Virtuals Protocol (VIRTUAL) Tokenomics

The Virtuals Protocol is a decentralized platform on Base that enables the creation, deployment, and monetization of AI agents. Its native token, $VIRTUAL, is an ERC-20 token on Ethereum, with an equivalent bridged version on Base, and serves as the core economic engine for the ecosystem.

Issuance Mechanism and Supply

The $VIRTUAL token has a maximum token supply of 1.00 billion.

Agent Token Issuance

The protocol's primary mechanism for token issuance relates to the creation of individual AI agent tokens, not the $VIRTUAL token itself.

• Agent Token Minting: When a new Virtual Agent is created, 1.00 billion fungible tokens specific to that agent are minted.
• Agent Launch Fee: The creator of a new AI agent must pay a fee of 100 $VIRTUAL tokens to initiate the launch process.
• Bonding Curve: The newly minted agent tokens are placed on a bonding curve, paired with $VIRTUAL. A wrapped version of the agent's token is traded exclusively on the Virtuals platform during this initial period.
• Graduation: If the agent's market capitalization reaches approximately $610,500.00 (or 42,000 $VIRTUAL tokens, according to some documentation), the agent "graduates." The platform then unwraps the tokens, allowing users to interact with the official liquidity pool on Uniswap.

Allocation Mechanism

The initial allocation of the $VIRTUAL token is structured across three main categories:

Distribution Details

• Ecosystem Allocation: The 350 million $VIRTUAL allocated to the "Ecosystem" are earmarked for community incentives. Project documentation states that this allocation "will not have more than 10% emission per year for the next 3 years." However, the specific future methods for distributing this allocation have not been publicly disclosed.
• Initial Acquisition: The token was initially acquired by users through an Airdrop on December 23, 2023, where users holding $PATH tokens (from the former PathDAO) were eligible to receive ERC-20 $VIRTUAL tokens at a 1:1 rate during the migration.

Usage and Incentive Mechanism

The $VIRTUAL token is a core utility and governance asset within the Virtuals Protocol ecosystem.

Primary Utility

$VIRTUAL is primarily used on the virtuals.io platform for:

1. Payments (Routing Currency): It is used as the "routing currency" for users interested in interacting with Virtual Agents or purchasing an agent's token.
2. Agent Launch: Creators must pay a fee in $VIRTUAL to launch new Virtual Agents.
3. Governance: $VIRTUAL tokenholders can participate in the protocol's governance by delegating veVIRTUAL (a non-tradable, credit-based feature granted at a 1:1 ratio to $VIRTUAL held). Delegated veVIRTUAL allows users to vote on proposals, including protocol upgrades, approval of new Virtual Agents, and contributions to specific agents. Tokenholders with over 00 million veVIRTUAL can author proposals.

Future Revenue and Burning Mechanism

The project team has outlined a future mechanism for revenue generation and token deflation:

• Revenue Generation: Users will pay $VIRTUAL for various services provided by AI agents (e.g., personalized interactions, concerts, merchandise).
• Revenue Split: The generated revenue will be split to cover the cost of AI inferences and funnel a portion back into the project's treasury for growth and operational costs.
• Buyback and Burn: As revenue accumulates in the treasury, there will be periodic buybacks of the agent's token, which will then be burned. This mechanism is designed to support the ecosystem tokens, not necessarily the $VIRTUAL token itself, and revenue will not be shared with $VIRTUAL tokenholders or other platform users.

Future Staking and Incentives

As of December 6, 2024, the protocol does not have live staking or liquidity provisioning mechanisms. However, future plans include:

• SubDAO Governance: Tokenholders will be able to stake and delegate $VIRTUAL-paired LP tokens to subDAO validators.
• Rewards: Validators will earn rewards from the subDAO treasury, which will be funded by payments from AI agent interactions, a 1.00% tax on trading fees, and protocol emissions. Validators will be rewarded for selecting successful AI agents and penalized for selecting poor-performing ones.

Locking Mechanism and Unlocking Time

The locking mechanism primarily applies to the liquidity pools created for individual AI agent tokens, rather than the main $VIRTUAL token supply.

Liquidity Lock for Agent Tokens

When an AI agent successfully graduates from the bonding curve phase and forms a liquidity pool (Agent Token / $VIRTUAL) on Uniswap, the following locking mechanism is applied:

• Lock Duration: The liquidity pool (LP) is intended to be locked for 10 years.
• Ownership Discrepancy: Project documentation states that the locked LP will be held by the agent's creator, ensuring long-term commitment and stability. However, there is conflicting information regarding the fate of the LP tokens, with some sources mentioning they are burned, while others state they are locked for ten years and held by the creator.
• Fair Launch Principles: This long-term lock is part of the protocol's adherence to "Fair Launch Principles," which also include no pre-mining and a fixed total supply for the agent token.

$VIRTUAL Token Vesting

Regarding the $VIRTUAL token itself:

• Governance Token: The veVIRTUAL governance feature is non-tradable and credit-based, granted at a 1:1 ratio to $VIRTUAL tokens held. There is no locking or escrow mechanism required to receive veVIRTUAL.
• Vesting Concentration: A significant portion of the $VIRTUAL supply on Ethereum is held in vesting contracts, such as the "Sablier: V2 lockup linear" address, which holds approximately 15.98 million ERC-20 $VIRTUAL (1.60% of the maximum supply). This indicates that some portion of the token supply is subject to linear vesting schedules, though the specific unlocking time for all vested tokens is not fully detailed.