And as of this moment, obviously, we all are aware that Cardano is not a frontrunner when it comes to real-world tokenization. There are other blockchains that are far ahead in this category. But the agentic payments and the actual 402 payment, this is where Cardano has an edge.

[00:15:57]Cardano has a lead.

[00:15:59]And uh it's I mean, of course, it's yet to see how it actually performs, um how much usage Cardano actually gets. I do believe it will be considerably and relatively more than all the other blockchains. But again, that is something that we yet have to see. Uh we always talk about Cardano has built an amazing tech, but where's the use case?

[00:16:20]Where's Where's the utility? Where's the usage? Um what's the benefit of having an amazing tech when it's, you know, there's no utility for it? I mean, now you see the utility for it because the tech that Cardano uses, and because of which it has this edge over all the other blockchains when it comes to agentic payments, those blockchains cannot just adopt Cardano's technology from one day. I mean, Ethereum is considering using native UTXOs. You can't just develop this thing overnight.

[00:16:47]So, the tech that Cardano has built over these years, there will be use cases for it. Just like uh in the in the start, we talked about the 402 payment required status code. 30 years ago, they didn't have the tech, but they envisioned what it can do in the future.

[00:17:03]And that's exactly what Cardano is doing. It is building tech, envisioning what it can do in the future. As of this moment, it doesn't have the utility, the usage for it, but in the coming future, it may have. And this is probably one of the first this tech is giving Cardano an edge and benefit over all the other blockchains and just like this in the coming years there will be probably more use cases, more utility in which Cardano's tech will make it superior than all the other blockchains. And that is a vision that we you know most of the Cardano believers, most of the Cardano supporters they believe in and that's why we're all part of this. So, that's my take on the on the whole X402 payment, the X402 standard and why Cardano will be a leader in the whole AI agent economy. Let me know your thoughts in the comment section and just to be clear about this I'm not partnered or sponsored by anyone. I talked about Massumi but I'm not sponsored or or you know paid by anyone here. So, yeah, let me know your thoughts in the comment section and I'll see you guys in the next video shortly. So, stay tuned.