In a move that sent shockwaves through the cryptocurrency sector, X has implemented stringent new platform policies targeting applications that reward users for posting content, triggering immediate and substantial declines in related InfoFi tokens during January 2025. This policy shift represents a significant pivot for the social media giant, directly impacting emerging crypto projects that built economic models around user engagement and information distribution. Consequently, the market reaction was swift and severe, with several prominent tokens experiencing double-digit percentage losses within hours of the announcement. Industry analysts now scrutinize the long-term implications for the intersection of social media and decentralized finance.
X Restricts InfoFi Applications to Combat Platform Degradation
X’s product leadership, led by Nikita Bier, announced comprehensive revisions to the platform’s developer API rules. The changes specifically target so-called “InfoFi” applications—projects that monetize user activity through token rewards for posting, liking, or sharing content. Bier explained the rationale behind this decisive action, citing a measurable increase in AI-generated content and automated responses that degraded the overall user experience. The platform consequently revoked API access for non-compliant applications, effectively cutting off their operational capacity on X’s network.
This policy enforcement aims to reduce bot activity and spam, which had become prevalent under incentivized models. Developers of affected applications received notifications and guidance for transitioning their projects to alternative platforms, including Threads and Bluesky. The move reflects X’s broader strategy to prioritize authentic human interaction over automated, reward-driven engagement. Historically, social platforms have struggled to balance innovation with user experience, and X’s action establishes a clear precedent for 2025.
The Technical and Ethical Rationale Behind the Ban
Information Finance, or InfoFi, emerged as a dominant trend in early 2025, blending social media engagement with cryptocurrency rewards. Projects typically issued native tokens to users for creating content, curating information, or participating in community governance. However, this model created unintended consequences, including sophisticated bot networks designed to farm tokens and low-quality, AI-generated posts flooding timelines. X’s internal metrics reportedly showed a correlation between these applications and decreased user satisfaction scores, prompting the preemptive policy shift.
Market Reaction: InfoFi Tokens Experience Sharp Declines
The cryptocurrency market responded immediately to X’s policy announcement. Within 24 hours, the collective market capitalization of prominent InfoFi tokens fell by over 10%. Notable individual performances included:
- Kaito AI (KAITO): Dropped more than 19%
- Cookie DAO (COOKIE): Declined over 13%
- Several smaller-cap projects: Experienced losses exceeding 20%
This sell-off reflected investor concerns about the viability of engagement-based token models without access to major social platforms. Trading volumes spiked significantly as holders reassessed project fundamentals. The reaction demonstrated the market’s sensitivity to platform policy changes, especially for tokens heavily dependent on specific technological ecosystems. Comparatively, broader cryptocurrency indices showed minimal movement, indicating the sell-off remained contained to the affected niche.
| Token | Symbol | Price Change | Key Product Affected |
|---|---|---|---|
| Kaito AI | KAITO | -19.2% | Yaps (Incentivized Leaderboards) |
| Cookie DAO | COOKIE | -13.7% | Engagement Rewards Platform |
| Other Aggregate | N/A | -10.1% | Various InfoFi Applications |
Industry Experts Welcome Platform Integrity Measures
Prominent cryptocurrency commentators largely endorsed X’s decision. Michaël van de Poppe, a widely-followed analyst, expressed strong support for the changes, noting they would substantially reduce automated bot activity across the platform. Similarly, analyst Ali Martinez described the policy update as positive news for genuine social media users. These reactions highlight a growing consensus within the crypto community that sustainable growth requires quality engagement over pure volume metrics.
Experts point to historical parallels with previous platform changes, such as Facebook’s algorithm shifts that impacted media companies. The underlying principle remains consistent: platforms ultimately control their ecosystems and can dramatically alter the economic landscape for dependent businesses. For InfoFi projects, this event serves as a crucial lesson in diversification and platform risk management. Consequently, developers must now build more resilient models that don’t rely solely on single-platform APIs.
Kaito AI’s Strategic Pivot to Kaito Studio
In direct response to the policy change, Kaito AI announced the retirement of its “Yaps” product and associated incentivized leaderboards. Founder Yu Hu revealed that discussions with X made clear that fully permissionless, reward-driven distribution models could no longer operate under the updated restrictions. Instead, Kaito will launch “Kaito Studio,” a structured platform where brands select creators based on defined quality standards and collaborate on specific objectives.
Hu emphasized that this shift represents an evolution rather than a retreat. The company’s other products—including Kaito Pro, Kaito API, Kaito Launchpad, and the forthcoming Kaito Markets—will continue unaffected. Importantly, the $KAITO token will maintain integral functionality within the new Kaito Studio ecosystem, potentially serving governance, access, or reward purposes within the curated model. This adaptive response demonstrates how agile projects can navigate regulatory and platform challenges.
The Broader Context: InfoFi’s Rise and Challenges
InfoFi projects gained substantial traction throughout early 2025 as cryptocurrency companies experimented with novel monetization strategies for social engagement and information flow. The model promised to democratize content creation value, allowing users to capture economic benefits directly through tokens. However, critics consistently argued that these systems prioritized quantity over quality, often encouraging artificial engagement rather than meaningful participation.
The current situation mirrors earlier debates about Web3 social models and their sustainability. Platforms like Steemit previously explored similar concepts with mixed long-term results. X’s policy intervention now forces the industry to confront fundamental questions about incentive design, spam prevention, and user experience. Projects that successfully adapt may develop more sophisticated tokenomics that align rewards with genuine value creation rather than simple activity metrics.
Conclusion
X’s policy update restricting InfoFi applications marks a pivotal moment for cryptocurrency and social media integration. The immediate market reaction, characterized by significant declines in InfoFi tokens, underscores the dependency of these projects on platform permissions. As the industry digests these changes, projects like Kaito AI demonstrate possible adaptation strategies through product pivots and model evolution. Ultimately, this development may accelerate more sustainable approaches to tokenized social engagement, balancing innovation with platform integrity and user experience. The events of January 2025 will likely influence crypto-social development for years to come.
FAQs
Q1: What exactly are InfoFi applications?
InfoFi, short for Information Finance, refers to applications that use cryptocurrency tokens to reward users for social media activities like posting, liking, or sharing content. These projects aim to monetize user engagement and information distribution directly through blockchain technology.
Q2: Why did X decide to restrict these applications?
X’s leadership cited platform degradation caused by increased AI-generated content and automated bot activity. The incentivized models reportedly led to excessive spam and reduced authentic user interaction, prompting the policy change to improve overall experience.
Q3: Which cryptocurrencies were most affected by the policy change?
Kaito AI (KAITO) and Cookie DAO (COOKIE) experienced the most notable declines, falling over 19% and 13% respectively. The broader category of InfoFi tokens saw aggregate market capitalization drop more than 10% within 24 hours.
Q4: How are affected projects responding to the restrictions?
Projects like Kaito AI are pivoting their business models. Kaito retired its incentivized “Yaps” product and announced “Kaito Studio,” a more structured platform where brands collaborate with curated creators rather than using permissionless reward systems.
Q5: Does this mean the end of crypto-social projects?
Not necessarily. While permissionless reward models face challenges, the event may accelerate development of more sophisticated approaches. The industry will likely explore alternative platforms, improved tokenomics, and hybrid models that balance incentives with quality engagement.
