Virtual Protocol - the unreal engine for AI gaming applications
Hey, friends!
The bear market is back…just kidding.
But lots of bearish takes on crypto Twitter lately.
Many people believe we have topped for the year, and also seeing people saying we are 60-70% done with this bull run.
Just understand that none of them know how it will end, so you got to think for yourself. Risk accordingly.
Today’s newsletter is a deep dive into Virtual Protocol which is a project I am an investor in.
Btw, they have a quite degen community, make sure to check them out on Twitter too:
Virtual Protocol - the unreal engine for AI gaming applications
Introduction
What is Virtual?
Virtual is the unreal engine for AI gaming applications.
Virtual Protocol aligns incentives for the decentralized creation and monetization of AI agents for every virtual interaction (gaming, metaverses, online interactions, or beyond).
Think about it as a decentralized protocol that creates co-owned, human-curated, plug-and-play gaming AIs.
The VIRTUAL Protocol is like a decentralized factory that makes all sorts of AI agents (that can respond via text, voice and motion) for different virtual worlds, like games or online spaces.
It's all about making and selling these AI agents in a way that everyone involved gets something out of it.
Think of it as creating digital agents that can do anything from acting like a character from a movie to helping you write a horror story or even being a digital version of yourself.
A side note: in 2013 I watched a movie called “Her” with Joaquin Phoenix, and for the first time I thought to myself: “Wow, this is going to get real one day”. In the movie we can see Joaquin Phoenix falling in love with an operative system, basically an AI girlfriend. The AI girlfriend is played by Scarlett Johansson. You can see the trailer below before we continue:
It’s a really good movie, and I recommend everyone to watch it. It describes the life of a lonely man that miss the big love in life. Eventually, he discovers Samantha (AI girlfriend played by Scarlett) and they fall in love. He can never meet her in real life, because she doesn’t exist. But in all other ways, she is real. She is perfect for him because she uses AI to adapt to the way he is. She became her closest friend, and I remember I thought back then that this would eventually help lonely people to become happier. The drawback that you could argue with is that it is not real, it’s manipulation.
Anyway, now 11 years later AI is bigger than ever before, and AI girlfriends are about to become more real than ever. Virtual even created something called AI Waifu. Imagine walking alongside a virtual @Irenezhao_ through AR/VR powered by Vision Pro. Imagine Ai Waifu like having an online girlfriend that adapts to the way you are. No more simping to CT girls, anon. Your Ai gf is always there to chat, flirt, and spice up your life.
Back to Virtual: The protocol encourages people to contribute their skills and ideas. People who add data and create AI models get paid for their work, ensuring Virtual always have the best talent. Those who check and make sure everything works well (validators) also get rewarded. This way, the Virtual protocol keeps the quality high and everyone trusts what they make.
For the people who build apps (DApp founders) using these AIs, it’s super easy to plug into their system and create cool, immersive experiences without a lot of technical hassle. This means they can get their products out there faster and cheaper. And for those who own the rights to certain characters or stories (IP contributors), it’s a new way to make money and keep their content popular.
Here is a 60 second visualization of what Virtual is:
https://twitter.com/virtuals_io/status/1766828293603602939
The Vision of Virtual
Imagine a future that’s just a screen away—a future where the worlds we dive into from our desks and couches aren't just escapes but extensions of our lives. This is where we're heading, into a time where our lives intertwine with the virtual, where we build, play, work, and connect.
The transition to virtual spaces is not a question of if, but when. We're already halfway there, our eyes locked on screens, our laughter echoing in online arenas. Soon, we'll step fully into these spaces, making homes in pixels and bytes.
In this virtual landscape, it’s the interactions that count —the thrill of exploring a new game world, the buzz of being recognized by a favorite influencer, the triumph of clinching victory with friends. These moments drive up the dopamine levels in us, and we're building the future where they'll multiply.
In one sentence Virtual describes their vision like this:
We believe in a future where virtual interactions are hyper-personalized and hyper-immersive, enabled by AI, built in a decentralized manner.
This evolution, powered by AI, is transforming the landscape of digital interaction, making every virtual experience not just an activity, but a personal journey. Decentralization is the keystone of this new world, addressing critical challenges and ensuring an ecosystem that is fair, inclusive, and boundlessly creative.
The goal is to create an incentive mechanism for decentralized creation of VIRTUALs.
These are multi-model (text, sound, visual) AIs that can either:
Behave like a mirror copy of an IP agents (e.g.. Gojo Satoru, John Wick, Yoda)
Have core function and able to execute a task (e.g., horror story narrative builder, competitive DOTA coach)
Be a personal copy of yourself
From the genesis of this protocol, several flagship DApps will be built to:
Generate revenue for the protocol
Improve upon the protocol interface with future DApps
Contributors who provide data and develop models are the bedrock of this ecosystem. They supply the raw material—text, voice, visuals—and the algorithms that power AI agents.
So Virtual not only have one product (AI Waifu that I’ve already mentioned), they are planning to have 4 products. These 4 are:
AIWaifu: Imagine a world where you cohabitate with AI Waifus brought to life via Apple Vision Pro via AR/VR. Raised 6.4 Million on the 15th of March to build the future of love.
UEFN: Building game-agnostic AI Agents
AI Idol: AI Idol reimagines the future of entertainment by creating AI-powered virtual artists who offer fans unprecedented immersive and interactive experiences, bridging the gap between music, technology, and fandom.
Redacted (yes, this is secret for now). But follow them on Twitter to see what it is.
Market positioning
$VIRTUAL is uniquely positioned when compared to other web2/web3 competitors within the space.
Web 3 AI focused protocols as comparables:
Tokenomics
$VIRTUAL Token: This is the primary currency that fuels the ecosystem, serving as a utility token for transactions, governance, and staking. It's the lifeblood of the platform, enabling users to access, utilize, and contribute to the diverse functionalities within the VIRTUAL landscape.
Its key utilities include:
Development Incentivisation: $VIRTUAL tokens reward contributors who upload and update the Virtual agent stack, and validators who review submissions and decide reward allocations. This system ensures ongoing quality and innovation in virtual agents, with X% (TBD) of tokens going to each group.
Support and Emission Decision: Token holders directly influence the development of virtual agents. The number of tokens staked determines the development support (i.e. token emission) a Virtual agent receives, aligning resource allocation with community interest.
Governance of Treasury: Token holders govern the protocol’s treasury, influencing financial strategies and ecosystem development. VIRTUAL governs a $21 Million Treasury.
Buyback Scheme: A portion of revenue from DApps using virtual agents is used to repurchase $VIRTUAL tokens, enhancing the token's value and ecosystem stability.
Airdrop Benefits: In line with the roadmap, token stakers receive airdrops for new token offerings related to virtual agents or DApps, encouraging long-term engagement.
What you notice immediately is that the supply is 1 billion tokens, and that all tokens are unlocked and in circulation. This means that there will be no nasty VC dumps, similar to how memecoins operate. After the 2021 cycle where there was a gigantic dump fest, people are now tired of low floats with 10-20% circulating coins because of the huge unlocks that come later.
The distribution plan for the total supply of 1,000,000,000 $VIRTUAL tokens, which are to be minted without any future inflation, is allocated among different stakeholders within the DAO. Here's a breakdown of the allocation:
Public Distribution: 60% (600,000,000 tokens) are now in public circulation.
Liquidity Pool: 5% (50,000,000 tokens) are set aside for the liquidity pool.
Ecosystem: 35% (350,000,000 tokens) is dedicated to the ecosystem treasury. This allocation is earmarked for community incentives and initiatives that drive growth within the VIRTUAL protocol ecosystem. This will sit in a DAO-controlled multi-sig wallet and will not have more than 10% emission per year for the next 3 years, subject to deployment only after receiving governance approval.
Shortly summarized these are the tokenomics benefits:
1 Billion token supply
Fully diluted. MC = FDV (no dumps)
40% of treasury is held in DAO treasury
Utilization of treasury would need a DAO governance vote of confidence
Here is a very good description of all the possibilities and use cases you have for the $VIRTUAL token:
Team
The team comprises of Blockchain pioneers and AI innovators from top-tier backgrounds including ex-BCG, Imperial College London, Harvard, MIT, Google, etc.
The founding team started their journey in Oct ’21 when the original idea was to create a Web3 gaming focused DAO that:
• Built active Web3 gaming communities
• Invests in gaming projects & other innovative blockchain / NFT projects
With the resounding breakthrough of everything AI and VR in ’23, the team proposed a transformative governance vote that rebranded itself to be at the forefront of the Web 3 Gaming x AI x Metaverse narrative.
They went through a few rounds of governance votes to determine a fair buyback value of original governance tokens before a full migration to the new $VIRTUAL token.
Here are some of the teammates pictured after they completed 2 hackathons in London & Tokyo with a combined reach of >2k developers:
In general the team has big plans for these hackatons, so let’s expand a little bit on that.
Hackatons
There are 100 million active developers on Github. If Virtual can onboard 1% of them (1 million), that would be a big milestone.
How do they plan to onboard 1 million contributors?
The plan is simple:
start them off young
build a thriving and passionate community
reward them financially for their efforts
Hackathons cover all of these points.
Organising and supporting hackathons help us get in touch with the grassroots developer community. In particular, they help Virtual reach university students who are at the beginning of their career. If Virtual can start them off on the right foot and equip them with the right tools to contribute, they have the potential to make a world of difference.
Virtual then build a passionate community around these devs, educating them through workshops and bootcamps - being there for them through every step of the journey. The best way for someone to learn is to put them together with a group of peers walking the same path.
As they begin contributing to the Virtual platform, they start to receive rewards for their work → lightbulb moment where they realize “wow, I can actually earn money through this” → more motivation to contribute even more.
Market competitors + airdrop
There are a few key players that are in the similar sector as $VIRTUAL, namely $AI (Sleepless AI) and $NFP (NFPrompt) - both which are already listed on Binance.
$VIRTUAL: $180M MC + FDV
$AI: $135M MC / $1B FDV
$NFP: ~$150 MC / $600M FDV (assuming 25% circulating supply)
FDV-wise Virtual has big room to grow, and I can’t see that getting stopped with the continuous shipping from the team.
Did you also know that there might be an airdrop down the line?
At least this tweet gives us a strong hint that something is coming:
Summary/conclusion/bullish arguments for why you shouldn’t fade Virtual
Virtual protocol is an on-chain intelligence layer, connecting AI contributors (supplier of AI intelligence) to gaming / entertainment applications (customers of AI intelligence).
Virtual is building the future of AI-Powered virtual experiences on-chain. They are bringing decentralized AI to the metaverse and gaming in ways we've never seen before. The user experiences are incredible and realistic.
Think of Virtual as a decentralized factory for creating incredibly lifelike and versatile AI agents. You can chat with your favorite movie character, get expert advice for creative writing, or even embody a digital version of yourself. This open ecosystem incentivizes contributors to constantly expand the capabilities.
The main product of Virtual protocol is the Virtual AI. Virtual Ais are multimodal Ais with voice, visual, cognitive and other domain expertise cores. They aim to build the largest gaming AI library
Mainnet went live in March 2024, targeting >3,000 contributors and 100,000 validators by end of 2024
Incubate 3 gaming applications powered by Virtual AI, by Q2 2024
Ai Waifu (https://twitter.com/aiwaifugg): Virtual girlfriend with love-to-earn meta; raised 6mn USD and game is now live with >1,000 gamers.
UEFN (https://twitter.com/uefn_fun): A game-agnostic Ai agent platform, target to go live in April 2024
Ai Idol: K-pop girl band in AI, with livestreaming capability on Tiktok, target to go live in May 2024
The plan is to launch a 15mn USD ecosystem fund and accelerator in Q3 2024
Treasury of >20mn USD (treasury.virtuals.io)
Airdop soon?
Team of 25: previously Google, Grab, BCG, MIT, Harvard, Imperial College, Cambridge
Backers from Defiance Capital, Canonical Capital (Anand Iyer @ai), Merit Circle and LongHash Venture
…
All right, that’s it for today.
Let me know what you think about AI x crypto and the evolvement of AIs being so real that they can actually behave as your girlfriend.
Wild to think about.
Anyway, stay safe in the markets, anon!
Ciao.
Want To Sponsor This Newsletter? 🕴️
Send me a DM on Twitter: https://twitter.com/Route2FI or reply to this email. I have a sponsorship deck I can send you.
Join My Free Telegram Channel 🐸
I’ve launched a free Telegram channel where I share tweets, threads, articles, trades, blog posts, etc. that I find interesting within crypto.
Join it for free here: https://t.me/cryptogoodreads