Author: YQ, deep researcher in crypto infrastructure; Translation: xz@Golden Finance

In 1994, Marc Andreessen made a significant mistake, which he later admitted: Netscape failed to embed payment functionality into its browser. Due to regulatory risks and the conservative attitudes of financial institutions, the collaboration between Netscape and Visa, as well as between Microsoft and MasterCard, ultimately fell through. This led to the internet's default business model being dominated by an advertising surveillance system for thirty years—a trillion-dollar industry built on comprehensive behavioral tracking rather than direct value exchange.

Today, AI agents are breaking this balance. Autonomous systems do not watch ads, cannot be psychologically profiled, and have no monetizable attention. Content publishers face a binary choice: either allow parasitic scraping that destroys creative motivation or establish direct payment mechanisms. The x402 protocol is the most reliable attempt to activate the long-dormant "402 Payment Required" status code in the HTTP standard, reshaping the value exchange paradigm for the AI era by combining blockchain settlement with cryptographic authorization.

The timing seems ripe. Blockchain infrastructure has matured: Layer 2 networks achieve tiered transaction costs and sub-second finality, with stablecoins circulating over $42 billion across more than 20 chains. Google's A2A protocol more clearly outlines the ecosystem of "service payment and charging" for agents. However, after a deep study of the v1 specifications, v2 revision proposals, and early ecosystem progress, it becomes evident that the architecture has fundamental limitations that, without significant adjustments, may hinder large-scale application.

This article conducts a systematic critique based on the principles of distributed systems, payment protocol economics, and practical deployment cases, and subsequently proposes an architectural transformation plan to support internet-level deployment.

1. Understanding the x402 Architecture

The protocol utilizes the EIP-3009 transferWithAuthorization() mechanism to achieve gas-free stablecoin transfers. The client constructs an encrypted signed authorization credential, allowing a third party (i.e., a relayer) to execute the transfer on its behalf.

Key observation: This design achieves cryptographic payment verification without requiring merchants to handle private keys or directly manage blockchain infrastructure. Settlement occurs on networks like Base (Ethereum L2), with finality around 200 milliseconds and gas costs below $0.0001. The protocol appears simple and elegant; however, this superficial simplicity conceals several profound architectural issues that only become apparent upon closer examination.

2. Several Concealed Architectural Issues

Issue 1: Flaws in the Relayer Economic Model

Relayers perform three functions: EIP-3009 signature verification, blockchain transaction broadcasting, and API infrastructure provision. However, the protocol layer does not provide any economic compensation mechanism. Let’s calculate the costs precisely:

Coinbase's CDP relayers currently implement a zero-service fee for USDC transactions on the Base chain. Each transaction consumes about $0.0006 in gas fees for the relayer. When processing 1 million transactions per month, the gas cost alone reaches $600 (excluding server, RPC node, monitoring system, compliance expenses, and engineering maintenance costs). Relayers lack a cost recovery pathway at the protocol level.

Key finding: Compared to all successful payment protocols in internet history, Stripe charges 2.9% + $0.3 per transaction, PayPal takes about 3% in merchant fees, and credit card networks earn 2-3% through merchant discount rates. These protocols can capture value because they create value and establish sustainable business models that scale with transaction volume. In contrast, x402 relayers provide real value but cannot receive any value in return.

Issue 2: Two-Stage Settlement Mechanism Causes Delays and Atomicity Failure

The current architecture requires two independent blockchain interactions: a verification phase (checking signature validity and nonce status) and a settlement phase (executing the actual transfer). This design simultaneously triggers performance degradation and correctness issues.

A single request delay of 500-1100 milliseconds is still acceptable, but in actual application scenarios, an exponential accumulation effect occurs:

• An autonomous research agent fetching data from 100 APIs protected by x402: payment overhead accumulates to 50-110 seconds;
• A trading bot updating positions through 50 real-time data sources: delay accumulates to 25-55 seconds;
• An AI assistant invoking 20 tools in a conversation: interaction delay increases by 10-22 seconds.

This violates the core principles of distributed systems: this is not a hypothetical concern but an inevitable result of splitting atomic operations (payments) into a two-stage protocol. Since the 1970s, distributed systems research has made it clear: when atomic solutions exist, two-stage protocols have inherent vulnerabilities. The two-phase commit (2PC) in the database field has fully demonstrated its susceptibility to coordinator failures. x402 must avoid repeating this mistake.

Issue 3: EIP-3009's Exclusivity Fractures the Token Ecosystem

The protocol mandates the use of the EIP-3009 transferWithAuthorization() method for payment settlement. In principle, this allows any token compliant with the EIP-3009 standard to be compatible with x402. However, the reality is that the number of tokens meeting this standard is far fewer than those with economic relevance, particularly stablecoins.

This means that the x402 v1 version has compatibility issues with 40% of its primary target tokens. The compatibility situation for other stablecoins is even more severe: Tether (USDT), the largest stablecoin with a circulation exceeding $140 billion, has never supported the EIP-3009 standard and has no related plans. The DAI stablecoin adopts the EIP-2612 permission standard, which, while functionally similar, leads to protocol layer incompatibility due to interface differences.

Issue 4: Multi-Chain Support is Misleading

The protocol specification claims that x402 supports "Base, Solana, and any EVM network through self-hosted relayers," seemingly possessing chain-agnostic flexibility. However, a deeper examination of the implementation details reveals that its multi-chain support capabilities are far below what is superficially claimed.

Each relayer supports a different subset of networks, with variations in configuration requirements, token lists, and operational maturity. The protocol lacks a discovery mechanism for clients to query "which chains are supported by this merchant," forcing clients to either have funds on a specific chain or forgo the transaction.

Issue 5: Relayers are an Unnecessary Middle Layer

We need to examine the fundamental premise of this architecture: why must there be a relayer in the design? The traditional justifications are debatable.

This alternative design has multiple advantages:

• Atomicity: Verification and settlement are completed in a single on-chain transaction;
• Reduced latency: Minimizes one network round trip (200-500 milliseconds vs. 500-1100 milliseconds);
• Reliability: No reliance on the online status or API availability of relayers;
• Economic sustainability: Directly deduct protocol fees (1% platform fee) on-chain;
• Transparency: All settlement logic is auditable on-chain.

3. v2 Proposal: Improvements and Legacy Issues

The x402 team has released a v2 specification branch, attempting to address some of the v1 limitations through "transport layer-agnostic redesign." After reviewing the v2 changelog, roadmap, and specification documents, I believe that while v2 achieves incremental improvements, it fails to resolve the aforementioned fundamental architectural issues.

Main updates in v2:

Transport layer abstraction: The protocol is split into types (data structures), logic (schemes), and presentation layers (HTTP, MCP, A2A);

Scheme extensibility: Specifies "precise billing" schemes, supporting new models (usage-based, commercial licensing, etc.);

Service discovery mechanism: Introduces Bazaar API for retrieving resources supporting x402.

Main legacy issues not improved in v2:

Continues to use the relayer architecture (client → relayer/verification → relayer/settlement → merchant);

Maintains a zero-fee economic model (relayers still have no revenue);

Retains the two-stage settlement model;

Insists on EIP-3009 exclusivity (token support postponed to Q2 2026);

Continues explicit network matching (no cross-chain abstraction layer);

Still mandates relayer intervention.

4. Conditions Required for Internet-Level Scale Adoption

Based on thirty years of research on distributed systems and payment protocols, I summarize the following architectural principles:

Protocol fee-driven economic sustainability: Deduct a 1% settlement fee on-chain to generate continuous revenue;

Achieve atomic settlement through smart contracts: Eliminate race conditions with a single on-chain transaction;

Token flexibility: Synchronize support for EIP-3009, EIP-2612 permissions, and standard ERC-20;

Chain abstraction: Implement intent-based routing through Circle CCTP and Across protocol;

Minimize trust dependency: Direct settlement mechanisms without mandatory relayer intervention.

5. Conclusion

The x402 v1 has made substantial breakthroughs in addressing a problem that has plagued the industry for thirty years. Thanks to the maturity of blockchain infrastructure, micropayments have become economically viable. The rise of the agent economy has created an urgent demand for machine-native payment protocols. Coinbase's endorsement and integration with Google's A2A provide institutional-level credibility for the protocol. Its foundational technical path (HTTP 402 status code + blockchain settlement + cryptographic authorization) has solid design rationality.

However, good intentions and corporate endorsements do not guarantee the success of the protocol. The relayer model has spawned an unsustainable economic system—key infrastructure must permanently bear operational losses. The delays and atomicity failures caused by the two-stage settlement architecture could have been avoided through atomic solutions. The exclusivity of EIP-3009 has fractured the token ecosystem, excluding not only 40% of USDC circulation but also nearly all competitive stablecoins. Multi-chain support remains superficial, directly exposing the fragmentation issues of blockchain to end users. In scenarios where direct settlement through smart contracts can provide better features, relayers play an unnecessary intermediary role.

Although the v2 proposal has made improvements in transport abstraction, service discovery mechanisms, and scheme extensibility, it has not addressed core issues such as the relayer economic model, two-stage settlement, token restrictions, and cross-chain fragmentation. The roadmap postpones key fixes until Q2 2026. An autonomous internet requires an autonomous payment system—x402 v1 has demonstrated technical feasibility, and while v2 has achieved incremental optimization, it still has a long way to go to truly meet the demands.

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