What if I told you that blockchain now offers a better alternative to API keys? @Coinbase 🛡️ just launched x402 to make this possible. Here’s how a simple HTTP request can transform how we handle payments for digital service integrations A thread

Anyone who’s used API keys before will tell you how much of a pain they can be. If you’re unfamiliar with API keys, it’s a way for your code to contact external systems to get/post/edit information. For example, you want your website to display a live stock price, so you use an API key for a service that provides real-time price data. Today’s APIs have 2 big drawbacks: payment processing and security.

If using a paid service, you need to buy tokens where each call uses X tokens depending on its size - the ChatGPT API charges $0.003 per 1000 input tokens and $0.012 per 1000 output tokens for calls to/from its o1-mini model. API keys must also be secured within your code where they should never appear in plain text. If a bad actor gets your key, they have full access to that system. Both of these are major headaches for devs and businesses. So how can blockchain solve this?

One HTTP request code: 402. When a user makes a call to a service using their API, the server will return a HTTP code that represents the state of a request. Status code 200 means the request was successful, 401 - unauthorized, 403 - forbidden, etc. One of those codes is 402 - payment is required. It was designed for digital payment systems, but it’s rarely used because no standard convention exists. Until now.

@Coinbase 🛡️ has just released x402, a crypto-native API key alternative that lets you replace your keys with a wallet address. Instead of creating an account, generating a key, buying tokens, and securing your keys, you can now just add funds to a crypto wallet and use your wallet address as the API key itself. No KYC, no accounts, no buying more tokens. Just pure web3 efficiency.

The x402 protocol works as a simple plugin that you can embed in your code. On the client side, you take a connected wallet and automatically send a payment per API call. You replace your key with a function call to x402 that contains your wallet address, the server endpoint, and the amount needed to pay for the call. On the server side, x402 lets the server receive, verify, and settle payments directly onchain. It returns a response based on whether the payment was successful/failed.

This protocol will help streamline efficiency for apps through a pay-as-you-go process that requires little intervention. Devs will no longer have to create/manage tons of different accounts where each API requires a unique key and tokens. Instead, they can use one wallet to pay for all their API calls without ever having to set up any accounts. It also addresses the problem of leftover tokens (that usually expire) by enabling true micro-transactions capable of executing sub-cent payments for each call made.

The best part is that all your money is directly under your control and you pay exactly for how much you need. Your keys, your wallet. You no longer have to buy expirable tokens that you won’t use. Any funds in that wallet can be transferred in and out with no restrictions.

X402 will be particularly useful for AI agents because it removes the need to actively manage API keys. An AI agent that can conduct onchain transactions can monitor the wallet used for funding API calls and simply top it up whenever needed. This will increase the effectiveness of these agents by letting them interact with external services via APIs to bring data onchain with no service barriers.

For businesses providing APIs, x402 makes the process a lot simpler. They no longer have to generate and track keys, manage accounts, or collect invoices for token purchases because all that is automated onchain. Each user interacting with the API can be identified via their wallet address, and every call is instantly paid for and settled onchain, where each address contains a full transaction history.

x402 takes the ethos of blockchain and embeds it into an Internet native system by replacing a critical pain point with an efficient decentralized alternative. This protocol shows yet another use case where Web3 can resolve Web2 issues using crypto infrastructure.

If you enjoyed this thread and want to learn more about these types of systems or have questions about any of the ideas discussed, check out http://dcft.site for a free course that will take you through all of the fundamentals of blockchain! Become a blockchain pro today!