Glossary — Agentic AI
What is an MCP Tool?
An MCP tool is an executable capability exposed by an MCP server, described with a name, description, and JSON Schema parameters, that AI agents can discover and invoke through the Model Context Protocol.
WHY IT MATTERS
MCP tools are the action primitives of the protocol. They represent things an agent can do — send a payment, query a database, create a file, check a spending limit. Each tool has a schema describing its inputs and expected outputs.
What makes MCP tools powerful is standardization. A tool defined once on an MCP server is automatically available to any compatible agent. The agent's LLM sees the tool's name, description, and parameters — enough to decide when and how to use it.
Tool design matters enormously. Well-designed tools have clear names, comprehensive descriptions (the LLM reads these to decide when to use the tool), strict input validation, and informative error messages. Poorly designed tools lead to agents misusing them.
HOW POLICYLAYER USES THIS
PolicyLayer exposes spending controls as MCP tools — check_spending_limit, validate_transaction, get_spending_history. Any MCP-compatible agent can use these tools to enforce financial policies without custom integration.