The X402 is great, but what are some of the problems that are being masked?

Author: YQ, in-depth researcher of crypto infrastructure; Translator: xz@Jinse Finance

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

Now, AI agents are disrupting this balance. Autonomous systems do not watch ads, cannot be mentally profiled, and lack 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 revitalize 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 is well-developed: Layer 2 networks achieve tiered transaction costs and sub-second finality, and stablecoins have a circulation exceeding $42 billion across more than 20 chains. Google's A2A protocol further outlines a smart agent ecosystem of "service payment and fee collection." However, a thorough review of the v1 specification, v2 revision proposals, and early ecosystem progress reveals fundamental limitations in its architecture, making large-scale application difficult without significant adjustments. This article offers a systematic critique based on distributed system principles, payment protocol economics, and real-world deployment cases, and then proposes an architectural transformation scheme to support internet-level deployment.

1Understandingx402Architecture

This protocol utilizes the EIP-3009 transferWithAuthorization() mechanism to achieve gas-free stablecoin transfers. The client constructs a cryptographically 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 takes place on networks such as Base (Ethereum L2), with finality around 200 milliseconds and gas costs less than $0.0001. The protocol appears simple and elegant; however, this apparent simplicity masks several profound architectural problems that only become apparent upon closer examination.

2Several Hidden Architectural Problems

Problem 1: Defects in the Relay Economic Model

The relay performs 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 relay currently offers free service for USDC transactions on the Base chain. Each transaction consumes approximately $0.0006 in gas fees from the relay.

When processing 1 million transactions per month, gas costs alone reach $600 (excluding server, RPC node, monitoring system, compliance expenses, and engineering maintenance costs). The relay provider lacks cost recovery mechanisms at the protocol level.

A latency of 500-1100 milliseconds for a single request is acceptable, but in real-world applications, it can have an exponential cumulative effect:

Autonomous Research Agent retrieves data from 100 x402 protected APIs: cumulative payment overhead of 50-110 seconds;

Trading Robot updates positions through 50 real-time data sources: cumulative latency of 25-55 seconds;

This meansx402 Version v1 has compatibility issues with 40% of its primary target tokens. The compatibility situation is even more severe with other stablecoins: Tether (USDT), the largest stablecoin with a circulating supply exceeding $140 billion, has never supported the EIP-3009 standard and has no plans to do so. The DAI stablecoin uses the EIP-2612 licensed standard; although functionally similar, interface differences lead to protocol-level incompatibility. **Issue 4: Multi-chain support is misleading** The protocol specification claims that x402 supports "Base, Solana, and any EVM network via self-custodied relays," seemingly offering chain-agnostic flexibility. However, a closer look at the implementation details reveals that its multi-chain support capabilities are far less than 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 this merchant supports," forcing clients to either have funds on a specific chain or abandon the transaction. **Question 5: Relays are an Unnecessary Middleware** We need to examine the fundamental premise of this architecture: why must relays exist in the design? Traditional explanations are debatable. This alternative design offers several advantages: Atomicity: Verification and settlement are completed in a single on-chain transaction; Reduced Latency: One less network round trip (200-500 milliseconds vs. 500-1100 milliseconds); Reliability: No reliance on the online status of relayers or API availability; **Economic Sustainability:** Protocol fees (1% platform fee) are deducted directly on-chain. **Transparency:** All settlement logic is auditable on-chain. **3. v2 Proposal: Improvements and Legacy Issues** The x402 team has released the v2 specification branch, attempting to address some of the limitations of v1 through a "transport layer-independent redesign." After reviewing the v2 changelog, roadmap, and specification documents, the author believes that although v2 achieves incremental improvements, it fails to solve the aforementioned fundamental architectural problems.

v2Major Updates:

Transport Layer Abstraction: Decomposes protocols into types (data structures), logic (schemes), and presentation layers (HTTP, MCP, A2A);

Scheme Scalability: Standardizes the "Precise Billing" scheme and supports new modes (by usage, commercial licensing, etc.);

Service Discovery Mechanism: Adds a Bazaar API for retrieving resources that support x402.

Service Discovery Mechanism: Adds a Bazaar API for retrieving resources that support x402.

Major Updates:

v2Main unresolved legacy issues:

Continues using the relay architecture (client → relay/verification → relay/settlement → merchant);

Maintains the zero-fee economic model (relay still has no revenue);

Retains the two-phase settlement model;

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

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

Relay involvement is still mandatory.

Relay involvement is still mandatory.

4Conditions Required for Internet-Scale Adoption

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

Protocol Fee-Driven Economic Sustainability:Deducting a 1% settlement fee on-chain to generate continuous revenue;

Achieving Atomic Settlement through Smart Contracts:Eliminating race conditions in a single on-chain transaction;

5、Conclusion

x402 v1 has achieved a substantial breakthrough in solving this problem that has plagued the industry for thirty years. Thanks to the maturity of blockchain infrastructure, micropayments are now economically feasible. The rise of the intelligent agent economy has created an urgent need for machine-native payment protocols. Coinbase's endorsement and integration with Google A2A provide institutional-grade credibility for the protocol. Its basic 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 a protocol. The relayer model fosters an unsustainable economic system—critical infrastructure must permanently bear operational losses. The delays and atomicity failures introduced by the two-phase settlement architecture could have been avoided through atomic solutions. EIP-3009's exclusivity fragmented the token ecosystem, excluding not only 40% of USDC circulation but also virtually all competing stablecoins. Multi-chain support remains superficial, directly exposing the fragmentation problem of blockchain to end users. In scenarios where direct settlement via smart contracts offers superior features, the relayer effectively plays an unnecessary middleman role. While the v2 proposal improves upon transmission abstraction, service discovery mechanisms, and solution scalability, it remains completely unaddressed of core issues such as the relayer economic model, two-phase settlement, token restrictions, and cross-chain fragmentation. The roadmap postpones key fixes to the second quarter of 2026. An autonomous internet requires an autonomous payment system—x402 v1 demonstrated technical feasibility, and while v2 achieved incremental optimizations, it still has a long way to go before truly meeting the needs.