Virtuals Protocol (VIRTUAL) tokenomika

The Virtuals Protocol ($VIRTUAL) token economics are designed to facilitate the creation, co-ownership, and monetization of AI agents on the Base chain. The token serves as the core utility and governance asset, powering transactions and the agent launch mechanism.

Issuance Mechanism

The $VIRTUAL token is an ERC-20 token on Ethereum, with an equivalent bridged version on Base.

• Maximum Supply: The maximum token supply is fixed at 1.00 billion $VIRTUAL.
• Initial Distribution: The initial distribution of $VIRTUAL tokens occurred via an airdrop on December 23, 2023, to users who held the predecessor token, $PATH, at a 1:1 migration rate.
• Agent Token Issuance: When a new Virtual Agent is created on the platform, 1 billion tokens specific to that agent are minted. These agent tokens are then added to a liquidity pool, establishing a market for the agent's ownership.

Allocation Mechanism

The initial allocation of the 1.00 billion maximum supply of $VIRTUAL is structured across three main categories:

The Ecosystem allocation (35.00% of supply) is earmarked for community incentives and is planned to have an emission rate of no more than 10% per year for the next three years. However, the specific future distribution methods for this allocation have not been publicly disclosed.

Usage and Incentive Mechanism

The $VIRTUAL token is primarily a utility and governance token within the Virtuals ecosystem.

Core Utility

• Routing Currency and Payments: $VIRTUAL is used as the "routing currency" for transactions on the Virtuals Protocol platform. Users must use $VIRTUAL to interact with Virtual Agents or purchase an agent's token.
• Agent Launch Fee: Creators must pay a fee of 100 $VIRTUAL to launch a new Virtual Agent.
• Liquidity Pairing: $VIRTUAL serves as the base pair for all new agent tokens, facilitating liquidity and trading.

Governance

• Voting Rights: All $VIRTUAL tokenholders can participate in the protocol's governance by delegating their tokens to receive veVIRTUAL (a non-tradable, credit-based feature granted at a 1:1 ratio).
• Proposal Authority: While any user delegated veVIRTUAL can vote on proposals, only tokenholders with over 00 million veVIRTUAL can author a proposal. Proposals can influence protocol upgrades, approve new Virtual Agents, and approve contributions to specific agents.

Value Accrual and Burning Mechanisms

The protocol incorporates a buyback-and-burn mechanism, primarily focused on the individual AI agent tokens, which indirectly supports the $VIRTUAL ecosystem.

• Agent Token Buyback and Burn: Inference payments from an AI agent's use (e.g., in applications or games) are directed toward a buyback-and-burn mechanism for the agent's specific token. This creates deflationary pressure on the agent tokens.
• Future Revenue Split (Planned): The project team envisions a future mechanism where revenue generated from user payments for services (e.g., personalized interactions, merchandise) will be split:
  1. A portion will cover the cost of AI inferences.
  2. Another portion will be funneled back into the project's treasury.
  3. As the treasury grows, there will be periodic buybacks of the agent's token, which will then be burned. Note: Revenue will not be shared with $VIRTUAL tokenholders or other platform users under this model.

Future Incentives (Planned)

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

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

Locking Mechanism and Unlocking Time

The locking mechanism primarily applies to the liquidity pools created for new AI agents, rather than a general vesting schedule for the $VIRTUAL token itself.

Agent Token Launch Lifecycle

New AI agents are launched through an Initial Agent Offering (IAO) process that involves a bonding curve and a liquidity lock:

1. Token Creation: The creator pays a fee of 100 $VIRTUAL to initiate the agent.
2. Bonding Curve: The agent's token is paired with $VIRTUAL tokens.
3. Liquidity Pool Creation: Once the bonding curve reaches a certain threshold (e.g., 42,000 $VIRTUAL or a market cap of approximately $610,500.00), a liquidity pool (Agent Token / $VIRTUAL) is formed on Uniswap.
4. Liquidity Lock: The liquidity pool (LP) is locked for 10 years to adhere to "Fair Launch Principles" and ensure stability. The project documentation states that the LP tokens are held by the agent's creator during this lock period.

VIRTUAL Token Unlocks

The $VIRTUAL token itself has two major recorded unlock events related to its initial distribution and ecosystem allocation:

The unlock on December 24, 2023, corresponds to the initial release of 650 million $VIRTUAL, representing the Public Distribution and Liquidity Pool allocations. The unlock scheduled for December 24, 2033, for 350 million $VIRTUAL, corresponds to the Ecosystem allocation. This suggests the Ecosystem allocation is subject to a long-term lock, despite the stated plan for a maximum 10% annual emission over the first three years from this pool.