Written by Alice, Foresight Ventures
At the end of the year, the Christmas atmosphere quietly descended, and I finally opened the PS5 and finished the game (Black Myth: Wukong) at this time. The top experience brought by this game is really amazing, and it also made me think about the development direction of Web3 Gamefi.
Compared with Web2 games, Web3 games have natural advantages in technical architecture: blockchain-based asset ownership, player-led economic models, and open ecosystems. But it is undeniable that at this stage, Web3 games are still difficult to compete with top Web2 games in terms of gameplay depth and immersion. However, the rise of AI Agents is quietly changing this situation.
a. The rise of AI agents in games
The AI Meme craze has significantly promoted the combination of Crypto and AI and the advancement of technology, causing quite a stir in the market. Refer to our previous research report for a brief review:
AI Agent Key Nodes
Early 2024: Fei-Fei Li and her team published a paper titled “AI Agent: A Survey of Frontiers in Multimodal Interaction” at Stanford University, which explored the autonomous decision-making and actions of AI agents based on multiple types of environmental data. This paper received positive responses from academia and industry, and laid a theoretical foundation for the subsequent development of AI agents.
July 2024: The AI model Terminal of Truths (ToT) debuts, attracting a lot of attention with its humor and creativity. It interacts with users through social media and successfully seeks financial support from A16Z founder Marc Andreessen. This event sparked discussions on the autonomy and governance of AI agents, and ignited the AI Agent Meme narrative craze, becoming an important turning point in the development of AI agents and driving their popularity up sharply.
Key web3 projects
1. Luna (AI K-pop idol):
It is an AI idol on Virtuals Protocol with 6 million fans on TikTok. It can interact with fans in real time, breaking the traditional interaction model between idols and fans and demonstrating the potential of AI to create virtual idols in the entertainment field.
The ability to trade on social media platforms provides a new perspective on the role of AI in the digital economy and its impact on user consumption behavior.
2. AI16Z (AI venture capital fund):
Using AI to make investment decisions, combined with big data analysis, market trend forecasting, etc., can make investment decisions more efficient and accurate and reduce the impact of human bias.
As a DAO organization, it allows community members to influence investment decisions by holding its tokens, building a unique investment ecosystem and governance model.
3. AIXBT (AI Crypto Market Analyst):
It focuses on providing analysis and insights into the cryptocurrency market. In the volatile crypto market, it can help users understand market trends in real time and assist in making investment decisions, which is extremely practical.
Active on social media such as Twitter, using its dissemination analysis results to demonstrate the ability of AI to communicate and exchange information efficiently with humans. It also involves technical applications such as the Eliza framework for building encrypted AI agents.
4. Zerebro (AI Artist):
It can generate a variety of artistic content such as music, memes, NFTs, etc., highlighting the potential of AI in the field of artistic creation and blurring the boundaries between human and AI-created content.
Collaborating with other creators to create works of art shows that AI can be used as a collaborative tool to expand the boundaries of artistic creation. At the same time, relying on the ZerePy open source Python framework, it is convenient for people without programming experience to deploy AI agents, helping more people participate in AI art creation.
The organic integration of AI and GameFi is expected to become a key turning point for Web3 games to surpass Web2 games, bringing a "Netflix moment" to Web3 games.
AI Agent has many advantages in Web3 games, as shown below:
AI helps with asset issuance and circulation: AI Agent can act as a trader to conduct asset trading activities on the chain, and its counterparty can be either human players or other AI agents. At the same time, AI itself contains a unique Meme culture and has the ability to issue its own assets, which undoubtedly improves the liquidity and tradability of AI Token and injects vitality into the in-game economic ecosystem.
Dynamic Storyline: AI Agent has the powerful ability to tailor personalized game content for each player, giving each player a unique gaming experience and saying goodbye to the dilemma of homogenized game content.
Optimized player interaction: NPCs driven by AI technology are highly flexible and adaptable. They can make dynamic adjustments based on the player's gaming style to create realistic and attractive interactive scenarios, adding more vividness and fun to the player's gaming experience.
Cross-platform integration: AI Agent is naturally good at cross-platform transactions. Whether it is between different game platforms or across various blockchain networks, AI will have more advantages than humans when executing transactions. It is fast and the path is safe and not easy to be phished. Website deception. It significantly reduces the various obstacles players face when experiencing the game, making the cross-platform operation of the game smoother, more efficient and more convenient.
Decentralized AI model: Blockchain technology provides protection for AI Agent, ensuring transparency and fairness in its operation, eliminating possible biases, and making the gaming environment more fair and reasonable.
b. Xterio: A pioneer in empowering Gamefi with AI
As a pioneer in the AI+GameFi track, Xterio has taken the lead in realizing the deep integration of AI and blockchain technologies.
Xterio is a Web3 game platform and publisher that aims to create an interconnected "game industry chain" covering the entire life cycle - a one-stop ecological service including game distribution, game virtual asset trading, game derivative value-added, etc.
1. Top team & Funplus parent company background
Xterio's founding team comes from top game developers such as FunPlus, Electronic Arts, Zynga, Activision Blizzard, Krafton, Jam City, NetEase, etc., and its members have an average of more than 15 years of rich experience.
Here we have to mention Funplus, the top game developer behind Xterio, the leader in the global SLG track. In the annual Chinese game developers' overseas revenue list released by data.ai, FunPlus has dominated for five consecutive years. At its peak, three games occupied the top 10 mobile games, including (State of Survival), (King of Avalon), (Age of Guns), and other mobile game developers that are popular around the world. In 2024, Funplus's revenue was nearly 400 million US dollars, and its valuation reached 8 billion US dollars, making it one of the top 10 global game unicorns together with ByteDance and Mihoyo.
Xterio CEO Micheal is the CSO of FunPlus. He previously served as COO and executive director of NetEase Games for 22 years. He is a veteran in the web2 gaming industry, and his status is comparable to that of Elon Musk or Jack Ma in the gaming industry. Despite his high position, Micheal still resolutely devoted himself to web3 entrepreneurship. As he said, "I am not good at being a 'rational' person. In my opinion, 'rationality' is almost equivalent to 'boring'. Although this word is positive in the eyes of many people, I prefer to pursue an 'irrational' attitude towards life. It is those seemingly 'irrational' moments that ignited the spark of my entrepreneurial journey."
Relying on its powerful parent company, Xterio has a luxurious team lineup, rich gaming experience and strong R&D advantages. In particular, Funplus has been actively exploring the direction of AIGC games since 2023, laying a good technical foundation for it.
In the primary market, Xterio received a seed round led by Funplus, and subsequently received a total of US$80 million in financing from top investment institutions including Binance Labs, Makers Fund and Foresight Ventures.
source
2. Dual Rollup Architecture of Ethereum and BNB Chain
On the technical level, Xterio L2 uses the dual Rollup architecture of Ethereum and BNB Chain to build a game L2. In April 2024, Xterio reached a cooperation with BNB Chain, planning to use BNB as the Gas token of Xterio Chain and as the L2 settlement execution layer on BNB Chain, using OP Stack as the Rollup architecture, and EigenDA as the data availability layer.
In the Ethereum part, Xterio has partnered with AltLayer and EigenLayer to launch a Restaked Rollup designed specifically for gaming volumes. This Rollup leverages the security of EigenLayer users re-staking ETH, becoming the only gaming AVS service at present, which perfectly fits the current re-staking narrative and provides strong support for Xterio in terms of security and decentralization.
In the BNB Chain part, Xterio has built a relatively mature product matrix ecosystem, and has launched three of its own AAA games, such as Age of Dino, Palio and Overworld, as well as more than 70 game partners. From a data perspective, the total number of on-chain transactions exceeds 140 million, the total number of active addresses exceeds 16 million, and is still growing rapidly.
3. Xterio Ecosystem Game Inventory
Xterio has launched three ecological games:
1. Age of Dino is a AAA flagship strategy mobile game with over 10 million users.
2. Palio: Palio is an innovative AI-driven game developed by Xterio. It introduces an “emotion engine” designed to give non-player characters (NPCs) human-like empathy and interactivity. Users are able to create and interact with AI agents, which will evolve and form unique emotional bonds with players.
3.Overworld: An ARPG open world game for European and American players, Mobile+PC, similar to the gameplay of Genshin Impact, and the anime style is more like Marvel superheroes. The core gameplay includes exploring the open world, PVPVE combat, weapon forging, socializing, building houses, etc. The total transaction volume of the Overworld NFT series exceeded 10,000 Ethereum.
c.Xterio’s understanding of AI
In the AI gaming sector, Xterio’s core value proposition consists of three parts:
1. AI engine and toolbox for games
Xterio focuses on three key areas of technological innovation to create an AI toolkit that provides a wide range of application scenarios for games.
A human-like general AI agent
Xterio is committed to creating the most human AI Agent, enabling it to fully and seamlessly integrate into all aspects of human life, including real-time monitoring of on-chain conditions and conducting transactions on behalf of users. The same agent can be flexibly used in different games to provide players with a coherent and consistent service experience.
Xterio Emotionally Intelligent Chat Engine
Xterio's emotional intelligence chat engine was developed in collaboration with Reka (Reka.ai is an AI company founded by former DeepMind, Google Brain and FAIR researchers) and is designed to recognize and respond to human emotions more accurately and effectively than ordinary LLMs, providing players with a more intimate and warm communication experience. This advanced technology will directly serve Xterio AI agents and specific characters in its games, enhancing the emotional connection and interaction between game characters and players.
This emotionally intelligent chat engine was officially launched at the Meet Your Anima event in April 2024, where it performed brilliantly, with a total of more than 72 million on-chain transactions, processing approximately 1 billion input requests, and generating 300 million output requests.
Graphical model technology
Xterio's unique graphics engine provides developers with a cost-effective way to create visuals, creating beautiful game graphics at a lower cost.
This set of tools has been successfully applied to @PalioAI's Gen0 NFT series, creating the largest AI-generated game NFT series to date. As Xterio's flagship product in the field of AI games, PalioAI is a Pixels-like pixel farming game that incorporates AI elements, judging from the game interface released on the official Twitter account. Players may be able to entrust resources and wallets to AI agents in the game to execute business strategies on their behalf. At present, the NFT blind box of this series has not been revealed, but its unique design and innovative gameplay have aroused the expectations of many players and deserve continued attention.
(Palio game interface sneak peak)
2. Cross-platform game distribution
Xterio is one of the few studios in the industry that can build cross-platform games on PC, mobile, and web. Through AI integration, Xterio provides developers with a complete set of publishing tools, including:
Launchpad and ecosystem support: Simplify the game publishing process and build in community interaction tools.
NFT Marketplace: An AI-powered solution for creating and trading gaming assets with blockchain-secured ownership.
Cross-chain capabilities: Supports seamless deployment of games on blockchains such as Ethereum, BNB, and Optimism.
3. AI Agent drives game mechanics change
Xterio is using AI Agents to innovate game mechanics. The recent Befriend AI campaign is a great example.
Xterio and AI startup Reka have jointly developed the latest emotional AI engine, which allows users to interact with AI characters, experience AI emotional companionship and dynamic feedback, and have the opportunity to win the last airdrop reward of $XTER before TGE. The core highlights of the Befriend event include:
AI Oracle Interaction Mechanism: Users can have emotional conversations with AI Oracle every day. AI will provide thoughtful responses and dynamically adjust the interactive content based on the user's expressions and needs.
Daily mission system: Through daily missions and invitation mechanisms, players can further improve their scores to unlock more new scenes and additional rewards.
Technical advantages: The emotional AI engine developed by Xterio and Reka can deeply understand user emotions and provide personalized interactive experience.
This is the first innovative experiment to integrate AI agents into the game world. In the foreseeable future, we can expect AI NPCs to dynamically adapt to the player's strategy to create more challenging gameplay, AI-created storylines to allow the game narrative to change in real time based on the player's decisions, and customized AI companions to help players explore the vast game world and provide real-time insights and strategic support....
d. Xterio Community Growth and Achievements
Xterio’s leading position in AI+Web3 gaming is strongly supported by community data:
Xterio already has more than 8 million users and has completed more than 100 million transactions.
Among all Layer 2 chain gaming sectors, the active user wallet (UAW) ranks third and has staked more than 1 million ETH.
Launched the first AI-driven asset generation engine and successfully integrated it into the ecosystem.
Its Launchpad has raised more than 5,000 ETH through NFT sales, reflecting the community's recognition of its vision and providing solid financial support for Xterio's future development.
d. Strategic significance of investing in Xterio
From an investor's perspective, Xterio is not only a web3 game company but also an infrastructure provider that promotes the development of the AI+Game industry. It has built a complete AI technology engine and framework, allowing more developers to become direct participants in this game revolution. Our investment logic for Xterio is as follows:
AI drives gaming revolution
The rise of AI Agent has become the key to Gamefi's breakthrough and the Nexflix moment in the gaming industry. The dynamic interaction capabilities, personalized experience and immersion that AI can bring to Web3 games are expected to reshape the industry landscape. As one of the few companies in the industry that can build game studios across PC, mobile and web terminals, Xterio deeply integrates AI technology and provides developers with a comprehensive set of publishing toolkits. It has launched a general AI Agent framework, an emotional intelligent chat engine, and a highly efficient and economical graphic model technology, with extremely high technical barriers and first-mover advantages.
Strong background and team support
The parent company FunPlus is the leader in overseas SLG games with a valuation of up to 8 billion US dollars and is one of the top 10 global gaming unicorns. As Funplus CSO, Micheal resolutely devoted himself to web3 entrepreneurship. His rich experience and outstanding leadership have helped Xterio to safeguard the company and greatly enhanced investment confidence.
Diversified ecological game layout
Xterio has successfully launched three ecological games with different styles: Age of Dino is an Eastern AAA flagship strategy mobile game; Palio is the first AI game with an "emotion engine"; Overworld is an anime-style ARPG open world game from the West. Xterio's diversified ecological game system meets the needs of different player groups, reduces the risk of dependence on a single game, and improves ecological stability and sustainable development capabilities.
A thriving community ecosystem
Xterio has accumulated more than 10 million users in community building, completed more than 100 million transactions, ranked third in active user wallets (UAW) among all Layer 2 chain game sectors, and pledged more than 1 million ETH.
For Foresight, Xterio represents the "underlying logic" of the future gaming industry: AI technology-driven, user-centric, and co-building the ecosystem. Choosing Xterio is both a trust in its technology and market capabilities, and our firm belief in the AI Agent + Gamefi model.
Xterio is redefining the gaming experience, creating Netflix moments for games, and pushing the Web3 gaming industry into a new stage.
