MCP - Introduction for Managers

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MCP – Introduction for Managers

Model Context Protocol

Introduction for Managers

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MCP

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Model Context Protocol, or MCP, is an open standard for Agentic AI applications that acts as a universal adapter to connect apps with local and cloud-based tools and data sources. It solves what is known as the ‘N-by-M integration problem’—the challenge of building a unique, custom connection from every single app to every single tool and data source.

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Model Context Protocol

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The N X M Integration Problem

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By providing a standard protocol for app-tool-data integration, MCP:

Reduces the complexity of custom integrations.
Enhances interoperability between systems.
And allows LLMs to access real-time information.

Tactical Enhancements

Prior to the development of MCP, LLMs were historically constrained by the information used in their training. This function and knowledge limitation was subsequently supplemented with tactical enhancements:

Web Search enabled LLM’s to access up-to-date information beyond the scope of their training. While this resolved the currency problem, web search only had access to public information.

Retrieval-Augmented Generation, or RAG, enabled models to integrate proprietary data, such as financial transactions in the banking sector, claims history in the insurance sector, and medical history in the healthcare sector.

OpenAI’s Function Calling was a major breakthrough – it allowed apps to share a set of tools and the conditions under which they should be called with models. But Function Calling only standardizes the request to use a tool, not the execution of the tool itself – developers still need to write custom code that tightly couples front-end apps with external tools and data sources, limiting the developer community’s ability to scale up the use of common sources.

MCP enables apps to do what web search, RAG, and function calling cannot – it empowers LLM’s to independently choose from a universe of tools and data sources, interact directly with those sources, and incorporate functionality and content from those sources in its own response generation.

MCP Architecture

Now let’s take a closer look at the MCP architecture, which is a client-server model. There are three key components of the MCP architecture, as shown in this schema – a Host Process, one or more MCP Clients, and one or more MCP Servers.

A typical agentic AI app consists of a presentation, application, and data tier. The Host Process resides on the application server. It performs three key functions. First, it presents the portfolio of available MCP tools to the LLM within the prompt’s context. Second, it interprets the LLM’s recommendation for which tool to use for a given task. And third, it orchestrates the communication between the other MCP components.

An MCP Client is a proxy that connects Host Process to the MCP ecosystem – each MCP Client manages the dialogue between the Host Process on the application server and a single MCP server. Specifically, it transmits requests from the Host Process using standard JSON-RPC messages, then relays the corresponding response from the MCP Server back to the Host Process, shielding the application from the complexities of the MCP communication protocol.

An MCP Server is a standalone application that exposes a specific function or data service to the MCP ecosystem. These functions and data services are almost unlimited – examples include cloud-based databases, enterprise CRM and ERP applications, and project management and email tools.

The Host Process uses a configuration file to find and connect to an MCP Server via the MCP Client. Once the connection has been established, the MCP Server advertises its specific capabilities back to the Host. It then listens for requests from the MCP Client, performs the requested actions, then returns the result back to the MCP Client, which hands it off to the Host Process.

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Rapidly Growing Ecosystem

Because MCP is a standardized protocol, any MCP-enabled app can access a rapidly expanding ecosystem of MCP servers that is supported by a diverse matrix of contributors.

As the original author of MCP, Anthropic acts as the primary caretaker and steward of the protocol’s evolution.

– The core specification, documentation, and software development kits for Python and Typescript are maintained in a public GitHub repository, allowing for community contributions, feedback, and transparent evolution of the standard.

– To bootstrap the adoption of MCP, Anthropic has published a suite of pre-built, reference MCP servers for widely used enterprise systems such as Google Drive, Slack, GitHub, and PostgreSQL.

To ensure their applications are “agent-ready”, most major software vendors have already started development of MCP servers for their respective service offerings. Notable integrations include Atlassian, Cloudflare, Microsoft, Notion, Salesforce, Webflow, Linear, and Stripe – but these are just a small sample of application integrations.

To facilitate adoption of MCP servers, public and private registries publish comprehensive server profiles, including server endpoint url’s and the function schemas that each server exposes.

NOTES

References and Disclaimers

Third-Party Contributors

From time to time, SINOLOGIX offers third-party content that complements our core focus. The authors we endorse are subject matter experts and thought leaders in their respective fields. We strive to offer a diverse range of perspectives on any given topic and these contributors help us achieve that objective.

Economic Bits (our side hobby)

"Things change gradually at first...

...then all at once..."

China GDP vs UST Holdings (2010-22) (billions)

(click/tap legend to filter data)

China GDP vs UST Holdings (2010-22) (billions)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)

Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)

Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Western media is starting to pay attention to China’s efforts to influence members of the so-called Global South, or more specifically the BRICS+ and Shanghai Cooperation Organization (with substantially overlapping membership), to denominate international trade in the Chinese Renminbi (RMB), aks the Chinese Yuan (CNY) and/or other local currencies. For very different reasons, Russia has promoted the idea of an entirely new currency for trade settlement. This is an accelerating trend among countries that have formed close economic and political relationships with China.

Coincident with the pivot to the RMB for trade settlement is a growing sentiment among the BRICS+ and SCO members that holding USD as their primary reserve currency poses a risk in the event the US declares sanctions and/or freezes a country’s assets, as happened with Russia and Belarus in 2022.

The combined effect of these two trends should be observable in a country’s US Treasuries holdings, and that’s exactly what we’re seeing in the chart above – China’s USD and Treasuries holdings peaked at $1.277 trillion in 2013 and declined by more than 32% in 2022.

Things change “slowly at first, then all at once”...
Ernest Hemingway, The Sun Also Rises Tweet

China and De-dollarization – Part 1 – Overview

The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.

2023-04-06

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attribution – data source – reference

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Newsfeeds

International and APAC

China and De-dollarization – Part 3 – Trade Agreements

As the multi-polar Global South movement accelerates, there is now a consensus that the time is right for strategic alternatives – banks, financial messaging systems, and possibly even a new currency. In this Part 03, we examine recent changes to the financial infrastructure proliferating amongst BRICS+ and SCO+ members.

2023-05-02

China and De-dollarization – Part 2 – BRICS and SCO

While China is a driving force in the Global South’s pivot away from the USD, the rapid expansion of inter-regional economic organizations made up of Asian, Central Asian, Middle East, African and Latin American countries has accelerated the shift in political and economic power that threatens to upend more than 70 years of US dominance on the world stage.

2023-04-14

China and De-dollarization – Part 1 – Overview

2023-04-06

China Semi Sector – 2022 Sanctions – Part 2

Recent news coverage in western media suggests that US sanctions against China’s semiconductor sector have caught the CCP and mainland industry leaders off guard. In this Part 2 of our two-part series on China’s semiconductor market, we do a deep(er) dive on the mainland Chinese chip sector, examine the Chinese government’s strategic plan to decouple China’s reliance on western technology suppliers, and evaluate the outcomes of that strategy.

2023-02-22

2022-11-13 – Markets React to US Chip Sanctions

A recap of mainland China, APAC, and international news items – this week, we look at the markets’ initial reactions to US sanctions on the transfer of advanced semiconductor technology to China.

2022-11-13

China Semi Sector – 2022 Sanctions – Part 1

Recent news coverage in western media suggests that US sanctions against China’s semiconductor sector have caught the CCP and mainland industry leaders off guard. In this research article, we examine this issue in the context of the global supply chain to analyze the short-term and long-term impact of US sanctions and the implications for both China and key industry players.

2022-10-20

Offices

US and Americas

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APAC

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Innovative Digital Solutions

Stunning Digital Solutions

Elevate user engagement...

Elevate user engagement...

...with state-of-the-art AI technology

...with state-of-the-art AI technology

MCP – Introduction for Managers

Model Context Protocol

Introduction for Managers

Sub Heading

column 01 - row 01 - col 01

(tap image to play)

column 01 - row 02 - col 01

column 02 - row 02 - col 01

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Model Context Protocol

Sub Heading

The N X M Integration Problem

(tap image to expand)

Tactical Enhancements

MCP Architecture

(tap image to expand)

Rapidly Growing Ecosystem

NOTES

References and Disclaimers

Related Research and Articles

Economic Bits (our side hobby)

"Things change gradually at first...

...then all at once..."

China GDP vs UST Holdings (2010-22) (billions)

(click/tap legend to filter data)

China GDP vs UST Holdings (2010-22) (billions)

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)

Global FX Exchange Reserves (2001-22) (% of total)

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)

Global FX Exchange Reserves (2001-22) (% of total)

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