X Ban Wipes Out Crypto Rewards, Kaito Pivots To New Model After 20% Slump

byAlex Reeve
X Ban Wipes Out Crypto Rewards, Kaito Pivots To New Model After 20% Slump
Takeaways
Hide
  • The Purge: X executives confirmed a ban on "InfoFi" crypto apps to eliminate incentivized spam, explicitly stating they are willing to forfeit millions in enterprise API revenue to restore product integrity.
  • The Crash: The policy shift triggered a violent repricing in the engagement farming sector, causing the KAITO token to plummet approximately 20% as its core business model lost platform access.
  • The Pivot: In response, Kaito AI announced the sunsetting of its permissionless "Yaps" product, pivoting to a vetted "Kaito Studio" model to survive the end of the open-access era.

X began a systematic purge of cryptocurrency reward applications this week. The platform’s head of product confirmed X willingly giving up millions of dollars in enterprise API revenue to eliminate incentivized spam. Assets in the “InfoFi” sector crashed on the news. The KAITO token plummeted approximately 20% during intraday trading.

Public records and posts from X accounts highlighted the decision to sever ties with projects that pay users to post. X Head of Product Nikita Bier clarified the financial trade-off involved in the restriction.

“These projects were paying us millions for Enterprise API access,” Bier said. “We don’t want it.”

Related: $6 Billion ‘Heist’: New GENIUS Act Robs Stablecoin Holders

Market Repricing and the InfoFi Fall

Sector assets faced a violent repricing on Wednesday. KAITO, the native token of the Kaito AI search platform, fell to a low of $0.5677 after previously trading near the $0.70 mark. Cookie, a similar initiative, announced, “InfoFi is changing, and it’s time to sunset Snaps.”

The 20% decline suggests the market views the “InfoFi” business model as structurally fragile. These protocols rely on X’s API to track engagement and distribute rewards. Losing platform access makes that tracking mechanism obsolete.

X Ban Wipes Out Crypto Rewards, Kaito Pivots To New Model After 20% Slump

Kaito founder Yu Hu announced immediate operational changes in response to the restriction. The company’ll sunset its permissionless “Yaps” product and incentivized leaderboards. 

Hu intends to launch “Kaito Studio.” This tiered marketing platform connects brands with vetted creators. Hu noted that a fully permissionless distribution system no longer appears viable in the current environment.

Industry Endorsement and X Spam Purge

Prominent figures in the digital asset space supported the restriction. Platform usability takes priority over tokenized growth metrics for most users. 

Blockchain investigator ZachXBT criticized the projects for creating an inorganic environment on the timeline. “The inorganic activity and fake metrics were obvious,” ZachXBT said. “It made X borderline unusable for everyone else.”

Spam levels became so toxic that burning enterprise revenue became the logical business choice for X leadership. Rejection of these fees signals a shift in how the platform balances monetization and product integrity. 

Related: Coinbase Torpedoes CLARITY Act Now, Chooses Chaos Over Capture

Chain Street’s Take

X sent a clear signal this week. Spam levels became so toxic that burning millions in revenue became the logical business choice. 

Projects losing API access just lost their landlord. The pay-to-post era ended. 

Markets must now value these protocols on actual utility. Product integrity finally beat growth metrics. 

If a business relies entirely on another platform’s permission, it’s a feature, not a company. X just reminded the market who owns the rails.

Frequently Asked Questions

Why did X ban crypto reward apps (InfoFi)?
Show

X (formerly Twitter) banned these applications to purge "inorganic" spam. Head of Product Nikita Bier stated that despite these projects paying millions for Enterprise API access, the platform rejected the money to prioritize user experience over paid engagement farming.

Why did the KAITO token crash 20%?
Show

KAITO crashed because its business model relied heavily on X's API to track and reward user engagement ("Yaps"). With X severing this access, investors realized the protocol's primary utility was structurally broken, leading to a selloff.

What is "InfoFi" in crypto?
Show

"InfoFi" (Information Finance) refers to protocols that monetize information flow and social engagement. These platforms typically incentivize users with tokens to curate content or post on social media, often leading to "engagement farming" spam.

How is Kaito AI pivoting after the ban?
Show

Kaito founder Yu Hu announced a transition to "Kaito Studio." Instead of a permissionless system where anyone can earn tokens for posting, the new model functions as a tier-based marketing platform connecting brands with vetted, high-quality creators.

What was the industry reaction to the X ban?
Show

Prominent figures like ZachXBT endorsed the move, criticizing InfoFi projects for creating fake metrics and making X "borderline unusable." The general consensus among builders is that the ban forces a necessary return to organic utility.

The author, a seasoned journalist with no cryptocurrency holdings, presents this article for informational purposes only. It does not constitute investment advice or an endorsement of any cryptocurrency, security, or other financial instrument. Readers should conduct their own research and, if needed, consult a licensed financial professional before making any financial decisions.

You May Also Like