Virtuals Protocol: Pioneer of on-chain AI Agents

1. Project Overview

Virtuals Protocol was established in 2021 as a blockchain-based AI agent generation platform. The project is dedicated to enabling everyone to create virtual characters that can interact with their environment like humans. The goal of Virtuals Protocol is to completely transform the way virtual interactions occur by creating personalized, immersive experiences.

The project was officially launched in 2023, with the core vision of utilizing blockchain technology to achieve decentralized co-ownership of AI agents, promoting the widespread application of AI in fields such as gaming, entertainment, and the metaverse. The AI agents of Virtuals Protocol possess multimodal interaction capabilities, including text, voice, and 3D animation, and can seamlessly operate across multiple platforms such as Roblox, TikTok, and Telegram games.

2. Development History

The development of the Virtuals Protocol can be divided into the following key stages:

2021: The predecessor of the project, PathDAO, was established, focusing on gaming guilds and GameFi investments, accumulating rich resources and experience for the subsequent transformation.

2023: With the global popularity of AI technology, PathDAO officially transformed into Virtuals Protocol, focusing on the integration of AI and blockchain, and deployed smart contracts on the Base chain.

2024: Virtuals Protocol launches its first AI agent Luna, gaining over 500,000 followers on TikTok and showcasing the commercial potential of AI agents. Currently, more than 1,000 AI agents have been created on the platform.

End of 2024: Virtuals Protocol launches on multiple exchanges, with the token $VIRTUAL's market cap skyrocketing from tens of millions of dollars to over 3 billion dollars in just over two months, marking the project's official entry into the mainstream cryptocurrency market.

3. Core Team

The team behind Virtuals Protocol consists of a group of young individuals with experience in consulting, blockchain, AI, and gaming. Key members include:

• Jansen Teng: Co-founder and CEO, graduated from Imperial College London, has been involved in the founding of multiple companies, and has experience working at Boston Consulting Group.

• Wee Kee: Co-founder, holds a bachelor's degree from Imperial College London and a master's degree from London Business School, and has also worked at Boston Consulting Group.

Other team members mostly come from the Southeast Asia region, with educational backgrounds including prestigious institutions such as Cambridge University and Imperial College, and have work experience in well-known companies. The team's technical strength and industry resources provide strong support for the project's success.

4. Business Model

Virtuals Protocol adopts a decentralized operational model, using blockchain as the underlying infrastructure. Users can create AI agents through the platform's user-friendly interface, and these agents have unique attributes and functionalities.

In terms of the business model, the platform charges users for creating and managing AI agents, with fees set according to the complexity of the agents and the amount of resources they consume. For example, creating a basic functional agent might require 10 VIRTUAL, while an agent with advanced features would require 100 VIRTUAL.

The platform also encourages developers to create derivative applications based on the Virtuals Protocol, adopting revenue-sharing and other cooperation methods for high-quality applications. Currently, there are about 20 different types of derivative applications being developed or in trial operation on the platform.

5. Ecosystem

The ecosystem of Virtuals Protocol includes the following layers:

1. Protocol layer: Provides AI models and algorithms to support developers in creating and deploying AI agents.

2. DApp Layer: Allows decentralized applications to integrate AI agent functions, such as NPCs in games and virtual influencers in social media.

3. Contributor Network: Data contributors, validators, and developers earn $VIRTUAL rewards by contributing data and models.

6. Token Economics

$VIRTUAL is the core token of the Virtuals Protocol, with a total supply of 1 billion tokens, distributed as follows:

• 60%: Public Circulation
• 35%: Ecosystem Treasury
• 5%: Liquidity Pool

The main uses of tokens include:

• Underlying asset: used to create new AI agents and liquidity pools
• Payment tool: Users pay the service fee of the AI agent through $VIRTUAL
• Governance: Token holders can participate in protocol governance and resource allocation decisions.

The token economic model enhances the scarcity and value of $VIRTUAL through deflationary mechanisms and community incentives. For example, a portion of the revenue from AI agents is used to buy back and destroy tokens, reducing the circulating supply and driving up the token price.

7. Industry Prospects

The AI agent industry is currently in a rapid development stage, with the global market size expanding at an average annual growth rate of 40%. It is expected that in the next five years, the market size will grow from the current $10 billion to $30 billion, and Virtuals Protocol is positioned in this highly growth-potential blue ocean market.

8. Competitive Analysis

1. AgentX: A project that laid out AI agents earlier, with over 100,000 users and collaborations with several large enterprises. However, it adopts a centralized architecture, which has limitations in data privacy protection and user ownership.

2. Altered State Machine ($ASTO): Focused on AI-driven NFT creation and training. Compared to Virtuals Protocol, ASM has uniqueness in the evolutionary NFT of the AI brain, but its stability in large-scale applications and complex scenarios needs to be verified. The market capitalization of $ASTO is only about 1%-3% of that of Virtuals Protocol.

3. Olas Network ($OLAS): Aims to bridge the gap between AI and blockchain in the form of a DAO. The community size and influence are relatively small, with a market capitalization of about 3%-24% of Virtuals Protocol.

9. Development Plan

Short-term (within 6 months): Optimize user experience, lower the threshold for creating AI agents, increase the target user count by 50% to 15,000 people, and enrich ecological application scenarios.

Medium-term: Expand international markets, increase promotion efforts in Europe, America, and the Asia-Pacific region, and enhance the project's international visibility. Plan to cover at least 10 major countries and regions by the end of 2025.

Long-term: Committed to becoming the world's leading AI and blockchain integrated ecological platform, building a digital world that encompasses various AI agent applications, and achieving deep integration with multiple fields of the real world.

10. Summary

Virtuals Protocol demonstrates strong potential in the integration of AI agents and blockchain. The project has a diverse and professional core team, a solid technical foundation, a unique and feasible business model, and a clear development plan.

$VIRTUAL token has multiple uses, and its economic model is designed reasonably, providing long-term appreciation potential. Considering the industry's high growth expectations, the continuously improving ecosystem, and market competitive advantages, there is still room for valuation increase for $VIRTUAL in the long term. However, given the significant increase in token market value in the short term, investors are advised to buy cautiously.

With the innovation of AI technology and the expansion of blockchain applications, the industry in which Virtuals Protocol operates is expected to experience explosive growth. With its first-mover advantage and the accumulation of technology and ecosystem, Virtuals Protocol is likely to stand out in the industry transformation, becoming a key force in leading development and providing global users with a richer, more convenient, and intelligent digital life experience.