Tripe self-made, Circle self-researched, but PayPal bets on KiteAI: why choose to create a payment Layer 1?

Original Title: Why does PayPal bet on Kite AI for Payment Layer 1 instead of reinventing the wheel?

Original Author: On-chain View

Original source:

Compiled by: Daisy, Mars Finance

It's been a long time since there has been such exciting news in the Crypto + AI sector: @GoKiteAI has received funding from global payment giant @PayPal Ventures and top VC @generalcatalyst.

$18M Series A financing. Many people find this impressive but are mostly left confused; let me 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 layer1 space with Tempo, and Circle, after years of laying the groundwork for USDC, is now planning layer1-Arc. Now PayPal has also entered the scene by investing in Kite AI. The underlying logic can be summed up in one sentence: the competition for control over the next generation of payment infrastructure.

The essence has exposed the anxiety of these traditional payment giants regarding the "pipeline crisis." Their original business model relied on earning a spread from transaction fees and interest from capital deposits. With the proliferation of stablecoins, a new cross-border entity, they must adapt to the new trend and establish a compatible payment system.

The difference is that Stripe and Circle chose to build their own wheels, while PayPal bet on KiteAI.

2. Why is PayPal entering the AI + payment track?

PayPal has not simply locked into micro payments, but has bound the new scenario of AI Agent through KiteAI. This is because the pain points of micro payments are not technological; relying on traditional mobile payments is sufficient to support the demand for high-frequency micro transactions. However, if the automation of AI Agent is to take on users' payment needs, the logic would be vastly different.

An AI Agent may call dozens of APIs per second, with each call requiring payment. This will inevitably create a 7*24 hour uninterrupted, fully automated, logic-based rather than emotion-based micropayment network. Traditional payment giants understand one thing: when AI Agents begin to autonomously trade on a large scale, existing payment rails simply cannot support it.

Think about it, a shopping agent needs to complete price comparisons, inventory confirmations, and order payments in milliseconds. Each step involves micropayments and trust verification. How could the current centralized clearing systems of Visa and Mastercard possibly cope with this?

So PayPal is betting on KiteAI, which is essentially a double bet: not only on the next generation of Crypto payment infrastructure but also on the trillion-dollar new market of AI Agent economy.

3. Why do we need 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 stream of transactions. It may call dozens of APIs per second, execute hundreds of decisions per minute, and easily conduct tens of thousands of microtransactions in a day.

This creates a deadlock; if the transaction value does not cover the cost of fees, then the AI Agent economic concept cannot get off the ground at all. Even with the cheapest layer 2 solutions available now, processing the large-scale concurrent microtransactions of AI Agents can easily lead to network paralysis.

In this regard, KiteAI has anchored its focus on three main directions in the AI Agent track: identity, wallet, and rules, primarily to achieve both autonomy and controllability for the AI Agent.

For example, an AI Agent tasked with procurement will have its "Agent Passport" that defines the scope and budget of the procurement, while the "Wallet System" will support native bulk micro-payments, and the "Rule Engine" will support abnormal risk control detection and real-time interception.

In simple terms, it redefines the infrastructure standards for AI Agents, but having components alone is not enough; it also requires a dedicated consensus mechanism tailored for AI: KiteAI's solution utilizes a state channel system + PoAI consensus.

On one hand, massive micro-transactions are processed off-chain and only settled on-chain at key nodes, which ensures both efficiency and maintains trustlessness; on the other hand, an economic incentive mechanism is built into the protocol layer, where those who improve the model performance with their data or complete tasks with their services receive rewards.

4. Why is Wall Street willing to pour money into KiteAI?

In fact, the team configuration of KiteAI is just to PayPal's taste, and Wall Street invests more in team configurations:

@ChiZhangData, an AI PhD from Berkeley, responsible for the product line at Databricks, @scottshicsEinstein works on AI infrastructure, building a security analytics platform from scratch at Uber. Additionally, key personnel from NASDAQ, PayPal, Ripple, and OpenAI can also be found in the angel investor echelon.

These people are not idealists who are purely Crypto Native, but pragmatic individuals who truly understand business needs, compliance, and how to productize technology. Under the current narrative window to Wall Street, this setup is simply tailor-made for telling stories to Wall Street.

Think about it, the top VC General Catalyst managing 33 billion dollars can invest in two rounds, which shows that they see the rare combination of KiteAI "understanding both AI and payments."