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Elon Musk’s social media platform X has taken a strong stance against InfoFi apps, revoking API access for applications like InfoFi, which reward users for posting content. The move aims to curb spam and AI-generated content, which X's product head Nikita Bier described as a 'tremendous amount of AI slop & reply spam'. This crackdown has led to immediate consequences in the crypto market, with several tokens and NFTs experiencing sharp declines.

Investor reactions have been mixed. While some, like DOGE founder Billy Markus, support the move, others, including Web3 Collective founder David Choukroun, have urged X to reconsider, arguing that creators need alternative revenue sources. InfoFi, which integrates financial incentives with user engagement, has seen its native token KAITO drop nearly 20% after the announcement. Related NFTs, such as Kaito Genesis NFTs (Yapybaras), have also lost value, with floor prices falling over 50%.

Why Did X Block InfoFi Apps?

X stated its action is aimed at improving the user experience by reducing spam. The platform encourages users to transition to Threads and Bluesky, indicating a shift in its developer and creator strategy. According to Nikita Bier, this decision reflects a broader effort to ensure the platform aligns with the needs of serious content creators and brands.

How Did the Market React to the X Decision?

Following the announcement, the KAITO token fell from $0.7011 to $0.5671 within a short period. This represents a nearly 20% drop in value. Other InfoFi tokens also experienced steep declines, with tokens like LOUD and ARBUS sliding by 16% and 9%, respectively. The overall market value of the InfoFi sector dropped by 11.5% in a single day, reflecting widespread concern about the future of incentivized content creation on X.

What Are the Implications for the InfoFi Sector?

The InfoFi concept, which rewards users for generating or engaging with content, has faced a significant setback. Projects like Kaito, which rely on this model, have been forced to adapt. Kaito Studio has been introduced as a tier-based platform, replacing features like Yaps and incentivized leaderboards. This shift signals a move away from fully permissionless distribution models, which the Kaito founder said are no longer aligned with the needs of serious content creators and brands.

The broader implications for the InfoFi sector remain to be seen. However, the response from the market suggests that investors are wary of the sustainability of models that rely heavily on incentivized engagement. As X continues to enforce its policies, other platforms and projects in the InfoFi space may need to reassess their strategies to remain competitive and compliant.