#KITEAI#
PayPal bets on KiteAI to seize control of AI Agent economic payment infrastructure Author: On-chain Observer Crypto +AI It's been a long time since we had such exciting news in the AI track:
KiteAI has secured $18 million in Series A funding from global payment giant PayPal Ventures and top VC General Catalyst. Many people are baffled by this news, but I will break it down and discuss it:
1) Why is PayPal betting on KiteAI as a payment Layer 1? Previously, Stripe announced that it would directly enter the layer 1 space with Tempo, and after years of laying the groundwork for USDC, Circle is planning its own layer 1, Arc. Now PayPal is also getting involved through its investment in Kite AI. The underlying logic can be summed up in one sentence: the competition for control over the next generation of payment infrastructure. Essentially, this reveals that these traditional payment giants are experiencing "pipeline crisis" anxiety; their original business model was to earn fees on the difference and interest on capital deposits. With the rise of stablecoins as a new cross-border entity, they must adapt to new trends and establish a compatible payment system. The difference lies in the fact that Stripe and Circle chose to build their own wheels, while PayPal is betting on KiteAI.
2) Why is PayPal entering the AI + payment track? PayPal is not simply focusing on micro-payments, but has bound the AI Agent to new scenarios through KiteAI. This is because the pain point of micro-payments is not technological; traditional mobile payments are sufficient to support the demand for high-frequency micro-transactions. However, if the automation of AI Agents is to accommodate users' payment needs, the logic changes significantly. An AI Agent may call dozens of APIs every second, with each call incurring a cost. This will inevitably create a 24/7 uninterrupted, fully automated micro-payment network based on logic rather than emotion. Traditional payment giants understand one principle: when AI Agents start to conduct autonomous transactions on a large scale, the existing payment rails simply cannot support it. Just think about it, a shopping Agent needs to complete price comparisons, inventory confirmations, and order payments in milliseconds, with each step involving micro-payments and trust verification. How could the current centralized clearing systems of Visa and Mastercard possibly cope with that? Therefore, PayPal's bet on KiteAI is essentially a double wager: it requires a new generation of Crypto payment infrastructure and also aims for the trillion-dollar new market of the AI Agent economy.
3) Why is there a need for an AI layer 1, and what are the advantages of KiteAI? The current public chain fee models are designed for "high-value transactions," while the microtransactions of AI Agents completely change the rules, generating a continuous, high-frequency, low-value trading flow. It may call dozens of APIs per second and execute hundreds of decisions per minute, resulting in tens of thousands of microtransactions in a single day. This creates a vicious cycle: if the transaction value cannot cover the fee cost, the economic concept of AI Agents simply cannot operate. Even the cheapest layer 2 today can easily become network-paralyzed when handling the scaled concurrent microtransactions of a large number of AI Agents. In response to this, KiteAI focuses on three main areas concerning the identity, wallet, and rules of AI Agents, primarily to achieve autonomous yet controllable AI Agents. For example, when an AI Agent needs to execute a procurement task, its "Agent Passport" will limit the procurement scope and budget, while the "wallet system" will support native batch micro payments, and the "rule engine" will enable anomaly risk control detection and real-time interception. In simple terms, it redefines the infrastructure standards for AI Agents. However, having components alone is not enough; it also requires a consensus mechanism specifically adapted for AI: KiteAI's solution employs a state channel system + PoAI consensus. On one hand, it packages massive microtransactions for off-chain processing, only settling on-chain at critical nodes, thus ensuring both efficiency and maintaining decentralization; on the other hand, it embeds an economic incentive mechanism at the protocol level, rewarding those whose data improves model performance and those whose services accomplish tasks.
4) Why is Wall Street willing to invest heavily in KiteAI? It is actually because KiteAI's team configuration is exactly what PayPal needs. Wall Street is investing more in team configurations: Chi Zhang, an AI PhD from Berkeley, responsible for product lines at Databricks, Scott Shi from Einstein working on AI infrastructure, who built a security analytics platform from scratch at Uber. Furthermore, you can also see key personnel from NASDAQ, PayPal, Ripple, and OpenAI in the angel investor lineup; these people are not idealists who are purely Crypto Native, but practical individuals who truly understand corporate needs, compliance, and how to productize technology. Given the current narrative shift towards Wall Street, this configuration is almost tailor-made to tell a story to Wall Street. Just think about it, the top VC General Catalyst, managing $33 billion, was willing to invest in two consecutive rounds, which shows they see the rare combination of "understanding both AI and payments" in KiteAI.