Editor's note: AI Agent projects attracted short-term attention due to Genesis's pull, but institutions are more concerned about decentralized AI infrastructure such as $TAO, $GRASS, etc. Market trends show that teams with narrative + technology have greater long-term potential. The strategy is to short-term speculate on Agent projects, roll profits into DeAI infrastructure, and bet on teams that can tell good stories and do technology.

The following is the original content (for easier reading and understanding, the original content has been reorganized):

It has been about two and a half weeks since the market bottom of the AI ​​agent track (market value of about US$4 billion), and the market is currently in a thorough @virtuals_io bull market.

That’s right…only Virtuals is going up right now. This wave of activity is very similar to when Virtuals first launched its proxy tokenization platform in October and November last year, when it established itself as a pioneer in “tokenized issuance” for AI projects and the first legitimate player to offer a top-level issuance network (assuming you’re willing to do a “fair launch”).

What’s different this time is that they just launched a new feature: “Genesis Launch” – a fairer way to issue tokens while giving back to early supporters. This also leads to the first trend we want to talk about:

Fair Launch/Gamified Launch Platform

From the previous degen players randomly charging some random tokens on pumpfun, to now it is almost a brand new project with a "guaranteed profit" of 5-10 times return.

Behind this is the introduction of a "points" mechanism to better bind the interests of all parties together, coupled with a fixed market value, fixed supply launch model - each project starts with 112,000 $VIRTUAL (approximately $200,000 in FDV). Each participant can get up to 0.5% of the token share based on the points they earn. Points can be obtained by holding/staking $VIRTUAL, holding mainstream proxy tokens (they have an official list), and even actively discussing Virtuals on social platforms.

Recently, Virtuals has also added a "cooling-off period" mechanism to limit quick selling behavior, further enhancing the appeal of Genesis Launchpad - making you think twice before selling.

Currently, this "Genesis Launch" platform has achieved obvious success. @BasisOS is the most successful example so far, with participants receiving up to 200 times the return. Since then, new projects launched by Virtuals have almost all started with a return rate of 5 to 40 times.

It is precisely because of the popularity of Genesis Launch that funds and attention have been refocused on the Virtuals ecosystem, raising the valuation floor of almost all agency projects on the platform.

However, despite the rekindled market enthusiasm, "scarcity of high-quality projects" is still one of the biggest problems of the Virtuals ecosystem - which leads to the second trend:

2. Popularity and transaction structure overwhelm the quality of the project itself

As a speculator/trader, as long as you understand the structure of Genesis Launch, you can make money even with a mediocre project and a mediocre team.

Because for projects that start with a valuation of $200,000, it is very likely that they will rise first and then fall, especially when you know that the project has no "insiders" and has not done a private placement round.

As a project owner, if you have a relatively novel idea, you can issue the coin first.

There is no need to make a product first, figure out who the target users are, or verify whether there is real demand in the market, let alone revenue and user growth. Just create maximum popularity and start (if you have a demo, of course you will get extra points, but if you don’t, it doesn’t matter, haha).

As long as the project meets the basic requirements (a decent white paper, a plausible product concept, and a team that doesn't look too shabby), it can basically take off smoothly on Virtuals' Genesis Launch.

The most important lesson for investors here is to view these launches as short-term speculative opportunities, not as medium- to long-term value investments.

Because nine times out of ten, these so-called "AI projects" are essentially shit packaged like AI. I have also given a very typical example on my Substack, you can check it out if you are interested.

But precisely because there is so much shit now, opportunities for truly high-quality projects have emerged—whether in the AI ​​track or in other areas outside of AI. This also leads to the third trend:

3. Potential opportunities for DeFi projects on Virtuals

Two months ago, I talked to the @logarithm_fi / @BasisOS team. Their product is a bit like Ethena, doing something similar to the "Delta Neutral Strategy", but without the stablecoin part.

I got to know this team when they were working on Logarithm. At that time, they were still working on the LPDeFi narrative (a product that uses Uniswap v3 liquidity as a strategy). I liked this team very much, so I gave them some suggestions on token economics, launch plans, etc.

To be honest, I didn’t think their coin would rise so much, because although their DeFi product has fundamentals, the so-called “AI” part is actually very early. But it turns out that all this doesn’t matter at all - this project still knocked down the entire market.

Judging from the success of Basis, the Virtuals platform now does provide a great window of opportunity for DeFi projects.

Even if you don’t have the “token incentive TVL” mechanism of traditional DeFi projects, as long as your product itself is solid and the logic is strong enough, combined with the traffic + sentiment of Virtuals, TVL will naturally increase.

So if you have a mature DeFi product and hope to improve user acquisition efficiency through AI, or use AI technology to optimize the structure of the product itself, you can come and talk to me. I am happy to brainstorm with you.

In addition to the “getting market attention” layer, a new experimental gameplay is now beginning to emerge on Virtuals, which is very similar to the trend of Ethereum shitter tokens in 2023-24 - this also leads to the fourth trend:

4. Use the protocol revenue generated by "transaction volume" as a growth engine

There was a time when many small Ponzi DeFi projects emerged on the market, frantically experimenting with various token models: for example, charging a 1-3% handling fee on each transaction, using this part of the income to expand the project's treasury, support their Ponzi DeFi strategy, and then return the profits/dividends to token holders.

At that time, there were not many projects on Ethereum, and users were "rich and daring". The project owners could earn six or even seven figures in a week or two by using this method.

Now, we are starting to see similar things happening in the AI ​​agent community.

For every transaction on Virtuals, a 1% transaction fee is charged by default, of which 70% will be returned to the project party. Some other Launchpads also have a 1-2% handling fee mechanism, and the return ratio is 70%-100%.

For example, @Squidllora, which was recently launched on the @autodotfun platform (with intelligent support from @AlloraNetwork), uses this part of the creator fee to expand its own treasury, and then uses the money to trade mainstream currencies. The strategy relies on the inference model provided by Allora (if you are not familiar with Allora, its positioning is a bit like a "pure financial version of Bittensor" - scientists compete to see who can make the strongest encryption prediction model covering various time dimensions).

Part of the profits earned from the transaction will be used to repurchase the $SQUID token.

The advantages of this model are very obvious, and it is especially suitable for projects with sufficient funds and that do not rely on transaction fees to support the team.

Project owners can use AI agent tokens as a marketing tool and user diversion tool to gain attention, accumulate transaction fee income, and initiate a whole new set of AI experiments.

However, looking back at the entire AI agent battlefield, apart from the Virtuals ecosystem, other platforms have basically nothing to compete with. Even if many teams develop publicly and deliver continuously, their revenue still does not increase.
This also leads to the fifth trend:

5. Virtuals is the only platform that dominates the market, and other platforms have hardly seen any growth

Driven by Genesis Launch, the valuation bottom of Agent projects on Virtuals continues to rise. But it should be noted that the emergence of this wave of new projects does not mean that the fundamentals or technology have been significantly improved. The real catalyst is the huge optimization of the transaction structure - in other words, more people are willing to play Virtuals games now because they know they can make money.

This trend is likely to continue until prices of existing projects reach a stage top/local ceiling.

Once the price stops rising, some attention will naturally start to overflow and turn to other ecosystems, such as @CreatorBid, @arcdotfun, @autodotfun, especially those projects with low market capitalization but obvious fundamental improvements (new features, new products, new collaborations).

At present, CreatorBid (CB) and Arc are the two most noteworthy ecosystems, and there are still several undervalued projects that have not yet started to rise: for example, the regular 3-4 targets on CB that integrate with subnets or focus on Bittensor product development;

Or some handshake projects on Arc that are directly related to Ryzome are also worth keeping an eye on.

The best way to gain a foothold is to make a low-level layout in advance before everyone notices the value of these tokens.

6. AI investment opportunities are still very limited for institutions

Despite the sharp rise in the prices of major AI Agent ecosystem tokens such as $VIRTUAL and $AI16Z, many institutions are still on the sidelines. The reason is simple: these rapidly rising tokens are only suitable for retail investors/degens, have thin liquidity, and a fragile LP structure (especially on Virtuals).

It is also for this reason - the lack of mature liquidity infrastructure + the increasing attention to decentralized AI - that institutional funds have begun to turn to investing in AI infrastructure, Agent L1, and public chain-level AI laboratories, rather than the current batch of short-term Agent project tokens.

You may be curious, what are these institutions buying?

$GRASS

$TAO (including subnets)

$VANA

$FLOCK

$PROMPT (maybe)

There are also a number of projects that have not yet been launched but have clear moats, such as @NousResearch, @PluralisHQ, @PrimeIntellect

Most of these projects are working on Web3-ing real high-performance models and decentralizing model ownership. They are not "shells" like decentralized GPT, but truly complex infra + model layers with high barriers to entry, incomprehensible, and no one knows how to invest.

How can we better position ourselves based on these trends?

My own strategy is very simple: gradually roll the profits earned from short-term AI Agent projects (especially those with weak teams but strong Genesis pull) into the DeAI Infra project.

It is important to understand that these infrastructure projects will not explode in the short term, as most of them do not have consumer products and are slowly being built at the Infra layer.

But just like OpenAI, Grok, and Anthropic have suddenly evolved in daily tasks, real-time retrieval, code generation, etc., the Web3 model will also usher in a qualitative change at a certain point in time - truly capable of native tasks of Web2/Web3.

So should we invest heavily in DeAI Infra?

No. Crypto is essentially a narrative and distribution driven market.

Distribution ≫ Technology, this is a game of "90% storytelling + 10% model".

As long as a project can tell a story, has good UI/UX, knows how to go online, how to design a token mechanism, and how to attract and retain users, it will be able to survive well.

Therefore, my core investment logic remains: invest in teams that understand the dual-wheel drive of "narrative + technology".

This is just like Web2 VC will invest in some vertical SaaS. Although the open source model may be used behind the scenes, the product barriers are still maximized by relying on its own data and operations.

I believe this logic will still hold true in Web3 in the short term, especially now that hype and community are the main driving forces, and things that are easy to understand are easy to sell.

Now the market is also moving in this direction:

Genesis Launch is becoming an “industry default”

More and more teams are beginning to cooperate with the Infra project, not just to hype it up, but also to actually use each other's technology

·While doing distribution, we also develop real AI technology, and narrative + practical work begin to merge

Quick summary

Virtuals’ Genesis Launch model is dominating market attention and revenue;

Most projects have hype > technology, and their essence is still short-term trading;

DeFi projects with fundamentals have found incremental opportunities in the Virtuals ecosystem;

Transaction volume drives creators’ income, which is triggering a new wave of experiments;

Virtuals is currently leading, but other ecosystems such as CreatorBid and Arc may catch up soon;

Institutions are still on the sidelines, and are betting more on decentralized AI Infra;

The optimal strategy is to roll the short-term profits of the Agent project into DeAI Infra and bet on teams that understand both narrative and technology.

「 Original link 」

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