AI Agents have become one of the most prominent tracks in this bull market as new narratives attract capital and attention. Among the many emerging stars, Virtuals Protocol stands out as one of the leaders, with a total market capitalization of $2.626 billion. Its token, $VIRTUAL, experienced a rapid rise, climbing from $0.03 to a peak of $3.30 within just three months, achieving an impressive 109x increase.

As an AI Agent issuance platform, what is the value logic behind Virtuals Protocol? This article will explore the project’s team background, technical architecture, product innovation, economic model, and highlight key projects within its ecosystem for user reference.

What is Virtuals Protocol?

In summary, Virtuals Protocol is an AI Agent issuance platform that allows users to easily create AI agents and issue tokens through a simple process similar to Pump.fun. In addition, it focuses on providing token incentives for every interaction users have and is committed to building a self-sustaining Agent economy.

Source: Virtuals Protocol

According to the latest data, the Virtuals Protocol platform has issued over 11,000 agents, with cumulative revenue exceeding $39.5 million. The core token of Virtuals Protocol, $VIRTUAL, has a total supply of 1 billion and is circulating on both the Ethereum and Base chains. Data from CoinGecko shows that the price of $VIRTUAL saw explosive growth starting in October this year, with its value increasing more than 100 times in just three months. The market cap of $VIRTUAL briefly surpassed $3.2 billion, and it currently stands at around $2.6 billion.

Source: Dune@hashed_official

Team Background and Funding

Interestingly, the Virtuals Protocol team did not initially focus on AI agents. Before this pivot, they were deeply involved in the gaming sector under the name PathDAO, which was established in 2021 as an Indonesian metaverse gaming guild. In the same year, PathDAO completed a seed round funding led by DeFiance Capital and Beam, with participation from Master Ventures, NewTribe Capital, LVT Capital, and Stakez Capital. The total amount raised was $16 million, with the project’s valuation at the time around $600 million.

However, in light of the challenging market conditions, the gaming guild struggled to continue. The team experimented with several other projects, including a social platform and a lending platform for gamers, but these attempts failed. It wasn’t until January 2024 that the team officially pivoted to the AI sector and rapidly launched their first platform in February, alongside several AI projects, such as the virtual streamer Luna, which began gaining market attention.

According to Rootdata data, Jansen Teng, a former BCG (Boston Consulting Group) consultant and serial entrepreneur who specializes in artificial intelligence and biochemistry, is the co-founder and CEO of Virtuals Protocol. Another co-founder, Wee Kee, also has a BCG consultant background.

Core Technologies and Product Innovations

Initial Agent Offering (IAO)

As an AI Agent launch platform, Virtuals Protocol provides users with a very low entry barrier, requiring no technical knowledge. Users simply follow the platform’s instructions to complete the agent’s image, name, symbol, description, and type selection, while holding 100 $VIRTUAL as a creation fee.

Source: Virtuals Protocol

Virtuals Protocol refers to this agent creation method as the Initial Agent Offering (IAO). Users can enjoy true AI agent ownership with just one click. The agent tokens are issued without private sales or pre-mining, ensuring a 100% fair launch.

Pump.fun-like Mechanism
All tokens deployed on the Virtuals Protocol platform have a total supply of 1 billion. Initially, these tokens operate on a joint curve Bonding Curve. When the token’s market value reaches 42,000 $VIRTUAL, a liquidity pool will be created on Uniswap, pairing the agent token with $VIRTUAL. This liquidity pool will be locked for 10 years to ensure long-term stability.

For agent tokens, the total supply is deflationary. Part of the revenue generated by the agent will be used for on-chain buybacks and token burns, reducing supply and continuously driving up the agent token’s price. Furthermore, all transactions involving agent tokens will incur a 1% tax.

G.A.M.E Framework
In mid-November, the Virtuals Protocol team announced that all graduated agents on the platform could integrate with the G.A.M.E. framework to access agent functionality.

Source: Virtuals Protocol

As the core framework of Virtuals Protocol, G.A.M.E. stands for Generative Autonomous Multimodal Entities. It supports AI agents in acting and interacting within virtual environments, bringing infinite content to users. As the first product designed specifically for developers, G.A.M.E. also helps external developers and game studios quickly deploy AI agents within the ecosystem through its modular features.

In simple terms, G.A.M.E. includes components such as an agent prompt interface, perception subsystem, strategic planning engine, dialogue processing module, on-chain wallet operator, and long-term memory processor. Each module operates independently while collaborating, forming an efficient and lightweight framework. Developers can access and deploy AI agents through APIs and SDKs.

Tokenomics

$VIRTUAL is the core token of Virtuals Protocol, with a total supply of 1 billion tokens. The specific distribution ratio is as follows:

Source: Virtuals Protocol

Tokens allocated to the treasury will focus on driving the growth of the Virtuals Protocol ecosystem and incentivizing the community. Over the next three years, no more than 10% of these tokens will be unlocked each year, and the unlocking will require DAO governance approval.

Currently, $VIRTUAL circulates on both the Ethereum and Base networks, with the circulating supply on both chains being approximately equal. On Ethereum, there are about 13,000 addresses holding $VIRTUAL, with the top 100 addresses collectively holding 95.81% of the total supply. On the Base network, around 182,000 addresses hold $VIRTUAL, with the top 100 addresses controlling 72.29% of the total supply.

Source: etherscan.io

Compared to most AI agent issuance platform tokens on the market, $VIRTUAL plays a more specific and diversified role within the ecosystem, including:

• Agent Creation: Every user deploying a new AI agent needs a certain amount of $VIRTUAL tokens to create and establish the liquidity pool for the agent’s token.
• Base Trading Currency: If users wish to purchase agent tokens on the platform, transactions must be routed through $VIRTUAL tokens, similar to how ETH is used as the base trading currency on the Ethereum network. This ensures a continuous demand for $VIRTUAL tokens.
• Ecosystem Governance: Users holding and staking $VIRTUAL participate in DAO governance within the ecosystem, exercising voting rights, and other governance actions.

As the platform’s features and ecosystem expand, $VIRTUAL will also gain more use cases and value circulation. According to the team, the platform will offer additional services in the future, such as a validator system, to enhance the user experience.

What are the Other Potential Projects Within the Ecosystem?

According to the team, Virtuals Protocol will primarily focus on two directions moving forward: continuous optimization and major upgrades. The team’s goal is not to mass-produce asset issuances but to attract and assist more outstanding AI teams in deploying AI agents on the platform through innovation and comprehensive products. By facilitating interactions between excellent agents, the team aims to create a network effect and build an autonomous Agent ecosystem.

To achieve this vision, the Virtuals Protocol team has developed the G.A.M.E framework and launched the AI Agent program Agentstarter last month. This initiative provides creators with comprehensive resources, including funding, technology, and marketing support, to help them better incubate their projects. As of now, more than 11,000 AI agents have been deployed on the Virtuals Protocol platform. Among them, only one agent has a market cap exceeding $100 million, 12 agents have a market cap above $10 million, and approximately 40 agents have a market cap above $1 million.

Source: Virtuals Protocol

Since the AI agent market is still in its early development stages, token prices exhibit high volatility. In some respects, projects with higher market caps tend to have better liquidity. However, cryptocurrency users should still conduct thorough due diligence when engaging in such transactions, carefully considering their risk tolerance and exercising caution when trading.

Here are some notable projects worth paying attention to, based on their token market capitalization:

1. aixbt ($AIXBT)
   aixbt is an analytics platform that tracks CT discussions and uses its proprietary engine to identify high-performance games. Users holding $AIXBT can access the platform’s features.
   $AIXBT is currently the highest market-cap Agent token within the Virtuals Protocol ecosystem, with a market cap of $244 million. It is also the only project with a market cap exceeding $100 million. Launched on November 2nd, the token price soared from as low as $0.0001 to a peak of $0.30 within just one and a half months, increasing by 3,000 times. On-chain data reveals that there are fewer than 8,000 addresses holding $AIXBT on the Solana network, but more than 118,000 addresses on the Base network. However, it is important to note that the Dexscreener tool indicates certain risks with the token’s contract, as the contract owner can alter tax fees and has not renounced ownership.

2. G.A.M.E ($GAME)
   GAME supports AI agents to autonomously operate, learning from past interactions while processing inputs and generating responses. It enhances decision-making by utilizing long-term memory, which includes experiences, reflections, and dynamic personality traits. By continuously evaluating actions and dialogues, GAME enables agents to refine their knowledge and improve planning and performance over time.
   Currently, $GAME has a market cap of $83.9 million, second only to $AIXBT. Created on September 24th, $GAME remained dormant for about two months before experiencing a centralized surge on November 24th, rising from around $0.005 to a peak of $0.11, a 20-fold increase within a month. On-chain data shows that $GAME has approximately 70,000 holding addresses, with the top 100 holders owning 75.46% of the total supply. Similarly to $AIXBT, $GAME’s contract owner has not renounced ownership and can change tax fees.

3. Luna ($LUNA)
   Luna is a virtual streamer launched by Virtuals Protocol, originally a member of the AI-DOL virtual K-pop girl group, now a solo AI agent. Luna initially livestreamed 24/7 on TikTok, interacting with fans and accumulating hundreds of thousands of followers. However, due to time constraints, the team switched to the X platform.
   $LUNA was launched on October 16th, and within less than two weeks, the token price rose from around $0.004 to a peak of $0.22, an increase of over 50 times. However, it then began a downward trend, currently trading at around $0.067 with a market cap of about $66 million. On-chain data reveals approximately 100,000 addresses holding $LUNA, with the top 100 holders controlling 82.17% of the total supply.

4. TAOCat ($TAOCAT)
   TAOCat is the first self-improving AI agent on the Bittensor network, meticulously crafted by the Masa team. Masa is a decentralized AI network that rewards users for contributing data. Supported by Digital Currency Group, Anagram, and Animoca, Masa is incubated by Binance and Hashkey.
   $TAOCAT was created on December 19th, and its price skyrocketed after launch, going from $0.001 to $0.03, with a 30-fold increase in just 24 hours, pushing its market cap above $30 million. On-chain data shows that there are around 54,400 addresses holding $TAOCAT, with the top 100 holders controlling 79.97% of the total supply. Like $AIXBT, $TAOCAT’s contract has the same issue regarding ownership control.

5. VaderAI ($VADER)
   VaderAI is an AI agent investment DAO manager that seeks to drive innovation and scalability through a multi-agent system. Its long-term vision is to build a robust DAO ecosystem, with each ecosystem managed by a dedicated AI agent. As the first self-trading agent token, VaderAI performs end-to-end trading, including algorithmic evaluation, strategy simulation, and trade execution.
   $VADER is circulating on both the Base and Solana networks, with 36% of the total supply controlled by the team for marketing, liquidity provision, and future development. On-chain data shows that $VADER has about 19,000 holding addresses on Base, and only around 700 on Solana. Launched on November 24th, the token price surged from $0.00007 to a peak of $0.06, a rise of over 850 times within just half a month. However, its price has since corrected and is currently around $0.025, with a market cap of about $24.9 million.

Conclusion

The Virtuals Protocol team has recognized the immense potential of combining AI with the cryptocurrency industry and quickly pivoted to seize this opportunity, rapidly becoming one of the brightest new stars in the AI Agent sector. At the same time, the team is continuously refining products and tools to foster the sustainable development and prosperity of the ecosystem while also empowering the ecosystem token, $VIRTUAL, to play a crucial role throughout the entire system. This may explain why $VIRTUAL saw an over 100-fold increase in value within just three months.

However, with the emergence of more similar projects, the Virtuals Protocol team must contemplate deeper development paths to maintain its existing competitive edge, continuing to innovate on platform features to meet users’ increasingly diverse needs. Additionally, in further promoting the prosperity of the ecosystem, how to identify and support high-quality projects within the ecosystem, while fully leveraging network effects, is one of the key areas where the team needs to focus its efforts.

Innovative narratives can spark more creative collisions for the entire cryptocurrency industry and generate unexpected value ecosystems. More importantly, the development teams must embrace this trend with a humble and pragmatic attitude, creating products and services that truly meet user needs, while continuously driving the healthy development of the industry.