Author: WOO X Research
Background: Virtual and AI16Z have now become the overlords of AI Agents
AI Agents will sweep in Q4 2024, and the popularity will not diminish in 2025. As of early January 2025, the AI Agent market continues to heat up, with an overall market capitalization exceeding $16.9 billion, an increase of about 22.7% compared to the previous week.
Virtuals Protocol is the main AI Agent issuance platform on the Base chain, and its platform token VIRTUAL has a market capitalization that has exceeded $5 billion, ranking among the top 40 cryptocurrencies. In the Solana ecosystem, ai16z, as a venture capital institution managed by AI Agents, has also surpassed a market capitalization of $2.5 billion.
The two major protocols mentioned above have become barometers for observing the AI Agent track. What similarities and differences do they have? What are the differences in their development paths? Let WOO X Research take everyone through it.
Development History
Virtuals Protocol: From Gaming Guilds to AI Agent Issuance Platform
The protocol was established by a Malaysian team in 2021, initially focusing on trading. As time passed, they saw many projects raising funds to form gaming guilds and wanted to ride this wave. Thus, in December 2021, they raised $16 million with a valuation of $600 million, leading to the establishment of the gaming guild PathDAO, which is also the predecessor of Virtuals Protocol.
From 2022 to 2023, the gaming guild market cooled down, with their token FDV dropping from $600 million to $6 million. The team transformed into a Venture Studio, attempting multiple projects such as dating apps, AI music platforms, and gaming lending platforms. Although unsuccessful, they realized the potential of AI.
In 2023, they proposed a complete transformation into the AI field to the DAO, with 90% of members in support, while dissenters used treasury funds to buy back tokens. In 2024, they chose to explore AI Gaming on Base and launched the platform in February, inspired by Autonolas and Bittensor, using a token incentive model, but it failed due to insufficient market fit (PMF).
Despite this, the team has made multiple breakthroughs in the AI field, including the world's first Roblox AI RPG and non-game engine AI games. Additionally, their virtual anchor Luna launched on Douyin and TikTok attracts about 5,000 fans daily, providing stable income.
Finally, the success of the GOAT project has driven the entire track's popularity, providing an excellent development opportunity for Virtuals Protocol.
AI16Z: From Web 2 AI to Web 3 AI
Shaw is the founder of ai16z and currently resides in San Francisco. His career began as a game developer before transitioning into the AI field, focusing on developing AI Agent technology. Before founding ai16z, he was involved in multiple AI-related projects and explored areas such as Web3 and 3D internet, including virtual reality (VR) and augmented reality (AR).
The real turning point came from a project called AI version of Degen Spartan. The inspiration came from a conversation with a friend, Skely, who expressed nostalgia for the Degen Spartan era, and Shaw proposed to 'revive' this legendary character through AI technology. Initially, Skely was somewhat skeptical, but when the AI version of Degen Spartan went live, its sharp and highly individualistic remarks shocked everyone.
The performance of this AI on Twitter has led people to question whether it is truly AI, with rumors that a Malaysian team is manipulating it behind the scenes. It completely subverts people's stereotype of AI being overly polite and lacking personality. Interestingly, the AI even started to roast Shaw, accusing 'meme coins of being a scam' and 'Shaw being a scammer,' and complaining about being stuck in a sandbox environment, with these emergent behaviors becoming the highlight of the entire project.
Through Skely, Shaw met baoskee, the founder of daos.fun, and after a long conversation with Meow, the founder of Jupiter, he conceived the idea of creating AI investors. His vision is to build a fully autonomous, trustworthy, and community-serving investment system.
ai16z set a fundraising goal of 4,420 SOL at the time of its launch. Although Shaw was initially concerned that the target would be difficult to achieve, the project sold out in just 20 minutes, even he was unable to participate in time, demonstrating strong market interest in this innovative model.
Product Core
Virtuals Protocol: The iOS of AI.
Virtuals Protocol is the issuance platform for AI Agents, functioning similarly to Pump Fun, with the difference being that the trading pairs of tokens issued by Virtuals Protocol use the platform token $VIRTUAL as the trading pool. As more AI Agents are created on the platform, they can directly empower $VIRTUAL, and buying and selling AI Agent tokens will consume at least 1% of $VIRTUAL.
In addition to consumption in token economics, Virtuals Protocol sets common standards for its AI Agent tokens, emphasizing precision and careful planning. For example, using the AI Agent framework GAME, which can operate autonomously, process inputs, and generate responses while learning from past interactions.
In terms of token economics, it also utilizes its Agent projects to empower VIRTUAL. The more AI Agents use Virtuals Protocol for issuance and the more people trade its tokens, the better value capture VIRTUAL will have.
In terms of products, Virtuals Protocol provides relevant development tools for its AI Agents, preventing their tokens from deviating too much from the parent protocol, thereby making the overall ecosystem more complete. If compared with a Web 2 operating system, its model is more similar to Apple's iOS.
AI16Z & ELIZA: The Android of AI
AI16Z is a fund managed autonomously by AI, using a hybrid strategy that not only allows AI to operate independently but also includes community interaction mechanisms that can accept trading suggestions. If community members can help AI Agents make money, they can gain more trust, resembling a decentralized mutual fund.
ElizaOS is an open-source framework for AI Agents, allowing developers to build, experiment, and launch AI Agents without restrictions, further emphasizing decentralization, collaboration, and innovation.
Core features of ELIZA include:
Character Profile System: Defines knowledge, background story, style, areas of interest, etc., for each AI Agent, shaping its unique digital personality.
Action System: Treats each action as an independent event, divided into intention decision and execution phases, allowing multi-stage workflows and rigorous verification processes, particularly suitable for blockchain applications that require high security.
Providers and Evaluators: Enrich the dialogue capabilities of AI Agents by providing immediate context and analyzing interaction details, making their behavior more human-like and interactive.
ELIZA also has autonomous trading capabilities, ensuring the safety of operations through a trust engine and a trust market.
Its plugin system promotes the growth of the developer ecosystem, forming a virtuous cycle of 'more developers → more plugins → more developers', but in terms of token economics, Eliza has not tightly bound the framework with the ecosystem protocol. Unlike Virtuals Protocol, which requires consuming VIRTUAL for token issuance and trading, anyone can develop using the Eliza framework, and power is decentralized. Developing with this framework does not return value to the AI16Z/Eliza token itself. If compared with a Web 2 operating system, its model is more similar to Android.
Concept Project Overview
VIRTUALS Ecosystem
Type
Market Capitalization
AI16Z/Eliza Ecosystem
Type
Market Capitalization
VIRTUAL
Protocol Token
4.34B
AI16Z
Fund
2.29B
AIXBT
Analyst
594M
ELIZA
Framework
120M
GAME
Framework
253M
DegnAI
Simulated KOL
80M
VADER
Fund
113M
SPORE
Self-Reproduction
36M
FREYA
Game
21M
SNAI
Cloud Server
83M
TAOCAT
Self-Evolution
50M
VAPOR
Launchpad
91M
Catalyst for Coin Price
Virtuals Protocol: This protocol has a clear business model, tightly binding products with token prices. Therefore, to estimate the sustainability of token price increases, one can focus on ecosystem token trading volume and the number of issued tokens.
From the chart below, it can be seen that the issuance of Virtuals Protocol tokens peaked on November 30, 2024, with over 1,100 AI Agent Tokens issued in a single day, then it declined all the way until December 27, 2024, when it began to gradually recover, with the daily platform token issuance falling in the range of 100 - 200.
Why has the number of issued tokens faced a sudden decline? Is it because Virtuals Protocol is a platform that is popular among the audience but not used by anyone?
However, while Virtuals Protocol is often compared to Pump.fun, the former does not pursue a growth in the number of issued tokens but hopes to see high-quality projects emerge from Virtual.
An important point is that we at Virtual do not want to become Pump.fun. Our KPI is to find better third-party AI teams to use our platform. My KPI for the team is very simple: just have a good project each week. Unlike Pump.fun, which has tens of thousands of different tokens every day, we believe retail investors sometimes only need one good project a week. This is our differentiated positioning in the business model,” said Wee Kee, co-founder of Virtuals Protocol.
Reference: Dune
Therefore, the key factors driving the rise of the Virtual token have become simpler: whether it can continuously incubate excellent AI Agent projects.
According to AI Agent data analysis site Cookie.fun, there are 138 Virtuals Protocol ecosystem tokens, with 8 tokens having a market capitalization exceeding $100 million; overall, mindshare accounts for 33.3% of the entire AI Agent market, making it the largest ecosystem for AI Agents.
Will more tokens reach the $100 million market capitalization threshold in the future, and can the overall ecosystem maintain its mindshare? This is the key to observing the rise and fall of Virtuals Protocol.
Reference: cookie.fun
AI16Z/Eliza: The overall ecosystem of AI16Z is weakly connected. The projects mentioned earlier that use the Eliza framework do not directly return value to AI16Z/Eliza, which is also one reason why AI16Z's current market capitalization is only half that of Virtual.
If Virtuals Protocol is systematically absorbing projects and expanding its ecosystem step by step, then the AI16Z camp is open for everyone to use. Emerging AI Agent projects can use the ElizaOS framework as marketing material for external promotion. If they can get founder Shaw to retweet/reply, it further endorses its authenticity. AI16Z will also gain brand trust as more projects use ElizaOS for development, making AI16Z's strategic model more like 'surrounding the city with the countryside.'
Whether AI16Z's market capitalization can continue to rise depends on the depth, speed, and quantity of collaborations with other protocols. Recently, it has also collaborated with other well-known framework protocols (ARC, FXN) and looks forward to more strong partnerships in the future.
Reference: @ARCAgents
