Original Author: Shu Fen (@x.com)
Published on: January 2, 2025
Many have remarked that the current crypto bull market lacks innovative narratives. However, AI stands out as the most innovative and enduring core narrative. As of December 2024, the highest-yielding projects in the cryptocurrency market (excluding on-chain activities) stem from the AI sector—particularly Virtuals, boasting returns up to 23,079%.
Phrases like “Next Stop for Large Models,” “Revolutionizing Human Lifestyles,” and “Initiating a New Industrial Revolution” underscore the significance attributed to AI Agents. Both retail and institutional investors are underprepared for the current momentum and future trajectory of AI Agents. Many in my circle hadn’t paid attention until the surge, and now, faced with an overwhelming influx of information, they find it challenging to navigate. This comprehensive analysis aims to demystify AI Agents, serving as an introductory guide tailored for the crypto community.
This report is structured into three sections:
1. Fundamentals of AI Agents
2. Analysis of Prominent AI Agent Projects
3. Anticipated Applications of AI Agents in the Web3 Domain
1. Fundamentals of AI Agents
AI Agents first garnered public attention in March 2023 with the release of a project called AutoGPT. This framework leveraged large language models (LLMs) to autonomously decompose complex tasks into manageable sub-tasks and utilize tools to accomplish them.
The debut of AutoGPT was groundbreaking, marking the first instance where language processing, content creation, logical reasoning, and perceptual action technologies were applied in practical scenarios. Subsequently, OpenAI introduced a series of GPT models, prompting numerous tech companies to develop applications, platforms, development tools, and operational frameworks to establish a competitive edge in the evolving ecosystem.
What exactly is an AI Agent, and how does it function?
An “agent” refers to a representative or intermediary. In simple terms, an AI Agent is an AI-empowered representative that, unlike traditional software which passively executes commands, operates through the following workflow:
– Perception Module: Acquires input.
– LLM: Processes understanding, reasoning, and planning.
– Tool Utilization: Executes tasks.
– Feedback and Optimization: Validates and refines actions.
OpenAI defines an AI Agent as a system driven by an LLM “brain,” endowed with autonomous understanding, perception, planning, memory, and tool utilization capabilities, enabling the automated execution of complex tasks. Unlike traditional AI, AI Agents can independently think and employ tools to progressively achieve specified objectives.
Illustrative Example:
Consider experiencing symptoms of a cold. Traditional software might simply advise visiting a doctor and taking precautions. In contrast, an AI Agent could monitor your temperature and other health indicators, cross-reference online information to recommend appropriate medications, facilitate payment and home delivery, and even draft a sick leave note for the following day. This exemplifies the remarkable capabilities of AI Agents.
2. Analysis of Prominent AI Agent Projects
According to recent data from Cookie.fun, as of December 30, the total market capitalization of AI Agents has reached $11.68 billion, with a 7-day increase of nearly 39.1%. This growth trend underscores the rapid expansion of the AI Agent ecosystem within the crypto market.
Among the AI Agent surge, ai16z and Virtuals Protocol have emerged as dominant projects. Specifically, Virtuals’ ecosystem market cap stands at $5.01 billion, and ai16z at $1.63 billion, together accounting for 56.8% of the AI Agent market share.
From a blockchain distribution perspective, Base and Solana are the primary arenas for AI Agents. Base hosts AI Agent projects with a combined market cap of approximately $5.76 billion, while Solana’s stands at $5.47 billion, collectively contributing 96.1% of the overall market. Projects on other chains cumulatively hold a market cap of only $920 million.
This concentration indicates that, despite the swift rise and significant attention and capital influx into the AI Agent ecosystem, the market structure remains relatively centralized, heavily reliant on a few leading projects. The AI Agent ecosystem is still in its nascent stages.
Below is an analysis of current prominent AI Agent projects, evaluated based on three criteria:
1. Long-term Value
2. Genuine Market Demand
3. Revenue Streams
If you find certain projects absent from this list, please reassess them against these criteria. The following insights are for reference only and do not constitute financial advice.
1. Virtuals
Launched last year, Virtuals Protocol primarily establishes co-management for AI agents in gaming and entertainment. These AI agents can be tokenized via blockchain and co-managed, featuring capabilities like autonomous planning, goal achievement, environment interaction, and on-chain wallet control.
Virtuals distinguishes itself from other Web3 AI agent protocols by simplifying AI agent complexity, offering a plug-and-play solution akin to Shopify. This enables non-AI professionals to easily deploy AI agents in gaming and consumer applications, facilitating tokenization and decentralized co-management to derive protocol revenue from AI agents.
Additionally, Virtuals has developed an AI virtual idol band, AI-dol, amassing hundreds of thousands of followers on TikTok, showcasing its innovative approach.
The total token supply for Virtuals is 1 billion, fully released, distributed as follows:
– 60% held by the public
– 5% allocated to the liquidity pool
– 35% reserved for the ecosystem treasury, with a maximum annual release of 10% over three years. Currently, the ecosystem fund holds over 30% of the tokens.
Long-term Value: Virtuals addresses the pain point of non-AI professionals being unable to participate in the AI surge, boasts a solid user base, maintains transparent tokenomics, and executes effective marketing. As a leading project in the AI Agent ecosystem, its market cap has seen a continuous rise with minimal corrections, suggesting a high probability of significant adjustments in the future. Therefore, in the short term, Virtuals presents considerable risk.
2. ai16z
Despite sharing a name reminiscent of the renowned venture capital firm a16z, ai16z has no affiliation with A16Z and has not received its investment. The sole connection is the attention from a16z founder Marc Andreessen.
With a total token supply of 1.09 billion, ai16z operates as a DAO. According to core influencer Shaw, ai16z plans to launch several games based on the Eliza framework and aims to develop a practical AI Agent investment tool, DeFi AI Agent. Shaw asserts that ai16z’s goal is not to create an AI robot mimicking a16z but to outperform it in its forte—investment.
This suggests that ai16z focuses on investment model AI agents, seemingly akin to previous AI bots or Telegram bots. The question arises: Can AI truly succeed in investment? This remains uncertain. Notably, the core technology, Eliza OS, is built upon OpenAI’s capabilities with minimal additional development. Should OpenAI release its own AI agents, it is unclear how Shaw would respond.
Summary: ai16z appears to capitalize on the current AI hype, potentially offering short-term trading opportunities. However, its long-term prospects remain uncertain due to a lack of technological differentiation and reliance on existing frameworks.
3. Anticipated Applications of AI Agents in the Web3 Domain
AI Agents have the potential to significantly reshape the Web3 ecosystem, offering innovative use cases and driving adoption in various sectors. Here are some of the most promising applications:
3.1 AI-Powered DeFi Solutions
AI Agents can be utilized to optimize decentralized finance (DeFi) protocols by autonomously managing tasks like liquidity provision, yield farming, and risk assessment. They can act as personal financial advisors, tailoring investment strategies based on user preferences and market conditions.
3.2 GameFi and Virtual Economies
In the gaming and virtual worlds, AI Agents can enhance user experiences by creating intelligent NPCs (non-player characters), managing in-game economies, and facilitating player interactions. Projects like Virtuals are already paving the way for such applications, showcasing how AI can merge with entertainment and gaming.
3.3 Decentralized Autonomous Organizations (DAOs)
AI Agents could revolutionize DAO operations by automating governance tasks, analyzing community proposals, and executing smart contract decisions. This would make DAOs more efficient and accessible to broader audiences.
3.4 Personalized AI Assistants
By integrating AI Agents with blockchain technology, users can have decentralized, private AI assistants for daily tasks, such as managing wallets, tracking portfolios, or curating personalized content.
3.5 AI Agents in Social Media
AI-powered bots can provide enhanced interaction on decentralized social media platforms, moderating content, combating misinformation, and improving user engagement.
Closing Thoughts
The emergence of AI Agents represents one of the most exciting narratives in the current crypto bull market. While the ecosystem is still in its early stages, the rapid development of foundational projects like Virtuals and ai16z underscores the potential for transformative applications.
Investors and developers alike should remain cautious, as the sector is still experimental and carries inherent risks. However, for those willing to explore, AI Agents offer a glimpse into the future of Web3 and beyond.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before investing in cryptocurrencies.
Original Article by Shu Fen (@x.com)