[Enhancement] Hierarchical Tool Management for MCP - Solving Context Overflow at Scale

[JoshMcMillen]

This proposal extends MCP to support hierarchical tool organization and lazy loading, addressing the critical context window consumption problem when dealing with many tools. The solution introduces category-based discovery and dynamic loading while maintaining full backward compatibility with MCP 1.0.

The Problem

Current MCP implementations face significant scaling challenges:

• Context Window Saturation: At ~400-500 tokens per tool definition, 50 tools consume 20,000-25,000 tokens—most of a 32K context window, or a substantial portion of larger windows
• Degraded Selection Accuracy: LLM performance degrades when choosing from large, flat tool lists
• No Dynamic Loading: All tools must be loaded upfront, regardless of current task relevance
• Poor Organization: Flat tool lists become increasingly difficult to navigate and manage

Real-world impact: Many MCP servers are artificially limiting their tool offerings or creating multiple specialized servers instead of one comprehensive solution.

Proposed Solution

Core Design Principles

1. Full Backward Compatibility - All MCP 1.0 clients and servers continue working without modification
2. Progressive Enhancement - New features activate when both sides support them
3. Lazy Loading - Load tool schemas only when needed for the current task
4. Semantic Organization - Group tools in logical categories that match mental models

Key Features

1. Capability Negotiation

Extended initialization handshake to detect hierarchical support:

{
  "capabilities": {
    "tools": {
      "hierarchical": true,
      "lazyLoading": true,
      "dynamicRegistration": true
    }
  }
}

2. Tool Discovery Without Loading

New methods to browse available tools without loading full schemas:

• tools/categories - List available tool categories with metadata
• tools/discover - Query tools by category or search term

3. Dynamic Tool Management

Load and unload tools during the session:

• tools/load - Load specific categories or tools
• tools/unload - Free context by unloading unused tools
• tools/changed - Notification when tool availability changes

4. Enhanced Tool Metadata

Optional metadata to improve tool selection:

• Category membership
• Namespace support
• Version information
• Rate limiting details
• Latency estimates
• Usage examples

Expected Impact

Based on analysis and preliminary prototypes:

Metric	Expected Improvement
Context token usage	Significant reduction (load only 10-15 active tools vs. 50+)
Tool selection accuracy	Improved through reduced choice set and categorization
Initial connection speed	Faster with minimal initial tool set
Practical tool limit	Order of magnitude increase potential

No breaking changes. No forced migrations. Just progressive enhancement.

Migration Path

Phase 1: Soft Launch

• Servers implement new endpoints alongside existing ones
• Clients detect and use new features when available
• Full backward compatibility maintained

Phase 2: Adoption

• Popular servers and clients add support
• Best practices emerge from real-world usage
• Protocol refinements based on feedback

Phase 3: Standardization

• New features become recommended for complex tool sets
• Possible inclusion in MCP 2.0 as default behavior

Questions for Discussion

1. Naming Conventions: Should we use dot notation (github.create_issue) or another separator for namespaced tools?

2. Category Standardization: Should we define standard category names (e.g., vcs, database, filesystem) or leave it completely open?

3. Metadata Extensions: What additional metadata would be most valuable for tool selection algorithms?

4. Rate Limiting: Should rate limit information be standardized at the protocol level?

5. Tool Versioning: How should tool version conflicts be handled when multiple servers provide similar tools?

Reference Implementation

I'm working on a reference implementation that demonstrates these concepts. Key aspects:

• Full backward compatibility testing suite
• Example server with 200+ tools across 10 categories
• Client implementation showing progressive enhancement
• Performance benchmarks comparing flat vs. hierarchical approaches

Would love to collaborate with others on this.

Call for Feedback

Looking for input on:

• Real-world scaling pain points you've encountered
• Alternative approaches to solving the context window problem
• Compatibility concerns with existing implementations
• Security considerations for dynamic tool loading
• Performance implications in production environments

Next Steps

1. Gather community feedback on this proposal
2. Refine specification based on input
3. Develop reference implementations
4. Create compatibility test suite
5. Submit formal enhancement proposal if consensus is positive

---

This proposal maintains 100% backward compatibility while enabling MCP to scale to meet the needs of increasingly sophisticated AI applications. The hierarchical model isn't just about organization—it's about making MCP viable for production systems with hundreds of specialized tools.

What are your thoughts? What challenges have you faced with tool scaling in MCP?

[tadasant]

Likely related to modelcontextprotocol/modelcontextprotocol#1300