Why is x402 the key protocol for enabling encrypted payments?

x402 is extremely important for stablecoin payments, and some people (like Lincoln Murr) have compared it to a “Trojan Horse.” This is a great analogy. This Trojan Horse is not just about using “stablecoins.” Rather, it gradually impacts users in three ways, thereby reshaping the financial payment network.

Previously, for stablecoin payments, users had to: open their wallet → connect → sign the transaction → pay gas fees → wait for confirmation. For most non-crypto-native users, this process is too complicated, since creating a crypto wallet already excludes 90% of users.

But with x402, the process (for users) is: open a piece of paid content (such as a paid short drama, etc.) → the browser/wallet pops up with “Pay 3 USDC,” click “Allow” → payment completes, content is instantly unlocked. Users don’t need to know that they’re paying with stablecoins (such as USDC), or on which chain (Base), or who they’re paying (an AI agent). It “feels as smooth as using Apple Pay.” For users without stablecoins in their wallet, an agent can pay on their behalf, popping up Apple Pay/credit card to instantly buy USDC for payment, and automatically create an embedded wallet in the background (such as Privy SDK/Passkey).

Behind this simple user payment flow, all the complexity is pushed to the backend. For example, agents automatically select the cheapest chain/exchange stablecoins/cover gas fees. x402’s standardized and minimalist protocol allows any website/AI application to accept stablecoin payments from any chain by simply adding a few lines of code.

First, it is quietly changing the landscape of “payment networks.” Users think they’re using the “new internet version of Apple Pay,” but in fact, payments are routed through on-chain networks (such as Base/Arbitrum/Solana, etc.), not through Visa, MasterCard, Apple Pay, Pix, etc.

This means that in the future, parts of micropayment routing, clearing and settlement, data, fees, rules, compliance, and profits will gradually shift to supported public chain/L2 ecosystems and stablecoin issuers, and the traditional payment network market will be partially eroded.

Second, it is quietly changing users’ “wallets and identity.” When users click “Apple Pay-style payment,” the backend can automatically create an embedded wallet for the user (such as passkey device-level self-custody or Privy-custodied private keys). This way, subsequent on-chain operations—including saving, borrowing, investing, trading, etc.—can all be tied to this wallet. It becomes a globally universal on-chain financial wallet/identity.

Third, it is quietly changing the “final settlement layer of currency and value.” Users initially pay in fiat, which is converted to USDC and other stablecoins. Some of these stablecoins remain on-chain, rather than returning to the traditional banking system. These funds on-chain can be used by AI agents to pay other AI agents; creators can convert stablecoins to ETH to participate in staking and earn interest; project teams can use them to buy government bonds to generate more stablecoins. In this way, some stablecoins flow into the on-chain world, increasing on-chain liquidity and becoming part of the crypto dollar cycle, rather than flowing back to the traditional financial system.

Overall, X402 + stablecoins + crypto on-chain infrastructure will gradually and continuously impact the existing payment system. It’s not just about using stablecoins, but about moving money, credit, identity, and data into a parallel financial universe. And throughout this process, the user experience feels similar to traditional internet payment. So, it truly is a Trojan Horse.