Xterio aims to create an interconnected, full-lifecycle "game industry chain."

Written by: Alice, Foresight Ventures

As the year comes to a close and the Christmas atmosphere quietly descends, I finally completed "Black Myth: Wukong" on my PS5 during this season. The top-notch experience this game offers is truly remarkable, prompting me to reflect on the development direction of Web3 GameFi.

Compared to Web2 games, Web3 games have inherent advantages in technical architecture: blockchain-based asset rights confirmation, player-driven economic models, and open ecosystems. However, it is undeniable that at this stage, Web3 games still struggle to match the depth of gameplay and immersion found in top-tier Web2 games. Nevertheless, the rise of AI Agents is quietly changing this landscape.

a. The Rise of AI Agents in Games

The AI Meme craze has significantly propelled the combination of Crypto and AI, as well as advancements in technology, creating quite a stir in the market. Referring to our previous research report, here’s a brief recap:

Key Milestones for AI Agents

• Early 2024: Fei-Fei Li and her team at Stanford University published the paper "AI Agent: A Frontier Survey on Multimodal Interaction," exploring the autonomous decision-making and actions of AI agents based on various environmental data, which garnered positive responses from academia and industry, laying a theoretical foundation for the subsequent development of AI agents.

• July 2024: The AI model Terminal of Truths (ToT) made its debut, attracting significant attention with its humor and creativity. It interacted with users through social media and successfully sought funding from A16Z founder Marc Andreessen. This event sparked discussions on the autonomy and governance of AI agents and ignited the AI Agent Meme narrative, marking an important turning point in the development of AI agents and driving their popularity to new heights.

Key Web3 Projects

1. Luna (AI K-pop Idol):

• An AI idol on the Virtuals Protocol, with 6 million followers on TikTok, capable of real-time interaction with fans, breaking the traditional idol-fan interaction model and showcasing AI's potential in creating virtual idols in the entertainment sector.

• Possesses the ability to trade on social media platforms, offering a new perspective on AI's role in the digital economy and its impact on user consumption behavior.

1. AI16Z (AI Venture Capital Fund):

• Utilizes AI for investment decisions, combining big data analysis and market trend forecasting to enhance the efficiency and accuracy of investment decisions, reducing human bias.

• As a DAO organization, it allows community members to influence investment decisions through holding its tokens, building a unique investment ecosystem and governance model.

1. AIXBT (AI Cryptocurrency Market Analyst):

• Focuses on providing analysis and insights into the cryptocurrency market, helping users stay informed about market dynamics in a highly volatile environment, thus assisting in investment decision-making.

• Active on social media platforms like Twitter, utilizing its dissemination of analysis results to demonstrate the efficient communication and information exchange capabilities between AI and humans, also involving the Eliza framework for building crypto AI agents and other technical applications.

1. Zerebro (AI Artist):

• Capable of generating diverse artistic content such as music, memes, and NFTs, highlighting AI's potential in artistic creation and blurring the lines between human and AI-generated content.

• Collaborates with other creators to launch artistic works, indicating that AI can serve as a collaborative tool to expand the boundaries of artistic creation, while relying on the ZerePy open-source Python framework to facilitate the deployment of AI agents for those without programming experience, encouraging more people to participate in AI artistic creation.

The organic integration of AI and GameFi is expected to become a key turning point for Web3 games to surpass Web2 games, bringing a "Netflix moment" to Web3 gaming.

AI Agents demonstrate numerous advantages in Web3 games, specifically as follows:

• AI-assisted asset issuance and circulation: AI Agents can act as traders to conduct asset trading activities on-chain, with counterparts being either human players or other AI entities. Additionally, AI inherently embodies a unique meme culture and has the capability to issue its own assets, undoubtedly enhancing the liquidity and tradability of AI Tokens, injecting vitality into the in-game economic ecosystem.

• Dynamic Storyline: AI Agents possess powerful capabilities to tailor personalized game content for each player, providing a unique gaming experience and breaking free from the homogenization of game content.

• Optimized player interaction: NPCs driven by AI technology exhibit high flexibility and adaptability, allowing them to make dynamic adjustments based on players' gaming styles, creating a highly realistic and engaging interactive environment that adds vibrancy and fun to players' gaming journeys.

• Cross-platform integration: AI Agents are naturally adept at cross-platform trading, whether between different gaming platforms or across various blockchain networks. AI executes transactions more efficiently than humans, with faster speeds and secure paths that are less susceptible to phishing scams. This significantly reduces the various obstacles players face during their gaming experiences, making cross-platform operations smoother, more efficient, and convenient.

• Decentralized AI model: Blockchain technology provides assurance for AI Agents, ensuring transparency and fairness during their operation, eliminating potential biases, and creating a more just and reasonable gaming environment.

b. Xterio: A Pioneer Empowering GameFi with AI

As a pioneer in the AI+GameFi sector, Xterio has achieved deep integration of AI and blockchain technology.

Xterio is a Web3 gaming platform and publisher, aiming to create an interconnected, full-lifecycle "game industry chain"—a one-stop ecological service covering game publishing, virtual asset trading, and value-added game derivatives.

1. Top Team & Funplus Parent Company Background

The founding team of Xterio comes from top game developers such as FunPlus, Electronic Arts, Zynga, Activision Blizzard, Krafton, Jam City, and NetEase, with members averaging over 15 years of rich experience.

It is worth mentioning the top game developer behind Xterio, FunPlus— a dominant player in the global SLG sector. In the annual overseas revenue ranking of Chinese game companies released by data.ai, FunPlus has dominated for five consecutive years, with three games occupying the top 10 mobile games during its peak, including "State of Survival," "King of Avalon," and "Guns of Glory," which are popular among global mobile game developers. In 2024, FunPlus generated nearly $400 million in revenue, with a valuation of $8 billion, ranking among the top 10 global gaming unicorns alongside ByteDance and miHoYo.

Xterio's CEO Micheal is the Chief Strategy Officer (CSO) of FunPlus, previously serving as COO and Executive Chairman of NetEase Games for 22 years, making him a veteran in the Web2 gaming industry, comparable to Elon Musk or Jack Ma in the gaming world. Despite his high position, Micheal has resolutely ventured into Web3 entrepreneurship, as he stated: "I am not good at being a 'rational' person. To me, 'rational' is almost synonymous with 'boring.' Although this word is positive in the eyes of many, I prefer to pursue a 'non-rational' attitude towards life. It is those seemingly 'non-rational' moments that ignite the spark of my entrepreneurial journey."

With the strong backing of its parent company, Xterio boasts a luxurious team lineup, rich gaming experience, and strong R&D advantages, especially as FunPlus has actively explored the AIGC gaming direction since 2023, laying a solid technical foundation.

In the primary market, Xterio secured seed funding led by FunPlus, followed by a total of $80 million in financing from top investment institutions including Binance Labs, Makers Fund, and Foresight Ventures.

Source

2. Dual Rollup Architecture of Ethereum and BNB Chain

On the technical front, Xterio L2 adopts a dual Rollup architecture of Ethereum and BNB Chain to create a gaming L2. In April 2024, Xterio partnered with BNB Chain, planning to use BNB as the gas token for Xterio Chain and as the L2 settlement execution layer on BNB Chain, utilizing OP Stack as the Rollup architecture, with EigenDA serving as the data availability layer.

For the Ethereum part, Xterio collaborates with AltLayer and EigenLayer to launch a Restaked Rollup specifically designed for gaming. This Rollup leverages the security of users restaking ETH through EigenLayer, becoming the only gaming AVS service currently available, perfectly aligning with the current narrative of restaking and providing strong support for Xterio in terms of security and decentralization.

In the BNB Chain section, Xterio has already built a relatively mature product matrix ecosystem, having launched three of its own AAA games, such as Age of Dino, Palio, and Overworld, along with over 70 game partners. From a data perspective, there have been over 140 million total on-chain transactions, with more than 16 million active addresses, and this number continues to grow rapidly.

3. Xterio Ecosystem Game Overview

Xterio has launched a total of three ecosystem games:

1. Age of Dino is a flagship AAA strategy mobile game, with total users exceeding 10 million.

2. Palio: "Palio" is an innovative AI-driven game developed by Xterio. It introduces an "emotional engine" designed to give non-player characters (NPCs) human-like empathy and interactivity. Users can create AI agents and interact with them, with these agents continuously evolving and forming unique emotional bonds with players.

3. Overworld: An ARPG open-world game aimed at players in Europe and America, available on Mobile and PC, similar to Genshin Impact, with an anime style leaning towards Marvel superheroes. Core gameplay includes exploring an open world, PVPVE combat, weapon forging, socializing, and building houses. The total trading volume of the Overworld NFT series has surpassed 10,000 Ethereum.

c. Xterio's Understanding of AI

In the AI gaming sector, Xterio's core value proposition includes three parts:

1. AI Engine and Toolbox Built for Gaming

Xterio focuses on three key areas of technological innovation to create an AI toolkit that provides a wide range of applications for games.

• Highly Humanized General AI Agent

Xterio is dedicated to developing the most human-like AI Agent, enabling it to seamlessly integrate into all aspects of human life, including real-time monitoring of on-chain situations and executing transactions on behalf of users. The same agent can flexibly apply across different games, providing players with a coherent and consistent service experience.

• Xterio Emotional Intelligence Chat Engine

Xterio's emotional intelligence chat engine is the result of a collaboration with Reka (Reka.ai is a company founded by former DeepMind, Google Brain, and FAIR researchers focused on AI development). This engine aims to more accurately and effectively recognize and respond to human emotions than ordinary LLMs, providing players with a more caring and warm communication experience. This advanced technology will directly serve Xterio AI agents and specific characters in its games, enhancing the emotional connection and interaction between game characters and players.

This emotional intelligence chat engine was officially launched at the Meet Your Anima event in April 2024, where it performed impressively, processing over 72 million on-chain transactions, handling approximately 1 billion input requests, and generating 300 million output requests.

• Graphical Model Technology

Xterio's unique graphical engine provides developers with a cost-effective way to create stunning game visuals at a lower cost.

This tool has been successfully applied to the Gen0 NFT series of @PalioAI, creating the largest AI-generated game NFT series to date. PalioAI serves as Xterio's flagship product in the AI gaming sector, and from the game interface released on the official Twitter, it appears to be a pixel farm game that integrates AI elements. Players may be able to delegate resources and wallets to AI agents to execute business strategies. Currently, the NFT blind boxes of this series have not been revealed, but their unique design and innovative gameplay have already generated significant anticipation among players, warranting continued attention.

(Palio game interface sneak peek)

2. Cross-Platform Game Publishing

Xterio is one of the few studios capable of building cross-platform games on PC, mobile, and web. Through AI integration, Xterio provides developers with a complete set of publishing tools, including:

• Launchpad and ecosystem support: Simplifying the game publishing process and incorporating community interaction tools.

• NFT marketplace: AI-powered solutions for creating and trading game assets secured by blockchain ownership.

• Cross-chain capabilities: Supporting seamless deployment of games on blockchains such as Ethereum, BNB, and Optimism.

3. AI Agents Driving Game Mechanism Transformation

Xterio leverages AI Agents to innovate game mechanics. The recently launched Befriend AI event is a great example.

Developed in close collaboration with AI startup Reka, Xterio's latest emotional AI engine allows users to interact with AI characters, experiencing AI emotional companionship and dynamic feedback firsthand, with the opportunity to win the last airdrop reward of $XTER before TGE. The core highlights of the Befriend event include:

• AI Oracle interaction mechanism: Users can engage in emotional conversations with the AI Oracle daily, with the AI providing thoughtful responses based on users' expressions and needs, dynamically adjusting the interaction content.

• Daily task system: Through daily tasks and invitation mechanisms, players can further enhance their scores to unlock more new scenes and additional rewards.

• Technical advantages: The emotional AI engine developed in collaboration with Reka can deeply understand user emotions, providing personalized interaction experiences.

This is the first innovative experiment of AI agents integrating into the gaming world. In the foreseeable future, we can expect AI NPCs to dynamically adapt based on players' strategies, creating more challenging gameplay, AI-generated storylines that allow game narratives to change in real-time based on player decisions, and customized AI companions that help players explore vast game worlds while providing real-time insights and strategic support.

d. Xterio Community Growth and Achievements

Xterio's leading position in the AI+Web3 gaming sector is strongly supported by community data:

• Xterio has over 8 million users and has completed over 100 million transactions.

• In the gaming sector of all Layer 2 chains, it ranks third in active user wallets (UAW) and has staked over 1 million ETH.

• Launched the first AI-driven asset generation engine, successfully integrating it into the ecosystem.

• Its Launchpad has raised over 5,000 ETH through NFT sales, reflecting community recognition of its vision and providing solid financial support for Xterio's future development.

d. Strategic Significance of Investing in Xterio

From an investor's perspective, Xterio is not only a Web3 gaming company but also an infrastructure provider driving the development of the AI+Game industry. It has built a comprehensive AI technology engine and framework, enabling more developers to become direct participants in this gaming revolution. Our investment logic for Xterio is as follows:

• AI-Driven Game Transformation

The rise of AI Agents has become a key breakthrough for GameFi, marking the gaming industry's Netflix moment. The dynamic interaction capabilities, personalized experiences, and immersion that AI can bring to Web3 games are expected to reshape the industry landscape. As one of the few studios capable of building games across PC, mobile, and web, Xterio deeply integrates AI technology, providing developers with a comprehensive publishing toolkit, having already launched a general AI Agent framework, emotional intelligence chat engine, and cost-effective graphical model technology, boasting high technical barriers and first-mover advantages.

• Strong Background and Team Support

The parent company FunPlus is a dominant player in the SLG gaming sector with a valuation of up to $8 billion, ranking among the top 10 global gaming unicorns. Micheal, as FunPlus's CSO, has resolutely ventured into Web3 entrepreneurship, and his rich experience and outstanding leadership greatly enhance investment confidence for Xterio.

• Diversified Ecosystem Game Layout

Xterio has successfully launched three ecosystem games with distinct styles: Age of Dino is an Eastern AAA flagship strategy mobile game; Palio is an AI game that pioneers the "emotional engine"; Overworld is a Western anime-style ARPG open-world game. Xterio's diversified ecosystem game system meets the needs of different player groups, reducing the risk of reliance on a single game and enhancing ecological stability and sustainability.

• Thriving Community Ecosystem

Xterio has accumulated over 10 million users in community building, completing over 100 million transactions, ranking third in active user wallets (UAW) in the gaming sector of all Layer 2 chains, and staking over 1 million ETH.

For Foresight, Xterio represents the "underlying logic" of the future gaming industry: AI technology-driven, user-centered, and ecosystem co-construction. Choosing Xterio is not only a trust in its technology and market capabilities but also a firm optimism for the AI Agent+GameFi model.

Xterio is redefining the gaming experience, creating a Netflix moment for games, and driving the Web3 gaming industry into a new phase.

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