X's Policy Shift and Its Impact
X has implemented a significant policy change, blocking applications that reward users for posting on the platform by revoking developer API access for services tied to paid engagement. This decision was confirmed by X product lead Nikita Bier, who stated that the company had already cut off access for affected apps. Bier explained that the policy change was a direct response to a surge in low-quality automated replies and spam, which he attributed to incentive-based posting models.
This update signifies a notable shift in how X manages third-party monetization strategies that leverage its social graph. While X has historically tolerated bots and automated engagement, the explicit targeting of paid-posting models indicates increasing tension between X's product objectives and crypto-linked attention economies. The move directly impacts a core distribution channel for InfoFi-style products, raising questions about the long-term viability of token models that rely on incentivized social engagement.
Market Reaction to the Policy Change
The policy shift had an immediate effect on tokens associated with InfoFi activity. Kaito, the native token of the InfoFi network that monitors trending crypto conversations on X, experienced a decline of over 10% shortly after Bier's announcement. This downward trend continued, with the token trading around $0.59 at the time of publication, representing a decrease of approximately 14.5%. Kaito's market capitalization is currently near $140 million, with a fully diluted valuation of about $586 million.
At its peak, shortly after its February 2025 airdrop, Kaito's fully diluted valuation had reached close to $2 billion. The rapid reversal underscores the sensitivity of InfoFi-linked tokens to changes in platform-level policies. Kaito functions by aggregating posts from prominent crypto accounts to identify topics gaining traction within the community. This model is heavily reliant on access to X's data and on users' consistent posting, often motivated by token rewards or leaderboard incentives.
Reasons Behind X's Targeting of InfoFi Models
Nikita Bier specifically identified InfoFi as a contributor to the declining content quality on the platform, describing it as a source of "tremendous amount of AI slop & reply spam." This criticism reflects a broader concern within X that financial incentives directly linked to posting volume can distort user behavior and degrade the overall user experience. Unlike conventional marketing tools, InfoFi platforms frequently integrate token rewards, leaderboards, and automated prompts to foster continuous engagement.
In practice, this has resulted in numerous repetitive replies, low-effort summaries, and AI-generated responses designed to accumulate points rather than contribute meaningfully to discussions. Bier also suggested that developers affected by this change should explore alternative platforms. He indicated that if a developer account was terminated, X would assist in transitioning their business to Threads and Bluesky, pointing to rival social platforms as alternative venues.
Kaito's Response to the New Policy
In the wake of the API revocation and the subsequent market reaction, Kaito announced its intention to discontinue its Yaps product and its incentivized leaderboards. The company plans to introduce Kaito Studio as a replacement, which its founder Yu Hu described as being more aligned with a tier-based, traditional marketing platform. Hu noted that over the past year, Kaito had experimented with various approaches, including tighter eligibility criteria, higher leaderboard thresholds, social and on-chain filters, and different incentive designs.
He added that platform-wide algorithm changes on X, coupled with the launch of other InfoFi projects with minimal or no thresholds, had contributed to the persistence of spam and low-quality content across crypto social feeds. This strategic pivot suggests Kaito is aiming to transition away from open-ended engagement farming towards a model resembling managed campaigns and paid placements. It remains an open question whether this approach can effectively support a tokenized network at scale.
Investor Takeaway
Implications for InfoFi and Crypto Social Tokens
This incident highlights a fundamental vulnerability in InfoFi models: their dependence on the API and rules of a single social platform. Unlike DeFi protocols or onchain infrastructure, crypto products driven by social interaction are positioned downstream from centralized networks that can alter their terms of service without prior notice. X's action also occurs at a time when social platforms are facing increasing pressure to mitigate automated content and AI-generated spam.
As these efforts intensify, crypto projects focused on attention mining may encounter diminishing opportunities to operate at scale. The structural weakness lies in the reliance on external platform dynamics, which can shift abruptly and impact the core functionality and value proposition of these crypto-native applications.