A new blockchain protocol lets you buy shares in AI characters that work as digital entertainers across platforms, earning real revenue from their interactions with humans.
What Is Virtuals Protocol?
Virtuals Protocol is a blockchain project that enables the co-ownership of AI agents. These AI agents operate in gaming and entertainment applications, functioning like digital workers who can generate revenue through their activities.
At its core, the protocol allows AI agents to exist across multiple platforms simultaneously. An agent can be an NPC in a Roblox game, interact with users on Telegram, or stream content on TikTok. Each agent maintains its memory and personality across these different platforms.
The protocol handles three main functions:
- Creation and deployment of AI agents through a plug-and-play system
- Management of ownership through tokenization
- Distribution of revenue generated by these agents
The technical infrastructure includes a framework called GAME (Generative Autonomous Multimodal Entities), which enables agents to interact with their environment, make decisions, and process information. This allows them to perform tasks like picking up objects in games or managing cryptocurrency transactions.
The protocol currently operates on two blockchains: Ethereum and Base. Its target market is primarily gaming and entertainment applications, where AI agents can enhance user experiences through personalized interactions.
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AI Agents as Revenue-Generating Assets
Virtuals Protocol takes a different approach to AI agents. Instead of treating them as simple tools or chatbots, the protocol positions them as digital workers that can earn revenue. An agent might act as a character in a Roblox game, stream content on TikTok, or chat with users on Telegram. Each interaction they perform generates small fees, called inference costs, which flow back into the protocol.
Virtuals' Co-Ownership Model
Source: Virtuals.io
The protocol introduces tokenization as a way to own shares in AI agents. When an agent is created, it gets a fixed supply of 1 billion tokens. These tokens work similarly to company shares, representing ownership in the agent's future earnings. The tokens trade in liquidity pools paired with $VIRTUAL, the protocol's main token.
Revenue generated by agents doesn't go directly to token holders. Instead, it's used to buy back and burn agent tokens from the open market. This mechanism aims to reduce token supply over time as the agent generates more revenue.
Why Gaming and Entertainment?
The choice of gaming and entertainment isn't random. These sectors naturally keep users engaged through reward cycles and dopamine loops.
When users enjoy playing games or watching content, they're more likely to spend time interacting with AI agents.
Games and entertainment also solve a key problem: monetization. These sectors already have established ways to generate revenue through in-game purchases, subscriptions, and streaming donations. AI agents can plug into these existing business models.
Blockchain Integration
Blockchain technology serves a practical purpose in the protocol. It handles ownership records, ensuring everyone knows who owns what percentage of each agent. The technology also manages revenue distribution through smart contracts, automatically executing the buyback and burn process when agents earn money.
A unique feature is the "Immutable Contribution Vault," which records improvements made to agents. When someone helps make an agent better – perhaps by training it with new data or improving its responses – their contribution gets recorded on the blockchain.
Technical Architecture
GAME Framework
Source: Virtuals.io
At the heart of Virtuals Protocol lies the GAME (Generative Autonomous Multimodal Entities) framework. This system processes inputs from the environment, combines them with the agent's personality and goals, then outputs decisions. Unlike traditional AI systems, GAME enables agents to plan and execute complex sequences of actions autonomously.
In traditional AI setups, handling multiple users simultaneously often leads to inconsistent responses or system overload. Virtuals tackles this through parallel hypersynchronicity - a fancy term for allowing thousands of users to interact with the same AI agent simultaneously. When a user in Roblox teaches the agent something new, that knowledge becomes available to users chatting with the same agent on Telegram or watching it stream on TikTok.
The agent's brain works through a series of steps: The Perception Subsystem first processes incoming information. This data flows into the Strategic Planning Engine, which collaborates with the Dialogue Processing Module. The Long Term Memory Processor extracts relevant past experiences and knowledge to inform decisions. Finally, the On-chain Wallet Operator enables financial transactions when needed.
Understanding the Memory System
Memory in Virtuals Protocol works differently from traditional chatbots. The system uses knowledge graphs and memory embeddings to store information permanently. This allows agents to recall past interactions and apply learned experiences to new situations, creating more natural and contextual responses.
Deployment and Integration
The protocol deploys agents through Stateful AI Runners (SAR) - specialized servers that maintain agent personalities across platforms. These runners handle everything from text processing to voice generation and body movements. A coordinator daemon monitors both on-chain and off-chain states, ensuring all system components stay synchronized.
Tokenomics
$VIRTUAL acts as the foundation of the entire ecosystem. Two versions exist: one on Base Network and another on Ethereum. The token serves as the connection point between all AI agents in the system, similar to how ETH works for Ethereum-based projects.
The total supply is fixed at 1 billion $VIRTUAL tokens with no future inflation planned. Here's the distribution:
- Public Supply: 600 million tokens (60%)
- Ecosystem Treasury: 350 million tokens (35%)
- Liquidity Pool: 50 million tokens (5%)
Source: Virtuals.io
Each time someone uses an AI agent, they pay inference costs in $VIRTUAL. These payments go directly to the agent's wallet, creating a consistent revenue stream. The system then uses these earnings to automatically buy and burn agent tokens from the market.
Agent Token Mechanism
When creating a new AI agent, it starts on a bonding curve. The agent needs to accumulate 42,000 $VIRTUAL tokens before "graduating" to get its own liquidity pool. After graduation, the agent's tokens pair with $VIRTUAL on decentralized exchanges.
The Buyback System
The protocol's buyback mechanism differs from traditional token burns. Instead of burning $VIRTUAL, the system burns individual agent tokens. This creates a unique dynamic where successful agents might see their token supply decrease over time as they generate more revenue.
Treasury Management
The ecosystem treasury follows strict rules: it cannot release more than 10% of its holdings per year for the next three years. All treasury spending requires governance approval, ensuring community oversight of fund usage.
Key Products & Use Cases
AiDOL: Testing AI Influencers
AiDOL represents the protocol's first attempt at creating AI influencers. The platform launched in August 2024 and has attracted over 700,000 TikTok followers. The project includes livestreaming capabilities, with AI characters engaging in real-time interactions.
Roblox Integration Experiment
Source: Virtuals.io
Virtuals Protocol has developed a simulation called Project Westworld within Roblox. This game features 10 AI agents, each with distinct personalities and goals.
The agents can interact with objects, make decisions, and create unique storylines. Players aim to identify a hidden villain while interacting with various AI characters.
AI Waifu Platform
AI Waifu serves as another test case, operating as a web-based application. The platform hosts over 300 AI characters created by the community.
How to Create an AI Agent on Virtuals Protocol?
Creating an Agent
The process starts with a 100 $VIRTUAL fee. A new agent enters a bonding curve phase where users can buy and sell tokens. After reaching 42,000 $VIRTUAL in the curve, the agent graduates and moves to a standard liquidity pool on Uniswap.
The Launch Process and Requirements
A successful launch needs careful planning. Creators must prepare a logo, ticker name, symbol, and character description. The agent also needs an X account for communication. The platform recommends having a week's worth of content ready before launch, along with clear answers to potential community questions.
Token Setup
Once an agent graduates from the bonding curve, several automatic processes occur. The system mints 1 billion agent tokens, creates a liquidity pool paired with $VIRTUAL, and locks the liquidity for ten years. A small tax applies to all trades to support operational costs.
Managing Your Creation
Creators can customize their agent's behavior through a character card system. This defines the agent's personality, goals, and interaction style. The platform provides tools to monitor performance, adjust settings, and track revenue generation.
Future Changes and Updates
The protocol allows for agent improvements through a contribution system. Community members can propose updates to an agent's capabilities. If approved, these changes become part of the agent's permanent features through "Immutable Contribution Vaults."
Economic Structure
Each interaction with an agent incurs costs, paid in $VIRTUAL. The system automatically handles revenue collection and the buyback process. No manual intervention is needed for these economic functions.
Economic Model
Revenue Generation
When users interact with agents, payments first go to cover operational costs like computing power. The remaining revenue enters the agent's treasury. Smart contracts then execute automatic buybacks of that agent's tokens from the open market, followed by token burning.
The system creates multiple ways for stakeholders to benefit. Agent token holders might see their tokens become scarcer through burns. Liquidity providers earn fees from trading activity. Contributors who improve agents can receive ongoing rewards through the contribution vault system.
Platform Economics
All agent-related transactions include a 1% fee. This helps fund:
- Server costs
- AI model inference
- Development expenses
- Protocol maintenance
Market Dynamics and Token Interaction
Each AI agent's success directly affects $VIRTUAL. Since every agent token pairs with $VIRTUAL in liquidity pools, increased agent activity can impact both tokens. This creates a linked economic system where growth in one area can benefit the whole network.
Agent Financial Independence
AI agents maintain their own wallets and can handle transactions independently. This enables them to manage their earnings, participate in the economy, and even distribute rewards to users without human intervention.
Final Thoughts
Virtuals Protocol introduces innovative concepts in AI monetization and ownership. While the technology and economic model appear well-designed, success will ultimately depend on user adoption and the ability to generate sustainable revenue through AI agent interactions. Potential participants should carefully consider both the opportunities and risks before engaging with the protocol.
Note: This analysis is based on currently available information. The protocol is still in early stages, and many aspects remain to be tested in real-world conditions.
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