Prefix Caching for Builders

Prefix caching can reduce AI agent costs by up to 80% and improve latency, but improper configuration—such as placing dynamic data like timestamps at the start of a prompt—can inadvertently increase both. To maximize efficiency, developers should place stable elements like system instructions and tool definitions at the beginning of the prompt and move all changing variables to a dynamic suffix. Success requires monitoring cache hit rates to ensure that structural changes or reordered data do not trigger expensive recomputations.