Why Context Is the New Currency in AI: From RAG to Context Engineering

Context, not computation, is the new currency for creating truly intelligent AI systems. Current methods like Retrieval-Augmented Generation (RAG) are insufficient because they treat context as a static, fixed-size buffer, leading to failures in complex, real-world applications. A more advanced approach, termed "context engineering," is necessary to orchestrate information by improving selection, organization, and evolution of context. This involves moving beyond simple semantic similarity to incorporate temporal and user context, organizing information into narrative structures, and maintaining a stateful understanding across interactions.