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The system involves two key components: the client (user or AI agent) and the server (website or API). When a request is made, the server responds with a 402 message. The client then initiates a micro-payment using a digital wallet, typically holding stablecoins like USDC. Once paid, the client can retry the request, and the server verifies the payment instantly.
In addition, Coinbase developed a mediator or "oracle" that confirms transactions, manages settlement on the blockchain, and facilitates the flow of payments. This mediator operates off-chain to avoid high costs, handling instant verification and settlement, while the blockchain layer manages security and transparency.