Virtuals Protocol (VIRTUAL) Tokenomics

Overview

Virtuals Protocol (VIRTUAL) is a decentralized platform on Base and Ethereum, enabling users to create, deploy, and monetize AI agents. The VIRTUAL token is central to the protocol’s operations, serving as the primary medium for payments, governance, and agent creation.

1. Issuance Mechanism

• Token Standard & Supply:
  VIRTUAL is an ERC-20 token with a maximum supply of 1,000,000,000 tokens.
• Initial Distribution:
  • 60% (600,000,000) distributed at Token Generation Event (TGE) via public distribution.
  • 5% (50,000,000) allocated for exchange liquidity, released at TGE.
  • 35% (350,000,000) dedicated to the Ecosystem Treasury for community incentives and initiatives, controlled by the DAO.

2. Allocation Mechanism

• Public Distribution:
  60% of the supply was made available to the public at launch, including an airdrop to PATH token holders at a 1:1 ratio during the migration from PathDAO to Virtuals Protocol.
• Liquidity:
  5% was allocated to provide liquidity on exchanges at launch.
• Ecosystem Treasury:
  35% is reserved for community incentives, with a stated emission cap of 10% per year for the next three years. The DAO controls the distribution, but specific future methods for distribution are not fully disclosed.

3. Usage and Incentive Mechanism

• Payments:
  VIRTUAL is used as the routing currency for all transactions on the Virtuals Protocol platform, including purchasing and launching AI agents.
• Agent Creation:
  Users must pay a fee in VIRTUAL to create new AI agents. Upon creation, a bonding curve is established, and a liquidity pool is formed with the agent’s token and VIRTUAL.
• Governance:
  All VIRTUAL holders can participate in protocol governance. Voting power is delegated via veVIRTUAL (a non-tradable, credit-based feature at a 1:1 ratio to VIRTUAL held). No locking or escrow is required for governance participation.
• Future Incentives:
  • Planned validator and staking mechanisms: Tokenholders will be able to delegate VIRTUAL-paired LP tokens to validators, earning rewards from the subDAO treasury (funded by protocol emissions, trading fees, and agent interactions).
  • Revenue sharing: Payments for services (e.g., AI agent interactions, events) may be split between covering AI costs and treasury buybacks/burns of agent tokens.
  • No current direct rewards, dividends, or profit-sharing for VIRTUAL holders.

4. Locking Mechanism

• Agent Liquidity Pools:
  When a new agent is launched, the creator locks a specified amount of VIRTUAL to establish a liquidity pool. This pool is locked for ten years, ensuring long-term commitment and stability.
• Governance (veVIRTUAL):
  No token locking is required to receive veVIRTUAL for governance; delegation is required to participate in voting.

5. Unlocking Time

• Public Distribution & Liquidity:
  Both were unlocked instantly at TGE (2023-12-24).
• Ecosystem Treasury:
  The 35% allocated for community incentives is scheduled for unlocking on 2033-12-24, with emissions capped at 10% per year for the first three years post-launch.

6. Additional Notes

• Burning/Buyback:
  There is no confirmed live token burning or buyback mechanism for VIRTUAL as of December 2024. However, the protocol envisions future buybacks and burns of agent tokens funded by platform revenue.
• Network Security:
  VIRTUAL exists as an ERC-20 token on Ethereum and as an ERC-20 equivalent on Base, inheriting the security guarantees of these networks.

7. Summary Table

8. References

• Virtuals Protocol Whitepaper: Initial Agent Offering Mechanism
• Virtuals Protocol Tokenomics
• Virtuals Protocol Governance

In summary:
Virtuals Protocol’s token economics are designed to incentivize ecosystem growth, ensure long-term liquidity, and enable decentralized governance, with a clear structure for issuance, allocation, and future incentive mechanisms. The protocol is still evolving, with additional staking and validator rewards planned for the future.