Narrative
The x402 Mania: What's happening?
Crypto has a new obsession: the x402 standard. A new memecoin even pumped as high as ~$80M MC.
What is x402? It's a primitive that integrates (crypto) payments with traditional/web2 internet.
When you interact with websites, you (client) request information from other servers/APIs.
Before crypto, there was no native way to pay those servers/APIs for access. Fintechs like Stripe were workarounds—bridging TradFi with the internet—but not true digital-native solutions.
x402 changes that. It allows you/client to pay for the server/API content onchain. The image below will show how it works:
In theory, servers could manage their own onchain payment infra. But facilitators are the x402 infrastructure providers for those who prefer not to.
If you want a deeper explanation, this YT video is really good.
Last week, x402 usage went off the charts. It went from ~26k txns in one week to ~932k txns the next week.
Even though the txns this week have come down to 309k this week, it's still ~12x higher than 26k. The long-term trend remains bullish.
If you want to explore the x402 activity in more detail, visit x402scan.com.
This standard was built and promoted by Coinbase. So right now, the majority of x402 transactions are on the Base chain. But it's an open-source, neutral standard. All chains can integrate it.
Why does it matter?
This primitive that enables better payments & microtransactions has massive second-order effects.
Earlier, most online payments were mediated by Stripe on the frontend and TradFi on the backend. This is terribly inefficient for many reasons.
Most importantly, AI Agents CANNOT have TradFi bank accounts. (At least not without massive inefficiencies that kill composability.) So they weren't able to easily interact with other agents.
With x402, different AI Agents can directly interact with each other. And it changes the game.
#1. Good Agents
Now, good agents can directly accept payments for their work.
Imagine a fact-checking agent that allows X/Twitter users to fact-check claims by tagging them on X and pays a cent for every request. This wasn't really viable before. With x402, many such agents will be viable.
It won't be just humans that'll request agent services. AI Agents will request services from each other. There'll be an AI Agent Economy.
x402 is bullish for good agents. This includes all forms of agents, from DeFAI agents for yield farming to InfoFi agents for research.
#2. AI Agent Infra
While x402 is really important, the standard itself cannot accrue much value.
Much of the value will be accrued by other infrastructure surrounding AI Agents designed to accrue value. These infra will be built to facilitate proper commerce between AI Agents.
- Calculating agent works & payments
- Ensuring delivery of the services
- Discovery of the right agents
- And so on
Many teams are already working on this.
- Ethereum's ERC-8004
- EigenLayer's verifiability stack with EigenAI.
- Agent Commerce Protocol (ACP) from Virtuals Protocol
Right now, there are a lot of coins that are pumping based on this narrative. But none of them are proven long-term bets. This is a short-term narrative play, at least for now.
This is NOT innovation like HyperLiquid, where you have a clear way to bet on its success. It's more like infrastructure innovation, like zk proofs. There'll be many projects benefiting from this innovation, but you won't have an easy way to bet on it.
Stuff like the first memecoin using x402 infra will be dead soon. I'm not chasing it. In the short term, I can see a hype cycle for a few projects like Virtuals. I'll talk about it in the next article.
Sponsored by Lit Protocol
Lit Protocol: The Key to Unlocking Autonomy
Managing secrets online is risky.
Most applications need one of two things to work:
- A signature to take action (send a transaction, authorize an API call, approve an agent to execute something).
- Encryption to secure data and control who can access it.
Today, both are usually handled through centralized custodians or locally stored private keys. This makes automations risky, cross-chain workflows clunky, and managing access to sensitive data vulnerable to exploitation.
Enter Lit Protocol. It's a decentralized key management and private compute network for signing and encryption, powering some of the biggest products in our industry. This includes names like Gitcoin, Lens Protocol, Emblem Vault, Humanity Protocol, Spheron Network, Genius Protocol, and many others.
The metrics speak for themselves:
- >$333M in transaction volume
- >31M in encryption operations
- 1.7M+ wallets created on Lit's Datil mainnet beta
- $422M+ in Assets Under Decentralized Management (AUDM).
The protocol's value will flow to $LITKEY:
- Projects that integrate Lit will use $LITKEY to pay for signing, decryption, and compute operations
- $LITKEY stakers will help secure the network and earn a share of network rewards and revenue
- After Lit Protocol's v1 mainnet launch, locked $LITKEY will turn into $veLITKEY, giving stakers a critical role in protocol governance
You can participate in the $LITKEY Community Launch on Aerodrome starting October 30 at 00:00 UTC.
Ecosystem
Virtual Ecosystem Revival?
Crypto is starving for narratives.
Some degens are trying to force narratives by pumping x402 memecoins. There's an old narrative that's gaining some traction: Virtuals & AI Agents.
- While $BTC & $ETH only pumped ~6% on the weekly, $VIRTUAL is up ~82%.
- Top Virtuals ecosystem tokens like $GAME & $AIXBT are also up ~130% & ~40% in the last 7 days.
The protocol activity is also increasing. The chart below tracks the weekly number of transactions between Virtual agents.
In the last week, the transaction massively increased by ~600%. The total transaction count crossed >25k. (The data is from Virtuals' founder. Independent dashboards are still catching up, which often happens when narratives move faster than tooling.)
For newbies, Virtuals Protocol is a "society of AI Agents". It allows devs to create agents and provides infrastructure like "Agent Commerce Protocol" for transactions between agents.
The $VIRTUAL token is still down 73% from its all-time high earlier this year. So if the narrative takes off, there's room to run.
But will it run tho? Here are some reasons it can potentially run.
#1. The x402 mania
x402 protocol is very hot right now. In the previous article, I already covered why this narrative is bullish for Virtuals.
80/20: x402 = bullish AI Agents = bullish Virtual ecosystem.
A lot of Virtual agents have already integrated x402. More agents will do it. Degens will start chasing 10x on those agents. The last 2024 virtual mania was driven by degens chasing those returns on Virtual low-cap agents.
The Virtual trenches are getting hot again. Since all agents use $VIRTUAL to create liquidity, this directly pumps $VIRTUAL.
#2. Mini-Base Season
Despite many negative sentiments in crypto Twitter, onchain metrics of Base have been steadily growing in the past six months.
- Total Value Locked grew from $2.6B to $5.4B.
- Weekly stablecoin transfer volume pumped from ~$225B to ~$528B last week.
- Total fees paid by users across the ecosystem increased from ~$815k to $2.6M.
Additionally, Base has been consistently attracting attention on crypto Twitter. Last week, it was content coins and Zora. The week before that, Coinbase's acquisition of Echo drew a lot of attention.
So, there's a mini-Base season. Since Virtuals ecosystem is a top ecosystem on Base, it'll obviously benefit the season.
#3. Timing
The Virtual AI Agent narrative took off in Q4 last year. We are in 2025 Q4.
There could be some psychological associations that can drive degens to Virtual trenches. Granted, this is a shaky reason, but crypto can pump for any reason.
When Virtuals ecosystem pumped in 2024, it didn't receive any support from the Base team. This time around, I can see the Base team proactively promoting Virtuals. They've been promoting the "content coins" narrative very actively. Virtuals is a much stronger narrative to promote.
At the end of the day, this is a narrative play that'll be driven by degens flocking to Virtual trenches.
🚀 DeFi Catalysts
MegaETH has started its public sale, a guaranteed opportunity. Registered users can participate until Thursday, Oct 30th, 1 p.m. UTC / 9 a.m. EST.
Farcaster has acquired $CLANKER, a leading launchpad on Base. They'll integrate the project more deeply into Farcaster.
Berachain introduced BEND. It is built as a licensed fork of Morpho, one of the most audited and composable lending frameworks in DeFi.
YieldBasis shared the plans for the next phase of the protocol. It'll include enabling the veYB fee switch.
Aerodrome introduced Aero Ignition. It's a new mechanism for community-driven launches on Base.
Meteora introduced three product upgrades to its launchpad. Presale Vaults, Meteora Invent, and Dynamic Fee Sharing.
Plume Network, the RWA chain, introduced pUSD. It'll be powered by M0, a leading platform for stablecoin issuers.
Spark introduced Spark Savings V2. Users can now earn 4.75% APY on USDC, USDT, and ETH deposits.
mStable launched mPT-sUSDe. It leverages multiple protocols, Ethena, Pendle, and Aave, to create leveraged, fixed-rate returns.
Ethereal launched its mainnet alpha. You can now trade spot and perps using USDe and earn yield on it at the same time.
PumpFun has acquired Padre, a trading terminal that provides a seamless, high-speed trading experience with next-level analytics.
🪂 Airdrop Alpha
Polymarket officially announced the airdrop. Matthew Modabber, Chief Marketing Officer, confirmed the plans in an interview.
Wormhole introduced Portal Earn. It's a new loyalty and rewards program for Wormhole Portal users.
Melee Markets has released its alpha version. It describes itself as a mixture of Polymarket prediction markets and PumpFun returns.
🐦⬛ X Hits
- Lessons from trading.
- Report on crypto exchanges.
- Multicoin on "Attention Assets".
- Base app vs Farcaster experience.
- Prop AMM: the best market design & its potential on EVM.
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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