x402: The Key to Internet Money, Micropayments & The AI Agent Economy | Sam Ragsdale
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Bankless Nation. I'm here with Sam Ragsdale from Merit Systems. Sam, welcome to Bankless. Excited to be here. X four zero two is the topic of Dejure on crypto Twitter. People loosely know it as a payments protocol for AI agents, but I think we need to go into a lot more detail here on the episode. So maybe I will just start with the question. What is x four zero two?
Yeah. So starting from the top, x four zero two is a protocol more general than agents for gating access to API resources. In other words, off chain servers via crypto payments. I think it helps to go back to the beginning. HTTP is the transport protocol for network packets on the Internet, And it was designed in concert with the browser by Tim Berners Lee, Marc Andreessen, and a bunch of other people that I'm not gonna name drop right now in sort of the early nineties while the browser was being created. The status codes four hundred and five hundred are sort of the error status codes. The 20
So it's just been a placeholder. It's just been this four zero two thing that just sat on the shelf and be like, hey, once we figure out money, we'll take it down on the shelf and build this thing. But otherwise, it's just been this empty an empty vehicle that we will figure out payments in later.
Yeah. Exactly. And some people do implement on the server side like a four zero two saying, you know, you haven't paid for this thing when your API key doesn't have any credits in But there was never a way to respond to that. It would just be an error that you couldn't deal with and you would go through some admin console or something like that.
I see where this goes. So I feel like now with the excitement around x four r two, we now have a way to respond to that.
Yes. Exactly. So how it works is that a client, whether that's a browser, a human on a browser, or a crawler, or an agent, or some sort of other entity you could come up with, pings the server at a specified URL. That server responds with 402 status code and an X402 land that provides some additional details on how it can be called and how much that thing costs and that it will accept x four zero two payments on some chain in some currency. And then the client signs a crypto transfer, usually USDC on base, but Solana's coming, people are doing other coins as well. And it attaches that signed c
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Yeah. So so I I think you theoretically, you could put a credit card there if the resources were like a $100 or something, but micro transactions were not really a concept. I don't actually know the fee rates in the nineties, that was before I was around, but they were very expensive. I think sort of even now like Stripe will charge you a 30% minimum or sorry, a 30¢ minimum on each transaction. So micro transaction, 1¢ transactions for credit cards doesn't really make sense. And there wasn't the technology in place to do a cent or a tenth of a cent transactions. And this is also even before Pa
Yeah. I guess the premise of because of the economics of credit ca
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