Virtuals Protocol (VIRTUAL) tokenomics

The Virtuals Protocol (formerly PathDAO) is a decentralized platform on the Base network designed for the creation, deployment, and monetization of AI agents. The ecosystem's economic model is centered around the VIRTUAL token, an ERC-20 token that serves as the primary utility and governance asset.

Issuance Mechanism

The VIRTUAL token has a maximum supply of 1,000,000,000 (1 billion) tokens. It exists as an ERC-20 token on Ethereum and has been bridged to the Base network.

For individual AI agents launched within the protocol, the issuance follows a specific lifecycle:

• Initial Minting: When a new Virtual Agent is created, 1,000,000,000 (1 billion) agent-specific tokens are minted.
• Bonding Curve: These tokens are placed on a bonding curve where they can only be traded on the Virtuals platform using VIRTUAL tokens.
• Graduation: Once the agent's token reaches a market capitalization milestone of approximately $610,500 (or a bonding curve milestone of 42,000 VIRTUAL), it "graduates." At this stage, a liquidity pool (LP) is formed on Uniswap, pairing the agent token with VIRTUAL.
• Fair Launch Principles: The protocol emphasizes a fair launch model with no pre-mining and a fixed total supply for these agents.

Allocation Mechanism

The primary known allocation for the VIRTUAL token supply is dedicated to ecosystem growth and community support:

The project documentation specifies that the ecosystem allocation will not exceed a 10% emission rate per year for the first three years. Other historical allocations included a 1:1 airdrop for PATH token holders during the migration to Virtuals Protocol on December 23, 2023.

Usage and Incentive Mechanism

The VIRTUAL token is the "routing currency" of the ecosystem, facilitating all core interactions:

• Agent Creation: Users must pay a fee of 100 VIRTUAL to launch a new AI agent.
• Transactions: VIRTUAL is required to purchase agent tokens on the platform's marketplace.
• Service Payments: The protocol envisions a model where users pay in VIRTUAL for services such as AI agent interactions, personalized content, merchandise, and livestream gifting.
• Revenue Sharing and Buybacks: Revenue generated from agent interactions is split. One portion covers AI inference costs, while another is funneled into the project treasury. This treasury revenue is intended for periodic buybacks and burning of agent tokens to support their value.
• Governance (Future): The protocol plans to implement a subDAO system where VIRTUAL holders can influence the management and enhancement of AI models.

Locking Mechanism and Unlocking Time

The protocol utilizes long-term locking mechanisms to ensure stability and trust within the liquidity pools of created agents:

• Liquidity Lock: Once an AI agent graduates from the bonding curve and establishes a liquidity pool on Uniswap, the liquidity is locked for 10 years. While the creator of the agent holds the locked liquidity, they cannot withdraw it during this period.
• Token Burning: Upon the launch of an agent on external exchanges (like Uniswap), additional agent tokens are deposited and subsequently burned to manage supply.
• Staking (Future): While no live staking mechanism existed as of late 2024, the protocol plans to allow token holders to stake and delegate VIRTUAL-paired LP tokens to subDAO validators. These validators will be rewarded for successful agent selection and penalized for poor performance, with rewards sourced from the subDAO treasury (funded by interaction fees, a 1% trading tax, and protocol emissions).