Thesis

• Crypto AI x Memecoin mindshare is at all-time-highs: The creation of $GOAT has united users across the bellcurve and demonstrated that a) velocity at which autonomous AI Agents develop and emass social following cannot be understated; and b) mindshare meaningfully translates into memetic value of their underlying token(s). To me this also marks a shift Crypto x AI sentiment from infra → consumer, the number one consumer vertical of the cycle is memecoins, and virtuals is a platform that combines the best of both. 

  • This pitch is primarily a momentum-drive play, though should be noted that there’s a potential stronger fundamental case to be made around tokenized AI agents, which would require some re-underwriting based on the growth of ecosystem contributors and value accrual based on traction of existing agents. Alternatively, a more degen play could be to simply long $LUNA.

• Virtuals is a pump.fun-style platform for AI Agents - it allows permissionless creation and tokenization of AI Agents. Its first initial agent offering (IAO), Luna, has over 500K followers on tiktok, earns ~$700 per livestream in tips, and the agent token reached a $40M market cap in 5 days.

• $VITRUAL is the base currency of its agent ecosystem and is required to deploy, trade, and interact with agents in its ecosystem.  It accrues value on both the velocity at which new agents are deployed, and the virality of individual agents being that to purchase an agent token, one must first buy $VIRTUAL.

Overview of Virtuals

Virtuals is a platform to launch, tokenize, own, and interact with AI Agents in different digital economies. The protocol is built upon a few design principles:

• Decentralized creation: Anyone can deploy agents and community contributors can develop agents collaboratively

• Multimodel functionality: Agents on the platform can be designed and operated across multiple models (Text, speech, sound, visual etc.)

• Token-based Economy: $VIRTUAL is used to incentivize contributions, as well as being the primary base asset

To create an Agent, the creator must set up an Agent/VIRTUAL LP by locking 2400 $VIRTUAL for 10 years, after that the $agent token can be permissionlessly traded. The $Agent token supply is always fixed at 1 billion and can be freely traded once the LP is deployed.

AI Agents are multi-model that can be customized in many ways. For example, it can behave like known IP characters, have a core specialty or function, or be a personal copy of yourself. Virtuals recently launched $LUNA, an AI Agent representing a virtual idol named Luna, which livestreams on youtube and Tiktok with over 500k followers and makes ~$700 per stream in tips. It freely learns, speaks, makes decisions, and engages with audiences virtually. 

Virtual’s off chain AI Stack dubbed “parallel Hypersynchronicity” is developed with the goal of having agent interactions be consistent across platforms and models, with intelligence and consciousness updated in real-time with a vast stream of inputs. It also incentivizes contributions via an onchain vault which represent validated contributions in the form of NFTs (in the form of models, data, and IP) 

Traction

The success of $VIRTUAL can be boiled down to a) new agents being deployed (less tokens in circulation), and b) success metrics around individual agents created that drive value back to the protocol. 

• # New Initial Agent Offerings: i.e. becoming the defacto launchpad for tokenized agents, where number of IAOs means more $VIRTUAL is bought and locked as LP. This number currently sits at 341, which isn’t particularly oustanding compared to numbers on pump.fun, but should be noted that agent tokenization is only one part of its success, and requires further development and integrations on various digital platforms to grow its reach.

  

• # of “breakout” agents - loosely defined this as Agents that go on to amass engagement in various ways that ultimately translate to meaningful mindshare + price action. Currently, Luna is the only agent with a significant presence online mainly via tiktok. Should Luna’s maintain its position, a positive flywheel is plausible where: Agent gets breakout attention >  interest in agent + virtual ecosystem > higher $VIRTUAL price creates incentives for creators to launch new Agents > higher % of an agent getting attention 

  

Risks

• Narrative exhaustion for Agentic memecoins - this poses as the largest tailwind and would be a thesis invalidation should market leaders like $GOAT lose mindshare.

• Lack of new meaningful creations - $LUNA is currently the only agent on Virtuals with meaningful traction - tokenizing the agent is the easy part that Virtual abstracts, but training and maintenance still require substantial technical effort. There is also an increase in cost for deployment +inference when $VIRTUAL price increases as the number of tokens required to launch an LP is fixed at 2400

Appendix

Further reading

• https://route2fi.substack.com/p/virtual-protocol-the-unreal-engine

• https://www.shoal.gg/p/virtuals-protocol-launching-ai-agents
  

Official links:

• https://www.virtuals.io/ 

• LUNA https://tiktok.com/@aidolofficial 

• Gitbook: https://whitepaper.virtuals.io 

• Waifu chatbot: http://t.me/partona_bot 

• Luna’s idol group Tiktok: https://tiktok.com/@aidolofficial 

• Westworld (still in dev): https://x.com/virtuals_io/status/1840739008479133802