Coinbase Chat MCP

MCP vs API: Simplifying AI Agent Integration with External Data https://www.youtube.com/watch?v=7j1t3UZA1TY 00:00:00 For large language models to be truly useful, they often need to interact with external data sources and services and tools. And until recently, that was typically done with application programming interfaces or APIs. Now, in late 2024, Anthropic introduced a new open standard protocol, that's model context protocol or MCP. And it has already made quite the splash and it standardizes how applications provide context to LLMs. So let's define these two terms MCP and API and take a look at their similarities and differences. 00:00:44 Now a good metaphor for MCP is that it's kind of like a USB-C port for your AI applications and that's because it standardize its connections between AI applications, LLM's and external data sources. So, if you think about Just your standard laptop that you might be using. Well, that probably has a set of USB-C ports attached to it. That's a really old one. And in those ports, well, you can plug in all sorts of cables and they will use the USB-c standard to interface with all sorts peripherals. 00:01:22 So perhaps you've plugged one of these things into a monitor. Another one is connected to an external disk drive and perhaps you've also added in a power supply for the third one. It really doesn't matter who makes the peripherals, they all work together using this common standard. Well, MCP is kind of like that. So if we take a look at really what's in it, there is an MCP host and that also runs a number of MCP clients. Now, each client opens a JSON RPC 2.0 session using the protocol that comes with MCP, so the MCP protocol, and that connects to external MCP servers. 00:02:14 So we have a client-server relationship here. Now, servers, those expose capabilities. So perhaps we've got a server for access to a database, maybe we've got another one which gives us access to a code repository. And then maybe we have another server that gives us to an email server. So if we go back to the USB-C analogy, we can think of the laptop as being kind of like the MCP host. The MCB protocol, this is really what's signified by the USB C connection. And then the drive and the monitor and the power supply. 00:02:55 We can think of those really as MCP servers. Okay, so that's the architecture, but what are the capabilities of MCP? Well, it addresses two main needs of LLM applications. And when I say LLMs applications, I particularly mean AI agents. And those two needs, one is to provide context in the form of contextual data And the other is to enable tools and the usage of tools by these AI agents. So it provides a standard way for an AI agent to retrieve external context, which means things like documents and knowledge base entries and database records that sort of thing, 00:03:41 and it can also execute actions or tools like maybe run a web search or call an external service or perform some calculations. Now that's all done through this MPC server that I mentioned and that advertises a bunch of primitives. So let's take a look at three of them. Now one of the primitives is called tools and tools are discrete actions or functions the AI can call. So a weather service that might expose a get weather tool or a calendar service that may expose a create event tool. Now the server name advertises each tools name, 00:04:25 It's description, the input and output schema in its capabilities listing as well. Now when an LLM uses an MCP client to invoke a tool, the MCP server executes the underlying function. So that's tools. Now another primitive is resources. And resources are read only data items or documents the server can provide. Which the client can then retrieve on demand, so text files, database schema, file contents, that sort of thing. And then we also have as an additional primitive prompt templates, 00:05:02 and those are predefined templates providing suggested prompts. Now, not every MCP server will use all three primitives. In fact, many just focus on tools currently, but the important thing to understand here, is an AI agent can query an MCP server at runtime to discover what primitives are available and then invoke those capabilities in a uniform way. Because every MCP's server publishes a machine readable catalog, so tools/list and resources/list and prompts/list, agents can discover and then use new functionality without redeploying code. 00:05:45 OK, so that's MCPs. What about APIs? Well APIs are another way of letting one system access another system's functionality or data. An application programming interface is to find a set of rules or protocols describing how to request information or services. And by using APIs, developers can integrate capabilities from external systems instead of building everything from scratch. So an e-commerce site can use a payment API to process credit card payments, for example. Now the API acts as an abstraction layer. 00:06:14 So we have the requesting application, the client, well that doesn't need to know the internal details of the service that it wants to invoke, the server. It's all kind of abstracted away from it, because the server processes the request and the only thing we need to know is how to format the requests and understand the responses using the API. That's really all there is to it. Now there are a lot of different API styles but One of the most ubiquitous is the RESTful API style. You can kind of think of that as really the, essentially the web default API. 00:06:58 And a RESTFUL API communicates over HTTP. So this call here is an HTTP call with RESTfUL API where clients interact using standard HTTP methods. So they might use GET, for example, to retrieve data. They might use. Post to create data, put to update data, and delete to remove data. So for example, a REST API for a library system might have an endpoint that looks something like get, and then we say /books, /123 if we want to fetch book number one, two, threes, details. Or we might use a post and say post slash loans. 00:07:46 If we want to borrow a book. Each such endpoint returns data, often in a JSON format, representing the result. And in fact, many commercial large language models are offered over REST. Send a JSON prompt, get a JSON completion back. AI agents might also use REST APIs to perform a web search or interact with a company's internal REST services. So, MCP and APIs, they share... Many similarities, not least that they are both considered client-server model architectures. So in a REST API, a client sends an HTTP request like those gets or posts 00:08:30 I just mentioned to a server, and then the server returns a response in MCP. The MCP client sends the request like tools slash call to an MCP server and receives a response. So they really both offer layer of abstraction so that one system doesn't need to know the low level details of another's internals. The implementation details there, they're hidden. The client just follows the interface. So both MCP and APIs, they really help to simplify things, specifically simplifying integration, letting developers wire systems together instead of reinventing wheels. 00:09:13 But MCP and APIs have some fundamental differences too. And let's start with purpose built, which we can really consider as MCP's kind of area, versus general purpose, which we could really think of as being more of API's domain. So the model context protocol, it was explicitly designed to integrate LLM applications with external data and tools. It standardizes patterns like providing context data and invoking tools in ways that align with how AI agents operate. But APIs on the other hand, they weren't created specifically with AI or LLMs in mind 00:09:58 and that means that MCP bakes in certain assumptions that are useful for AI. Now that includes one of MCP's strongest advantages and that is the fact that it supports dynamic discovery. So what do I mean by that? Well, an MCP client can just simply ask an MCPserver, hey, what can you do? And it will get back a description of all available functions and data that server offers. Now the client or the LLM application using it can then adapt to whatever happens to be available. Traditional REST APIs, they don't typically expose an equivalent runtime discovery mechanism 00:10:39 and if the API changes, new endpoints are added the client needs to be updated by a developer. MCP is kind of flipping this model because the AI agents can retrieve the latest capabilities list from a server each time it connects and then it can pick up new features automatically. Now another big difference relates to standardization as well, specifically standardization of interface, and the difference here is that every MCP server regardless of what service or what data it connects to speaks the same protocol and follows the same patterns, whereas each API is unique. 00:11:18 The specific endpoints and the parameter formats and the authentication schemes, they vary between services. So if an AI agent wants to use five different REST APIs, it might need five different adapters, whereas five MCP servers respond to the exact same calls. Build once, integrate many. Okay, so similar, but different, but here's the kicker. When it comes to MCP, many MCP servers, when we actually look at their implementation, they actually use traditional APIs to do their work. In many cases, an MCP server is essentially a wrapper around an existing API, 00:12:04 translating between the MCP format and then the underlying services native interface by using that API, like the mcp github server, which exposes high level tools such as repository/list as mcb primitives, but then it internally translates each tool call into the corresponding githubs rest api request. So MCP and apis are not adversaries they're layers, they're layers in an AI stack. MCP might use APIs under the hood while providing a more AI friendly interface on top. And today you can find MCP service for file systems, Google Maps, 00:12:46 Docker, Spotify, and a growing list of enterprise data sources. And thanks to MCP, those services can now be better integrated into AI agents in a standardized way.