Impact of X API Restrictions on InfoFi Projects
Kaito, a prominent InfoFi project, is ceasing operations for its Yaps product. This decision comes as a direct consequence of losing access to the X API, which significantly impacted the incentive structure for influencers and users who relied on the platform for social media engagement. X's targeted approach towards automated bot posting led to the discontinuation of this incentive.
Kaito is not the only InfoFi project facing challenges, but the platform plans to reallocate its focus to other products. During its airdrop phase, Kaito utilized X to cultivate its leaderboard of active posters and influential users.
Yu Hu, the founder of Kaito, explained the broader issues within the InfoFi space. He stated, "Over the past year, we experimented with tighter eligibility, higher threshold in leaderboards, social + onchain filters and different incentive designs. However – intertwined with platform-wide X algorithm changes, and other InfoFi projects going live with varying degrees of thresholds (some with none), issues of low quality and spam largely remained across the broader crypto space."
Kaito's Yaps product served as a crucial platform for building crypto communities, with numerous projects leveraging it for marketing purposes. The social media posting model was instrumental in generating awareness for new tokens, especially those lacking the established communities seen in previous bull cycles.
Simultaneously, Kaito and other similar projects acknowledged the prevalence of low-quality content, which likely contributed to X's reconsideration of crypto-related activities on its platform.
Kaito's Shift Towards Curation and New Incentive Models
The restriction on permissionless posting for InfoFi projects does not signify a complete removal of influencers and key opinion leaders (KOLs). Instead, Kaito intends to implement a more stringent curation process for personalities, establishing a tiered structure that mirrors traditional marketing approaches.
Yu Hu elaborated on this new direction: "Top and emerging high-quality creators will stand to benefit far more in a relevance- and analytics-based model rather than open incentives – benefitting those high-quality creators who already use Kaito and those who previously felt we were detached from them."
Kaito will maintain its cross-platform presence, continuing to engage with users on X, as well as on TikTok and YouTube.
The crackdown on crypto InfoFi projects on X occurred concurrently with a general decline in viewership across platforms. As previously reported, YouTube viewership for crypto channels has reached a five-year low.
Despite these challenges, Kaito continues to recognize the value of the creator market, estimated at $20 billion, and is actively exploring new marketing avenues. Yu Hu also commented on the potential viability of tokenizing interactions within the crypto economy, suggesting that blockchain networks may primarily evolve into financial infrastructure.
Market Impact and Future of InfoFi
Following the announcement of Yaps' closure, KAITO tokens experienced a significant decline, trading at $0.54, nearing their all-time low of $0.49.
KAITO's market capitalization dropped to $185 million, representing approximately 50% of the total market value for InfoFi projects. The overall market capitalization for InfoFi projects has fallen to $355 million, making it one of the smaller sectors within the crypto space.
The restriction on InfoFi projects reflects X's stance on advertising, particularly concerning third parties who hired influencers and bypassed the platform's official advertising channels. This shift has also led to the closure of products by smaller projects. The evolving landscape of InfoFi may pave the way for new types of incentives and point farming mechanisms.