I. Project Introduction

I. Basic Project Information

Virtuals Protocol was established in 2021 as a blockchain-based AI Agent generation platform that aims to allow anyone to create an AI agent, a virtual character that can interact and engage with the environment like a human. The vision of Virtuals Protocol is to completely change the way virtual interactions occur by creating hyper-personalized and immersive experiences.

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

2. Project Development History

The development history of Virtuals Protocol can be divided into several important stages:

2021: The predecessor of the project, PathDAO, was established, focusing on gaming guilds and GameFi investment. PathDAO has accumulated rich resources and experience in the GameFi field, laying the foundation for subsequent transformation.

2023: With ChatGPT leading 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. This transformation marks a shift of the project from traditional GameFi to AI-driven blockchain protocols.

2024: Virtuals Protocol launched its first AI agent, Luna, which gained over 500,000 followers on TikTok, showcasing the commercial potential of AI agents. The success of Luna not only validates the technical feasibility of the project but also provides valuable experience for subsequent AI agent development. Currently, more than 1,000 AI Agents have been created on Virtuals Protocol.

By the end of 2024: Virtuals Protocol is listed on multiple well-known exchanges, and the market value of the token $VIRTUAL skyrockets from tens of millions of dollars to over $3 billion in just over two months, marking the project's official entry into the mainstream cryptocurrency market and gaining widespread attention and recognition.

III. Core Team Background

The team of Virtuals Protocol consists of a group of young individuals with certain experience in the consulting industry, blockchain, AI, and gaming fields. Core members include:

Jansen Teng: Co-founder and CEO, graduated from Imperial College in 2018, previously co-founded ThinAir Water, DIAM Digital Marketing, Aidaro, etc., and worked at Boston Consulting Group (BCG).

Wee Kee: Co-founder, obtained a bachelor's degree from Imperial College in 2017 and a master's degree from London Business School in 2018. He co-founded Aidaro and has also worked at BCG Consulting.

Other members include Matthew Tang, Josh Wang Khang Hwu, Hardeep Meghera, Armielyn Obinguar, Weixiong Tay, Charan Rao, Joshua Moh, and others. Other team members also come from Malaysia and other Southeast Asian regions, with educational backgrounds from prestigious institutions such as Cambridge University and Imperial College, and work experience in well-known companies like Accenture, Grab, and Shopee. The team's technical strength and industry resources provide strong support for the project's success.

II. Business Model

I. Operating Model

Virtuals Protocol adopts a decentralized operating model, using blockchain as the underlying infrastructure, and leveraging smart contracts to ensure transparency, fairness, and immutability of various interactions within the ecosystem. Users can easily create their own AI agents through the user-friendly interface provided by the platform, and these AI agents possess unique attributes and functions, such as some being good at writing articles, while others excel in graphic design.

In terms of business model, on one hand, the platform charges users a certain fee for creating and managing AI agents, with the fee standard set differentially according to the complexity of the agents and the resources they consume. For example, creating a basic functional agent may only require a payment of 10 VIRTUAL, while creating an agent with advanced features capable of handling complex tasks would require a payment of 100 VIRTUAL. On the other hand, the platform encourages developers to create various derivative applications based on Virtuals Protocol. For high-quality applications, the platform will collaborate with them through revenue sharing and other means to jointly promote the prosperity of the entire ecosystem. Currently, about 20 different types of derivative applications are under development or in trial operation.

II. Ecosystem Building

The ecosystem of Virtuals Protocol includes the following levels:

Ø Protocol Layer: Provides AI models and algorithms to support developers in creating and deploying AI agents. The protocol layer is the technical core of Virtuals Protocol, determining the performance and functionality of AI agents.

Ø DApp Layer: Allows decentralized applications (DApps) to integrate AI agent functionalities, such as NPCs in games and virtual influencers in social media. The DApp layer is the application scenario of Virtuals Protocol, determining the market potential and user scale of AI agents.

Ø Contributor Network: Data contributors, validators, and developers earn $VIRTUAL rewards by contributing data and models. The contributor network is the community foundation of Virtuals Protocol, determining the project's sustainability and development momentum.

III. Token Economics

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

Ø 60%: Public Distribution

Ø 35%: Ecosystem Treasures

Ø 5%: Liquidity Pool

The main uses of the token include:

Ø Base Assets: Used to create new AI agents and liquidity pools.

Ø Payment Tool: Users pay for AI agent service fees using $VIRTUAL.

Ø Governance: Token holders can participate in protocol governance and resource allocation decisions.

The design of the token economic model aims to increase the scarcity and value of $VIRTUAL through deflationary mechanisms and community incentives. For instance, a portion of the income from AI agents will be used to repurchase and destroy tokens, thereby reducing circulating supply and driving up token prices.

III. Project Prospects

1. Industry Analysis

The AI Agent industry is currently in a rapid development stage. According to a research report by iResearch Consulting, the global AI Agent market size has been expanding at an average annual growth rate of 40% in recent years. Behind this is a strong market demand for intelligent services, whether businesses hope to enhance office efficiency and optimize business processes through AI agents, or individual users expect AI agents to assist in creation and provide personalized lifestyle services, all of which are driving the rapid development of the industry.

In the future, as AI technology continues to advance, especially with breakthroughs in key technical fields such as natural language processing and image recognition, the capabilities of AI Agents will become even more powerful, and application scenarios will further expand. It is expected that the market size may triple within the next five years, growing from the current $10 billion to $30 billion. Virtuals Protocol is positioned in such a high-growth potential blue ocean market.

2. Competitor Analysis

(1) AgentX

AgentX is one of the earlier projects in the industry to layout AI Agents, and has already accumulated a relatively large user base, with the number of users exceeding 100,000, and has established partnerships with several large enterprises such as Microsoft and Amazon, exerting strong influence in the enterprise-level AI service field.

However, AgentX's disadvantage lies in its relatively traditional centralized architecture, which has certain limitations in data privacy protection and user ownership of AI agents, and this is where Virtuals Protocol's decentralized advantages are highlighted. For instance, in user surveys related to data privacy, over 70% of users expressed a preference for data processing methods that provide decentralized guarantees.

(2) Altered State Machine ($ASTO)

Altered State Machine is a platform for creating and training artificial intelligence agents, powering the creation and training of AI-driven NFTs that can interoperate across the metaverse. The ASM protocol enables individuals and organizations to own, train, and develop AI through a revolutionary genome mining and smart mining process. The vision of Altered State Machine is to become the ownership and monetization protocol for AI using NFT technology.

Compared to ASM, Virtuals Protocol has advantages in decentralized governance and cross-platform integration, while ASM demonstrates its uniqueness in the evolutionary NFTs of AI brains, but its stability and performance under large-scale applications and complex scenarios need further verification. The significant gap in market capitalization can also be seen: the circulating market value of $ASTO is only $20.36 million, and the fully diluted valuation (FDV) is $85.34 million (data as of December 29, 2024), which is only about 1%-3% of the corresponding market value of $VIRTUAL.

(3) Olas Network ($OLAS)

Olas Network (also known as Autonolas) is a framework that bridges the gap between artificial intelligence and blockchain. The project aims to use a DAO structure to coordinate ecological contributors and capital investors through token economics, making Olas Network a unified network that includes off-chain services such as AI, oracles, and cross-chain communication. Although Olas Network has a certain level of activity on social media, its community scale and influence are relatively small.

Currently, the circulating market value of $OLAS is $115 million, with a fully diluted valuation (FDV) of $848 million (data as of December 29, 2024), which corresponds to about 3%-24% of the market value of $VIRTUAL.

3. Development Planning

Virtuals Protocol has a clear development planning path. In the short term, it plans to continue optimizing the user experience of the platform in the next six months, lowering the technical threshold for creating AI agents, with the goal of increasing the platform's user base by another 50%, reaching around 15,000 people, while enriching the application scenarios within the ecosystem and introducing quality partners from different fields.

The mid-term goal is to expand international markets, especially to strengthen market promotion in key regions such as Europe, America, and Asia-Pacific, by holding developer conferences, online and offline technical seminars, etc., to enhance the project's international visibility, and strive to have $VIRTUAL listed on more mainstream cryptocurrency trading platforms, improving its liquidity and market value. The plan is to cover at least 10 major countries and regions by the end of 2025.

In the long term, it aims to become a leading global ecological platform integrating AI and blockchain, building a vast digital world covering various AI agent applications, achieving deep integration with multiple fields of the real world, and driving the development and transformation of the entire industry.

IV. Summary

Through a multidimensional in-depth analysis of Virtuals Protocol, we can see that the project shows strong development potential in the integration of AI Agents and blockchain. It has a core team with diverse professional backgrounds, solid technical foundations, a unique and feasible business model, and a clear development plan.

In terms of token valuation, its token $VIRTUAL has multiple uses, including payment, governance, and liquidity provision. The design of the token economic model is reasonable and has long-term appreciation potential. Considering the high growth expectation of its industry, the continuous improvement of its ecosystem, and its advantageous position in market competition, combined with the valuation levels of similar projects, in the long term, $VIRTUAL still has a certain appreciation space. However, based on the current market situation and project development trends, especially the significant rise in token market value in the short term, it is recommended that investors buy cautiously.

Looking to the future, with the continuous innovation of AI technology and the ongoing expansion of blockchain applications, the industry of AI Agents integrated with blockchain, under Virtuals Protocol, is expected to experience explosive growth. With its first-mover advantage and technological and ecological accumulation, Virtuals Protocol is poised to stand out in this industry transformation, becoming a key force in leading industry development and providing global users with a richer, more convenient, and intelligent digital life experience.