The InfoFi Survival Crisis: X Revokes API Access and the Collapse of Kaito’s Narrative
2026-01-20Beginner News
2026-01-20Beginner News
At the intersection of decentralized finance and social media data, an experiment regarding the "value of information" is facing its most severe survival challenge since its inception. On January 15, 2026, social media giant X (formerly Twitter) suddenly revised its platform rules, announcing the official revocation of API access for "InfoFi" applications, citing that such apps have generated large-scale spam to obtain token incentives. This decision instantly triggered a chain reaction in the Web3 space: as the leader in this sector, the Kaito platform token plummeted 19% within 24 hours, with its market capitalization shrinking to $160 million.
According to Kaito's on-chain dashboard on Dune, 25,798,188 KAITO tokens remain in a staked state, valued at approximately $14.16 million, distributed across 17,754 staking addresses. Due to a mandatory 7-day waiting period for unstaking, these assets are effectively in a state of "locked-in depreciation." This one-week waiting period hangs over the market like a sword of Damocles; the predictable massive selling pressure in seven days will test the limits of the team’s response. However, even more unsettling for the community is the "predictability" of on-chain traces: two weeks ago, Kaito's multi-sig contract address distributed 24 million KAITO to five addresses. One address that received 5 million tokens transferred all of them to a centralized exchange (CEX) on January 9. This suspected "pre-emptive exit" has plunged the once highly-anticipated narrative of "InfoFi" into a dual crisis of technical trust and ethical integrity.
The Origins of InfoFi: From Cognitive Asymmetry to Assetization
To analyze today's collapse, one must trace the logic behind the rise of InfoFi (Information Finance). The concept of InfoFi was first mentioned by Ethereum founder Vitalik Buterin in a 2024 research paper, where he envisioned a system that utilizes market mechanisms to induce participants to reveal true information. Kaito, a pioneer in practicing this vision, was founded in 2022 by former Citadel quantitative researcher Yu Hu. Its core intention was to solve the problems of fragmented and falsified information in the crypto market.
In its early stages, Kaito was regarded as the "Bloomberg + Google" of the crypto world. Through an AI-driven search engine, Kaito indexed cluttered data from X, Discord, Mirror, and various on-chain governance proposals into a structured format. This functional contribution was highly valuable: it broke the information asymmetry between retail investors and institutions, allowing "consensus" to be quantified and "sentiment" to be backtested. At this point, Kaito's contribution lay in providing an efficient set of "cognitive tools" for the crypto industry, completing the initial transformation from raw data to high-quality information.
However, the evolution of Web3 projects inevitably moves toward financialization. To accelerate user growth and ecosystem stickiness, Kaito launched the "InfoFi" network, the core logic of which is to tokenize "attention" and "contribution." The launch of the YAPS (Proof-of-Attention) mechanism and incentivized leaderboards marked Kaito's transition from a tool to a platform. Under this model, user posts, comments, and citations were no longer just social behaviors but became "mining activities" to earn points and token rewards. This "alchemy of attention" attempted to drive high-quality content production through economic incentives, but in the process of execution, it inevitably moved toward the opposite of its original intention.
The Alienation of Incentive Mechanisms: From Collaborative Content to Farming Frenzy
The core paradox of InfoFi is that once information flow turns into cash flow, information quality often rapidly degrades into data noise. Driven by Kaito and similar projects, so-called "contributors" gradually evolved into what the community calls "incentive farmers." To climb the leaderboard rankings and seize incentive tokens, a large number of accounts began using AI generation technology to post high-frequency, low-quality, and homogenized replies and retweets targeting trending projects on the X platform.
While this behavior appeared prosperous in the early stages of the ecosystem, bringing significant social media impressions to projects, it was essentially a "Tragedy of the Commons" in the digital world. This incentive-driven "Slop" (AI-generated spam replies) did not improve the effectiveness of information; instead, it severely polluted the social media ecosystem. For the X platform, this behavior of "injecting trash" via API interfaces in exchange for project tokens was nothing short of parasitic traffic extraction. Therefore, from a business logic perspective, X’s revocation of API access is a highly rational defensive move—it needs to maintain the moat of its own content quality and prevent the platform from becoming a "junkyard" for Web3 project farming.
For Kaito, this alienation brought profound negative impacts. First was the damage to brand reputation; a project originally aimed at seeking "information truth" became a driver of "social trash." Second was the false prosperity of liquidity; among the active addresses on the leaderboard, how many are real industry observers, and how many are automated script bots? When X’s API door closed, these "parasitic innovations" that relied on external ecosystem blood transfusions instantly lost their footing.
The Rashomon of Governance: Multi-sig Transfers and the Collapse of Confidence
Beyond the technical blockade, what truly disheartened investors was the lack of transparency at the governance level. As mentioned earlier, unusual large-scale transfers occurred from the Kaito multi-sig contract two weeks before the API ban. In the crypto world, a multi-sig wallet usually symbolizes the highest level of credit for a project, and the allocation of its internal funds should ideally involve clear community proposals or financial disclosures.
However, the distribution of 24 million KAITO and the subsequent precision selling of 5 million tokens to a CEX occurred just before the rule changes and the outbreak of negative news. This suspicion of "insider front-running" completely shattered the "Trustless" principle championed by Web3. If the project team used information asymmetry to cash out before the negative news was released, then the InfoFi claim of "breaking information asymmetry" becomes a massive irony: it attempted to eliminate market asymmetry in its product logic while utilizing internal information to create even more severe unfairness in its governance logic.
The "Prisoner's Dilemma" triggered by this behavior is spreading. Holders of the 17,754 staking addresses are forced to watch the token price bleed during the 7-day redemption waiting period. Furthermore, the upcoming unlock of 1.1 million tokens (followed by a larger unlock of 8.35 million) adds fuel to the expectations of selling pressure. In the absence of new capital entering the market, the "forced depreciation" of old holders stands in stark contrast to the team's "suspected dumping." This is not only a crisis for Kaito but a collapse of the trust endorsement for the entire InfoFi sector.
Redemption through Transformation or Unknown Destination: How Far Can Kaito Studio Go?
Faced with the pressure of a collapse, the Kaito team's response speed showed a certain degree of "preparedness." They are gradually phasing out YAPS and incentivized leaderboards, replacing them with the launch of "Kaito Studio." According to the official vision, Kaito Studio will shift from simple "posting for tokens" to a more professional and gated set of content creation and marketing tools, aiming to serve brands, deep content creators, and research institutions.
This transformation suggests an evolutionary direction for InfoFi: shifting from "generalized entertainment/social token distribution" to "professionalized/vertical value exchange." However, the growing pains of this transformation are immense. First, Kaito has lost the powerful support of the X platform API; how to obtain real-time external data flows has become a massive technical challenge. Second, having lost the traffic of "incentive farmers" brought by the wealth effect, how will Kaito maintain platform activity and market value? For a community that has already built a mindset of "earning fast money through posting," the difficulty of retaining users during a forced transition to a "creative studio" requiring professional output is foreseeable.
Furthermore, Kaito Studio faces a fiercely competitive business environment. In the AI search field, there are Web2 giants like Perplexity; in the crypto vertical, there are established institutions like The Block and Messari. Kaito's only advantage lies in its already formed tokenomic network, but this advantage is becoming precarious against the backdrop of damaged credibility.
Concluding Thoughts on Information Finance
Kaito’s setback is the shattering of the grand narrative of InfoFi under the impact of realism. It tells us that while information as an asset certainly has value, the "flow of information" can never be simply equated to the "flow of tokens." When incentive mechanisms override the content itself, financialization will only bring destructive noise rather than constructive wisdom.
The ban by X was merely a trigger; the real crisis stems from the InfoFi sector's long-term path dependency on parasitic traffic and the arrogance of centralized power within governance structures. For Kaito, the next seven days are not just a test of token selling pressure, but the final window to see if it can reconstruct its product logic through "Kaito Studio." If the team cannot convince the market with real product demand and transparent governance sincerity, then KAITO may become just another brilliant but brief bubble in the history of Web3 development.
From an industry perspective, Kaito’s "collapse in progress" is an important warning: any prosperity created by attempting to bypass content quality through pure token incentives will eventually face cleanup by ecosystem giants or backlash from market logic. The future of information financialization should not lie in how to incentivize more people to "speak," but in how to more accurately discover the voices that are truly worth listening to.
Reference Information:
1.BlockBeats. (2026). On-chain Analysis: AI Auntie on Kaito Staking and X API Ban.
2.Bier, N. (2026). X Developer API Policy Revision Regarding Posting Incentives. X Platform Service Announcement.
3.Yu Hu. (2026). The Evolution of InfoFi: Transitioning to Kaito Studio. Official Kaito Medium/Announcement.
4.Dune Analytics. (2026). Kaito Staking Dashboard (Real-time data: 25.7M KAITO).
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