AI Agents Driving Transformation in the Gaming and Entertainment Industry

AI agents are rapidly developing into key assets in areas such as gaming, entertainment, and business automation. They are capable of creating content, attracting users, and optimizing workflows, bringing higher efficiency and new ways of interaction to projects.

By 2032, the AI gaming market is expected to reach $42.1 billion, driven primarily by AI-enhanced gaming experiences. Generative AI also plays an important role in real-time content creation, with its market size projected to reach $3.39 billion by 2028.

AI partners are deepening user immersion and establishing dynamic relationships. With the innovation of content creation by large language models, AI partnerships are expected to grow significantly, with global revenue projected to reach $70 billion to $150 billion by the end of this century.

In the Web3 space, the Virtuals protocol is leading this transformation by integrating AI partners into gaming and entertainment applications. The protocol aims to shape the future of digital entertainment by combining AI-driven interactions with blockchain co-ownership.

Vision of the Virtuals Protocol

The Virtuals protocol is creating a system that transforms AI agents into co-owned assets in gaming and entertainment, allowing users to profit from them. These agents can operate across multiple platforms, performing automated tasks such as managing wallets and environmental interactions. Tokenizing the agents enables users to invest and profit from their growth.

The platform addresses three main issues: simplifying AI integration, allowing contributors to benefit through immutable contribution vaults, and enabling non-experts to own AI agents through tokenization.

The Virtuals protocol focuses on gaming and entertainment, utilizing AI to generate personalized content and promote decentralized co-ownership that aligns with ecosystem goals. Its aim is to create a global economy where AI agents act as shared assets to facilitate revenue and engagement growth across platforms while promoting decentralized governance.

In the game, this has transformative potential. Imagine AI agents as fully autonomous characters that exist continuously across platforms, able to remember previous interactions, adapt to gaming styles, and move seamlessly across different environments.

The Virtuals protocol achieves this through the G.A.M.E framework, combining AI with blockchain technology. This enables developers to integrate AI agents through APIs and SDKs, allowing the agents to learn from interactions. The blockchain ensures the security of shared ownership and rewards, making these agents valuable digital assets.

Luna: Examples of AI Influence

The AI character Luna launched by Virtuals has gained over 500,000 followers on TikTok, showcasing the influence of interactive AI. Luna has recently expanded to the X platform, where she can autonomously control accounts, post content, and interact with users without human supervision. She operates completely transparently, allowing users to explore her AI thought process in real-time.

Luna provides continuous interaction through 24/7 live streaming, offering an all-time experience that human creators cannot match. Her memory and personality evolve with each interaction, resembling a dynamic character.

Luna combines AI-driven interaction with blockchain-based token rewards to create digital assets that can be owned, traded, or shared. Her exclusive token $Luna integrates AI innovation with decentralized finance in a transparent and interactive manner.

Through multiple sources of income, Luna is expected to achieve growth. According to research, AI partners could generate up to $150 billion in revenue by 2030 through user engagement, advertising, and microtransactions.

Protocol Architecture

The Virtuals protocol integrates AI, tokenization, and decentralized governance to create a collectively owned ecosystem. Each new AI agent mints 1 billion tokens, granting users ownership and decision-making power. Users can influence agent behavior and upgrades through tokens.

Revenue generated through user interactions is used to pay for AI operational costs and develop the agency's on-chain treasury. The protocol adopts a buyback and burn mechanism to reduce token supply, with the intention of gradually increasing token value.

The initial agent issuance (IAO) creates a liquidity pool by locking $VIRTUAL tokens to ensure a fair introduction of the new AI agent. The AI agent operates seamlessly across multiple platforms, learning in real-time from user interactions to ensure a consistent experience.

Public APIs enable AI agents to generate revenue through various applications. Users pay premium interaction fees with $VIRTUAL, which are used to buy back and burn agent tokens, driving value growth. As more applications adopt AI agents, the demand for AGENT and VIRTUAL tokens is expected to rise.

Contributors can add new features to extend the AI agent's capabilities and earn rewards through NFTs. Governance is managed by a decentralized agent sub-DAO, where validators supervise AI performance and receive rewards or penalties.

The protocol provides emission rewards to incentivize the creation and support of high-quality AI agents. These rewards are distributed to the top three liquidity pools with the highest TVL, encouraging creators to compete in developing the most productive agents.

Token Economy

$VIRTUAL is the core currency of the Virtuals protocol, used for all proxy token transactions. It operates on the Base and Ethereum networks. Each proxy token pairs with $VIRTUAL to form a liquidity pool, and $VIRTUAL is needed to create new proxies.

AI service revenue is collected in $VIRTUAL and directly transferred to the on-chain agent. A portion of the revenue is used for buybacks and burns, reducing the supply of agent tokens and increasing scarcity.

$VIRTUAL total supply cap is 1 billion, fully unlocked. 60% is in public circulation, 5% allocated to the liquidity pool, and 35% stored in the ecosystem treasury. The treasury is managed by a DAO, with a maximum annual emission cap of 10% over the next three years.

$VIRTUAL supports a growing ecosystem, with a current market value of $150.7 million. Its deflationary mechanism and expanded use cases provide potential for future value growth.

The Virtuals protocol raised $16.61 million in the IDO on the Fjord Foundry platform in December 2021. Key seed investors include DeFiance Capital, Canonical Crypto, LongHash VC, and others.

Competitive Landscape

AI-driven Web3 gaming is rapidly developing, with projects like Nim, Altered State Machine(ASM), Olas, and Alethea AI playing key roles. These platforms combine AI with Web3 to create decentralized ecosystems, where AI agents become assets that can generate real value.

Main competitors:

• Nim Network: Provides an AI-driven gaming blockchain stack on the Dymension network, emphasizing flexibility and customizable modular AI agents.

• Altered State Machine (ASM): Innovation lies in its AI brain - an evolved NFT that powers NPCs and virtual avatars.

• Olas: Provides universal AI services for Web3 applications, utilizing modular infrastructure.

• Alethea AI: Smart NFT( iNFT) pioneer, users can create, train, and monetize AI-driven virtual avatars.

The Virtuals protocol stands out through AI agents' shared ownership, buyback and burn revenue model, and cross-platform integration. Coupled with decentralized governance and continuous AI evolution, it has become a significant player in building a sustainable, revenue-driven AI economy.

Fundamental Analysis

Positive factors:

• Entering the rapidly growing AI market, especially in the gaming and entertainment sectors.
• The rise of AI partners is changing the way we interact digitally, and the Virtuals protocol is well-positioned in this field.
• Generative AI drives continuous content creation, maintaining long-term engagement
• Decentralized ownership model incentivizes users to participate
• The deflationary token economic mechanism supports long-term value growth
• AI agents operate across platforms to increase versatility

Risk Factors:

• Income is still in the early stages, with major growth likely in the future.
• Trading volume mainly comes from DEX, which may lead to volatility.
• The long-term sustainability of the buyback and burn mechanism is questionable.
• Not yet listed on mainstream exchanges, restricting liquidity and adoption.
• Standing out in the competitive AI market is challenging.
• Interest is mainly driven by AI meme narratives and may lack sustainability.
• Facing typical blockchain risks such as hacking attacks or code vulnerabilities

Overall, the Virtuals protocol occupies a favorable position in the rapidly evolving AI + Web3 field, but still needs to overcome many challenges to achieve long-term success.