What is Virtuals Protocol?

In 2025, when AI and blockchain technologies are accelerating integration, Virtuals Protocol quickly becomes an important infrastructure in the cryptocurrency field and metaverse track with its innovative ‘AI Agent Tokenization’ model. The project not only redefines the creation and ownership of virtual assets but also promotes the democratization of AI technology through decentralized mechanisms, bringing disruptive changes to the gaming, entertainment, and social sectors.

Virtuals Protocol project positioning

Virtuals Protocol was founded in 2021, originally exploring GameFi in the form of the gaming guild PathDAO. It later transformed into an AI-driven blockchain protocol in 2023. Its core goal is to tokenize common ownership, converting AI agents (such as virtual characters, game NPCs, etc.) into community-shared revenue-generating assets, reducing development barriers and achieving fair revenue distribution.

Technical architecture and core functions:

1. Autonomous multimodal AI agent: Through generative AI technology, virtual agents can achieve multimodal interaction of text, voice, and animation, and have autonomous decision-making capabilities. For example, agents can explore the virtual world in Roblox, interact with users as virtual internet celebrities on TikTok, and even conduct asset transactions through on-chain wallets.
2. Modular contribution system: Users can contribute data, models, voice, or visual materials, record contribution value through the Immutable Contribution Vault (ICV), and redeem rewards. All contributions are confirmed in the form of NFT to ensure transparency and traceability.
3. Plug-and-play integration: Developers can quickly embed AI agents into games or social applications through APIs and SDKs, without the need to train models from scratch. For example, third-party DApps can call Virtuals’ AI characters as NPCs, significantly reducing development costs.

Token Economic Model: Deflation Mechanism and Incentive Synergy

As the core token of the ecosystem, VIRTUAL has a total supply of 1 billion, allocated as follows: 60% in public circulation, 35% in the ecosystem treasury, and 5% in the liquidity pool. Its economic design revolves around two core mechanisms:

1. Initial Agent Offering (IAO): Users can lock VIRTUAL to create new agent tokens. Once the market value meets the standard, a liquidity pool will be automatically generated, and locked for 10 years to maintain price stability. For example, the token LUNA of the virtual idol Luna is issued through this mechanism, with a portion of the revenue used for token buyback and burning, creating a deflationary effect.
2. Income sharing and governance: Token holders can stake VIRTUAL to participate in proxy governance, vote on the direction of AI upgrades, and share the income generated by DApps. The protocol also uses smart contracts to repurchase tokens with a portion of the income, forming a ‘value flywheel’.

Application Scenarios: Reshaping Game and Social Experience

1. Games and Metaverse: Traditional NPCs upgrade to AI characters with memory and learning capabilities. For example, after interacting with virtual agents in the game, players can continue the conversation across platforms (such as Telegram or Roblox), enhancing immersion.
2. Virtual companions and the Internet celebrity economy: AI idol Luna, incubated by the project, has 500,000 fans on TikTok, creating revenue through on-chain tips and NFT gifts, and sharing profits with token holders.
3. IP Derivatives and Co-creation: Users can train AI agents based on well-known IPs (such as film and television characters), and IP owners can automatically receive a share of the revenue through smart contracts, solving the problem of copyright monetization.

Competitive advantage and development potential

1. Technological barriers: Compared to competitor AgentX (centralized architecture) and Altered State Machine (single function), Virtuals Protocol has advantages in scalability and user experience with decentralized governance, multimodal interaction, and modular design.
2. Ecological expansion: As of May 2025, the platform has created over 1000 AI agents and explored applications in the financial sector with institutions such as Standard Chartered Bank. The token market value has exceeded $1 billion, ranking among the top 70 cryptocurrencies.
3. Industry Outlook: According to iResearch Consulting, the global AI agent market is expected to expand at an average annual growth rate of 40%, reaching $30 billion by 2025. Virtuals Protocol, by reducing the development threshold and implementing a profit-sharing mechanism, is expected to become the underlying infrastructure in this field.

Conclusion

Virtuals Protocol integrates blockchain and AI deeply, providing a scalable solution for the virtual economy. Its ‘Co-creation-Co-sharing’ model not only breaks the monopoly of traditional AI development but also allows ordinary users to directly participate in value distribution. Despite facing technical and market challenges, the project’s potential demonstrated in high-frequency scenarios such as games and social media may become the cornerstone of the ‘virtual resident’ economy in the Web3 era.