Virtuals Protocol Research Report
Originally published February 27, 2024 and posted to Discord at $12M FDV. $VIRTUAL proceeded to run to $225M (18x).
Virtuals Protocol Overview
Virtuals Protocol is building a chain-agnostic infrastructure layer for the creation of virtual AI personas capable of text, voice, and motion responses.
These AI personas will span a variety of use cases and enable creators, validators, and $VIRTUAL token holders to earn money through their monetization.
Use case examples:
- AI companionship apps are increasing in popularity. An influencer with over 1.8M subscribers on Snapchat has recently used her likeness to create an AI girlfriend chatbot that costs $1/hour to use [source]. Virtual Protocol will enable creators to create and monetize AI versions of themselves at scale.
- Lionsgate, the owner of the rights to John Wick, could further monetize their digital IP by creating a John Wick AI persona that can be rented/used by fans or video games. Cameo is a multi-billion dollar business that allows fans to pay celebrities for short-form video content. This is something that could be displaced and automated by AI personas of famous people and their characters.
- Car sales are moving away from the physical dealership sales process and more towards a digital process. Dealerships could better compete with companies like Carvana by implementing online AI sales associates tailored for the specific purpose of closing sales.
- Companies may choose to pay for AI customer service agents who are tailored for a specific type of business and equipped with relevant domain knowledge, such as processing eCommerce returns.
- Gamers may pay for an AI companion to play co-op (multiplayer) games with.
- A professional DoTA player may train an AI persona with the appropriate skills and knowledge to coach other DoTA players, greatly scaling their own coaching revenue.
- A professional video editor may train an AI persona to aid other video creators in the process of video editing.
In addition to creating and monetizing AI agents, Virtual Protocol’s technology can be used to build out entire dApps, each of which may have their own revenue, tokens, and economy. Here’s an example:
- A game studio is launching a new game that will contain over 1,000 NPCs (non-player-characters). The creation of these NPCs can be a manual, tedious, and expensive process. The game studio could purchase some pre-made AI NPCs from a dApp built on Virtual Protocol that specializes in AI NPC creation.
Abstract
Virtual Protocol is building infrastructure for the creation of virtual AI entities capable of text, voice, and motion responses.
These AI entities (agents) will span a variety of use cases such as gaming or AI companionship and be monetizable through Virtual Protocol.
The value creation from these AI agents and related dApps will flow back to $VIRTUAL token holders in the form of fees, rev share, and airdrops.
Thesis Statement
The $VIRTUAL token will accrue value from the dApps and AI personas that are created using Virtual Protocol as demand for AI agent solutions continues to increase at a rapid pace.
A bet on $VIRTUAL is a leveraged bet on the fast growing AI and Autonomous Agents market.
Autonomous AI and Autonomous Agents Market size was valued at USD 4.2 billion in 2022 and is estimated to register a CAGR of over 36.5% between 2023 and 2032. Businesses globally are increasingly integrating AI into their operations, propelling market growth.
- Global Market Insights
Virtual Protocol Participants
Virtual Protocol - A virtual factory for AI personas.
Data Contributors - Suppliers of algorithms + text, voice, & visuals data. Rewarded in $VIRTUAL for their contributions.
Validators - Review and verify the data and models, ensuring that outputs meet the highest standards.
dApp Founders - Use Virtual Protocol’s plug-and-play SDKs for multimodal inferences, to create dApps that utilize Virtual Protocol’s AI personas.
IP Contributors - License their content to be used in AI personas which can then be monetized.
End Users - Benefit from using and/or interacting with AI personas.
Investors - Stakeholders who gain from the growth and success of the ecosystem.
How it works:
1) Contributors contribute data inputs to help create AI personas:
2) Validators will ensure the quality of data inputs:
3) Virtual Protocol will build out a library of AI personas spanning multiple types and use cases such as self-mirrored personas, IP Character personas, and function specific personas.
4) Virtual Protocol will work with dApp builders who will leverage Virtual Protocol to build dApps that generate, use, and monetize AI personas.
For example, a dApp that allows you to create an AI persona of yourself and rent it out to fans.
These dApps will provide value back to $VIRTUAL holders through revenue share and token airdrops.
⚠️Technical Documentation
An overview of Virtual Protocol’s technical documentation can be found here.
Virtual Protocol Tokenomics
There are 1,000,000,000 VIRTUAL tokens.
5% of the token supply is used for liquidity.
35% of the tokens supply is in the Ecosystem Treasury. This can be used for things such a CEX listings, on-chain liquidity, bringing on advisors, or creating bounties or referral programs.
For example, there was recently a proposal passed to add $VIRTUAL liquidity to Base L2 (13,000,000 VIRTUAL tokens + 150 ETH).
60% of VIRTUAL tokens are allocated to the public supply.
Virtual Protocol Team
everythingempty (Co-founder)
EtherMage (Co-founder)
The Virtual Protocol team is doxxed and consists of over 10 competent full time employees with strong backgrounds including experience at Harvard, MIT, Imperial College, Accenture, BCG, and a variety of successful start-ups.
The two co-founders have backgrounds at Boston Consulting Group where they left to start PathDAO, a gaming DAO that was later transformed into Virtual Protocol. PathDAO has strong relationships with Defiance Capital and Beam (formerly Merit Circle) that have carried over into Virtual Protocol.
❗When PathDAO pivoted into Virtual Protocol, the DAO treasury came with it, meaning Virtual Protocol has a treasury worth $18.5M at the time of writing.
The Virtual Protocol treasury can be viewed here: https://treasury.virtuals.io/dashboard
Virtual Protocol Comparables
Virtual Protocol has a few pseudo-competitors and comparable projects that can give us an idea of what kind of market caps may be realistically achievable.
Autonolas - AI autonomous services platform - $3.5B FDV
SingularityNET - AI marketplace - $1B FDV
Morpheus AI - Open network for AI agents - Expected $1B+ FDV
FetchaAI - Open network for AI agents - $1.25B FDV
Humans.ai - AI agents platform - $180M FDV
Virtual Protocol - AI agents infrastructure - $50M FDV
There is a large disparity between $VIRTUAL protocol and many competing platforms in the space, making the risk/reward on $VIRTUAL quite attractive.
Addressable Market / Market Outlook / Gaming Vertical
Is there demand for this product and if so, how much? Are large token valuations realistically achievable based on demand?
Quite simply, we believe we’re moving into an AI bubble. While there are estimates, it is still largely unknown how exactly AI and Ai agents will be used on a day to day basis in the future, and what the monetization paths will look like.
Statista estimates the AI market size is expected to show an annual growth rate (CAGR 2024-2030) of 15.83%, resulting in a market volume of $738.80bn by 2030.
What the market is recognizing, however, is that AI is a world-changing technology and that technology has finally arrived.
Most AI start-ups will fail, but those who find product market fit will see exponential growth. This, coupled with the bullish crypto market we’re experiencing leads us to believe we will see rampant inflows of capital into any legitimate AI projects who stand a fighting chance at finding product market fit.
We believe Virtual Protocol is one of those projects, and is largely undervalued in comparison to its competitors.
In addition to the AI comparables, Virtual Protocol is building on Base, Coinbase’s L2 chain. We feel strongly that projects on Base will see strong speculation in the near future for a few reasons:
- Regulatory clarity could lead to the launch of a Base token from Coinbase, which would drive a lot of value onto Base.
- Coinbase is incentivized to support any projects building on Base with Coinbase listings, which is a positive catalyst for token price.
Also, the Virtual Protocol team is heavily focused on the gaming vertical. Their infrastructure may be used for a variety of use cases, but the team plans to directly support gaming use cases such as AI generated NPCs.
Blockchain gaming is a massive narrative in the current crypto market as it opens the door to assigning real monetary value to in-game economies.
The proliferation of AI is expected to have a significant effect on both the quality of games (AI NPCs are more interactive and not limited to a few phrases) and the amount of time & money game development costs. Rather than build out NPCs manually, studios could customize Virtual Protocol’s pre-made AI agent NPCs.
Progress
Virtual Protocol is launching their infrastructure layer and smart contracts on Base in Q1 of 2024. They are also incubating 4 protocol-owned gaming applications:
- AiWaifu - Anime themed AI companionship dApp (beta is live, launching on Blast L2)
- AI agents for live streaming - 24/7 virtual influencers streaming on Tiktok or Twitch powered by AI
- AI autonomous agents as NPCs for games (in progress)
- AI musician agents - Imagine Michael Jackson AI making songs that sound and feel just like MJ (in progress)
$VIRTUAL holders will get exposure and ownership of those consumer facing AI games.
Summary
- Virtual Protocol is building chain-agnostic infrastructure for the building and monetization of AI agents, a growing use case.
- $VIRTUAL token holders benefit from rev share and airdrops from dApps that build on Virtual Protocol.
- Virtual Protocol is primarily focused on gaming use cases, a hot narrative in the current market.
- Virtual Protocol is migrating their token and smart contract functionality to Base, a fast growing L2 supported by Coinbase.
- There are multiple comparable AI projects currently valued > $1B FDV, while $VIRTUAL is currently valued at $50M.
- The team is competent with >10 FTEs and an $18.5M treasury to pull from.
- Initial development progress is nearly complete, with smart contracts going live on Base in Q1 2024.
- $VIRTUAL sits at the crossroads of many key narratives: AI, Gaming, Airdrops, Base
Where to buy $VIRTUAL
$VIRTUAL can be purchased on Uniswap with the contract address: 0x44ff8620b8ca30902395a7bd3f2407e1a091bf73
Disclosure: Sistine Research has invested in $VIRTUAL via purchase on the open market and is also serving as an advisor to Virtual Protocol.
