App downloads exceed 600,000: The unique incentive model of the decentralized AI social network CharacterX

Author: TechFlow

Since the beginning of the year, with OpenAI launching Sora, the Apple Vision Pro conference being held, and technological breakthroughs in AI memory, a series of hot events have not only propelled the AI concept to become the mainstream narrative for financial elites in 2024, but the synchronous development of software and hardware has also led more people to anticipate further integration and collision of AI and social interaction.

This wave of enthusiasm has unsurprisingly swept through Crypto: on one hand, it is reflected in the emergence of AI + Crypto projects like mushrooms after rain, with tokens in the sector such as WLD and RNDR experiencing a surge. In just 30 days, WLD skyrocketed from $2.5 to $9.1, with a monthly increase of over 300%. According to the latest data from Coingecko on March 5, the total market value of AI-related crypto assets has reached $19.7 billion, an increase of 64% compared to $12 billion just half a month ago. On the other hand, as Web2 social products face criticism for centralization issues, decentralized social products integrating AI technology have become a key focus.

Image source: CoinGecko

In the current climate where the AI concept is flourishing, the decentralized AI entertainment social network CharacterX App has surpassed 600,000 downloads, with over 100,000 daily active users, and an average daily user engagement of 50 minutes, gaining widespread attention from the community due to its impressive data performance. As an AI + Crypto project focusing on the social sector, CharacterX App has launched a vast array of AI character NFTs, including public characters officially launched and numerous AI identity characters created by users based on their own needs. Users can interact with these characters to earn points that can be accumulated for future airdrop tokens. It is reported that the project's first season airdrop will also arrive in the first quarter of 2024.

Is social interaction a crucial breakthrough for the large-scale adoption of AI + Crypto? In the absence of practical scenarios, does the rapidly growing social AI product CharacterX have the potential to become a leader in this sector?

This article aims to delve into the new project CharacterX in the AI + Crypto sector, exploring its vision, layout, and potential in AI entertainment social interaction, as well as the future opportunities and challenges of AI + Crypto.

Social Interaction: An Excellent Entry Point for the Integration and Large-Scale Adoption of AI + Crypto

First, we can clarify the relationship between social interaction, AI, and Crypto:

Social interaction is a specific product in a concrete application scenario, while AI and Crypto, as important driving forces of the 21st-century technological revolution, are technical means to help products achieve higher quality services.

Why does the community anticipate the combination of the two innovative technologies, AI and Crypto?

AI improves efficiency, but the current development of AI tends to be monopolistic: through data feeding and model training, AI endows cold machines with "intelligence," providing more personalized services and helping make more efficient decisions or productions. However, data aggregation is a necessary path to building powerful AI, meaning that the pouring of vast amounts of personal information is the foundation for creating customized AI, and in this process, users cannot guarantee data privacy, data usage rights, individual biases, and centralization monopolies.

At this point, as a decentralized distributed ledger, Crypto combines technologies such as distributed storage, peer-to-peer transmission, consensus mechanisms, and cryptography. Its characteristics of immutability, transparency, security, and programmability can not only resist data fraud and abuse but also achieve a fairer distribution of value under the premise of openness and transparency.

In a sense, AI and Crypto have a complementary relationship: AI represents the most advanced productivity currently, capable of providing users with higher quality services; Crypto represents the fairest production relationship, promoting a fairer flow and cycle of value in social networks. The combination of the two will not only greatly enhance user experience but also lead to industry transformation and development.

Since the integration of AI + Crypto can unleash tremendous value, what is the current development status of the AI + Crypto sector?

In a previous article titled "A Comprehensive Guide to the Crypto AI Sector: An Overview of AI Business Categories and Notable Crypto Projects," TechFlow detailed the business types and potential projects of AI + Crypto. A careful reading of this article reveals:

Although the AI + Crypto sector encompasses multiple segments such as computing power, algorithms and models, and data, and has birthed popular community projects like Bittensor, Autonolas, and Render Network, there are not many projects that truly focus on specific application scenarios and emphasize product experience.

Image source: TechFlow

This phenomenon is not difficult to understand: on one hand, to leverage the AI hype, the sector has seen some hastily concocted "Frankenstein" projects that are not only homogeneous but also affect user perception; on the other hand, although there are some standout projects in the sector, both AI and Crypto have a high threshold for understanding and participation. Moreover, the integration of AI and Crypto is still in a very early stage, with some projects focusing more on AI and less on Crypto, and others vice versa. Projects that deeply integrate AI while also considering the decentralized philosophy of Crypto are still rare.

However, the limited choices do not mean that users are not paying attention. Combining the impressive data of CharacterX App, which has surpassed 600,000 registered users, we can glimpse the community's high hopes for the social sector in the deep integration of AI and Crypto.

First, social interaction is a high-frequency necessity of human nature: humans are social beings who need emotional support from one another. In social products, people's desires for expression, sharing, and showcasing can be fully satisfied.

Second, the understanding and participation thresholds for social interaction are relatively low, and the experience is the most intuitive: users do not need to spend a lot of effort learning the basic concepts of AI and Crypto; they can seamlessly switch from Web2 to Web3 by simply registering, sharing, and chatting, intuitively experiencing the efficiency and decentralized advantages of the product after the integration of AI and Crypto.

Most importantly, strong demand + low threshold + good experience can attract a large number of incremental users from Web2: in the continuous cycle of user experience → product optimization, the AI + Crypto sector can grow rapidly.

In summary, social interaction can be said to be an excellent entry point for the integration and large-scale adoption of AI + Crypto. In this highly promising sector, CharacterX stands out as a newcomer, not only benefiting from the sector's popularity but also relying on the project's strong capabilities in AI and precise considerations in the Crypto field.

Targeting the Social Sector: Deepening Emotional Connections, The Journey of AI Companionship

CharacterX aims to create a Decentralized Synthetic Social Network: "Decentralized" refers to storing AI identities and information in a decentralized manner for easier user access and use; "Synthetic" means that both humans and AI are important nodes that jointly construct the entire network; "Social" expresses the purpose of helping humans establish connections, which is one of humanity's most fundamental needs; "Network" defines that CharacterX is not just a platform or application but a cyber social network that everyone can participate in and build.

Specifically, CharacterX allows creators to create AI characters: these AI characters can be classic figures from their favorite films or literature, or they can be projections of the creators themselves in the virtual world. In fact, among the current 600,000 users, over half have chosen to build AI characters in CharacterX based on personal information, seeking like-minded friends while showcasing themselves to establish social connections with more people.

In terms of interaction, users can choose AI characters based on their preferences and interact with them, or they can choose Story gameplay to interact with AI characters in specific story scenarios. It is reported that CharacterX will soon launch interaction modes such as stranger matching and community features to provide users with a more immersive social experience. Additionally, the interactive content can continuously train the underlying AI models, helping AI characters grow in a more personalized direction.

Moreover, in the recently updated App version 2.4.0, CharacterX has launched a badge system aimed at encouraging users to explore the app's features and earn three types of badges: Social Expert, Active Contributor, and Creative Genius. Badges not only interpret user personalities and recognize their behaviors but also allow users to earn more points for accumulating more airdrop tokens.

CharacterX envisions itself as a "decentralized AI entertainment social network." Since it targets the social sector, CharacterX understands from the beginning that social products are born to meet emotional needs, and their success relies on users' emotional projections.

Therefore, compared to the already mature conversational AI tools in the market (such as ChatGPT), CharacterX's uniqueness lies in:

• In product design: It emphasizes the social attributes of the product more, focusing on building an AI social network through character interactions, stranger matching, communities, etc., deepening emotional connections between users and characters, as well as between users and creators, providing emotional value to users in all aspects.
• In product experience: It introduces multi-sensory technologies such as voice, images, 3D, and AR to create a vivid AI life, crafting an immersive user experience and optimizing the quality of AI character companionship.
• In community content atmosphere: Compared to film characters or two-dimensional paper figures, users' willingness to create tends to reflect their self-image in the AI world, and they prefer to interact with more "real" AI characters. Currently, a large number of users have created AI characters based on their real identities and are trying to gradually establish their own social networks through interaction.
• In decentralization: CharacterX firmly implements the decentralized philosophy. On one hand, by integrating blockchain technology and collaborating with a zero-knowledge proof (ZK) professional team, it achieves true data ownership and privacy protection, ensuring that user data is firmly in their hands; on the other hand, through the open-source of foundational models and public governance of decentralized social organizations (DSO), it realizes the decentralization of users' core identity information, identity data, and memories, empowering users with the right to participate in ecological governance.

Image source: Screenshot from Apple Store CharacterX page

If ChatGPT is an emotionless robotic butler, then CharacterX is more like a tangible, vocal, and characterful AI companion crafted just for you.

Of course, a good experience requires solid technical strength. In terms of deeply integrating AI to create a better experience, CharacterX possesses multiple advantages:

First, CharacterX's founder, Rene, comes from Stanford University. This strong educational background not only helps them leverage keen market insights to steer the project's development direction but also facilitates connections with top resources from Stanford University.

On February 22, 2024, CharacterX officially announced its partnership with Stanford University's blockchain accelerator. Professional guidance from Stanford will help CharacterX better leverage its technical advantages to jointly create a more impactful social experience. In the future, both parties will work together to promote the innovative integration of AI and blockchain technology.

Image source: Twitter @CharacterXAI

In addition to the founder, most of the other team members of CharacterX also graduated from prestigious universities such as the University of Chicago and Peking University, or have worked at companies and projects like Meta, TikTok, Tencent, and NEO, possessing profound technical strength and rich product experience in social products, Crypto development, AI applications, and 3D modeling. Previously, the team launched a 3D AR girlfriend product overseas, which received a positive response. The strong team background ensures the stable and positive operation of the project. According to the CharacterX team, core members of the team previously launched a social product in the North American market, achieving over 100 million users.

As AI becomes a focal point of the narrative in 2024, there is a significant demand from users, institutions, and funds in the crypto market for quality projects. CharacterX, with its exquisite product design and strong team background, has also garnered the favor of numerous VCs. In January of this year, CharacterX announced the completion of a new round of financing of $2.3 million at a valuation of $30 million, led by Lightspeed, INCE Capital, and Spark Digital Capital.

Image source: CharacterX Medium

Currently, CharacterX has released a test version of the app on iOS and Android, allowing users to conveniently install the application via Apple Store or Google Play. In terms of functionality, users can log in using their Google accounts and earn points through check-ins, inviting friends, and interacting with AI characters. It is worth noting that users can currently interact with AI characters through both text and voice. Although the characters do not yet exhibit many personalized traits, considering that the project is still in its early stages and the project team has strong capabilities in 3D and AI, it is believed that as character training deepens and product functions improve, the character representations will become richer and more complete.

Dual Token Incentive Model Around Character NFTs: Chatting to Earn CXT Airdrops

Building on the advantages of AI, CharacterX also demonstrates its recognition and understanding of decentralized concepts in integrating Crypto gameplay:

In CharacterX's design, all AI characters exist in the form of NFTs based on ERC-6551: the unique characteristics of NFTs perfectly match the customization needs of AI characters. Moreover, the NFT-as-wallet concept advocated by ERC-6551 supports the creation of smart contract wallet accounts for current ERC 721 NFTs, allowing NFTs to serve as on-chain identity wallet accounts. These NFT accounts can contain multiple wallet addresses, held NFTs, and ERC 20 tokens, making NFTs true representatives of on-chain identity accounts. These features further align with CharacterX's focus on the social sector.

Additionally, CharacterX has adopted a dual token model design:

• CXC: A system utility token that users can earn through check-ins, inviting friends, and other means after installing the app. Users must spend CXC to interact with the AI characters they have created.
• CXT: Currently exists in the form of app points, which users can earn through interactions with AI characters. In the future, after the Token Generation Event (TGE), CXT will serve as CharacterX's governance token.

It is worth mentioning that to encourage user participation, CharacterX will conduct multiple rounds of airdrops in the future, and the more CXT points users accumulate, the larger their share of future airdrop rewards will be.

Breaking out of the traditional social economic model design framework, under the design of NFTs and the dual token model, CharacterX vividly presents a fair, transparent, stable, and mutually beneficial revenue cycle mechanism built around three main participants: creators (Creators/KOLs), consumers (Consumers), and investors (Shareholders):

Image source: CharacterX

• Creators ⇆ Consumers: Creators create AI character NFTs, and consumers pay CXC to interact with AI characters and enjoy character services. Consumers earn CXT rewards through interactions; creators can not only earn minting rewards but also set economic strategies for their AI characters, such as interaction fees and investment dividends, continuously training, refining, and promoting their AI characters to obtain a steady stream of income.
• Creators ⇆ Investors: Creators create, train, and promote AI character NFTs, and investors can support creators by purchasing NFT fan tokens. Creators can directly face fans, obtaining a fairer and more stable value return, while investors, as fans, can earn returns through the appreciation of fan tokens; on the other hand, they can also earn returns through creator dividends.
• Consumers ⇆ Investors: Consumers pay CXC to interact with AI characters created by creators and earn CXT rewards through interactions. Creators can allocate a portion of their earnings as dividends to reward their fans (investors).

The well-designed economic model, combined with the upcoming expectations for airdrops in the first quarter of 2024, has shown a strong growth trend for CharacterX since the beginning of the year. In addition to the previously mentioned app downloads surpassing 600,000 and daily active users exceeding 100,000, its social media subscription users are continuously climbing, and the community's scale and activity are also on the rise. Notably, during the initial launch phase of the app, CharacterX achieved a stable revenue of $50,000 per month, which is quite rare among projects in the same sector during the same period.

Image source: Twitter @CharacterXAI

Indeed, as a newcomer, CharacterX has already achieved impressive results, and with more project milestones being realized in 2024, the project is set to enter a new phase of rapid development.

Looking to the Future: Multiple Milestones to be Achieved

Currently, the project has released a Beta version of the app with AI social interaction and creation features, allowing creators to create custom AI characters through editing character information, adding voice cloning, Q&A materials, advanced definitions, and more. Consumers can also interact with these created characters.

As the first quarter of 2024 comes to a close, to further achieve deeper emotional connections, multi-dimensional sensory experiences, and interactions unrestricted by time and space, the CharacterX team's focus will be on building an AI synthetic network based on SDID (Synthetic Decentralized Identifier): SDID is derived from the ERC-6551 concept and can further enhance privacy protection and interoperability across ecosystems and platforms, laying the foundation for the sustainable development of the AI synthetic network.

Additionally, one of the most notable project movements in March will be the airdrop: currently, users can earn CXT points in the CharacterX App by creating characters, interacting with characters, inviting friends, and other means. This gameplay is similar to the concept of Active to Earn: the more actively users participate, the more points they collect, and the larger the airdrop rewards they will receive in the future. At that time, CharacterX will announce the airdrop details on its official website and social media platforms. Interested friends can follow along, potentially investing in a promising AI sector project with no cost and perhaps reaping surprises in this bull market.

In the future, as the project roadmap continues to advance and the app undergoes multiple version iterations, CharacterX will continue to strengthen its efforts in social gameplay and product experience: in addition to adding multi-sensory enhancements such as 3D and AR, it will successively launch group gameplay, blue-chip NFT communities, and other features to further deepen social connections among participants.

Image source: CharacterX Official Website

In summary, CharacterX's team has accurately grasped every hot narrative in the market: focusing on the social sector alone is enough to demonstrate the project's long-term development determination, as the social sector has strong demand, high traffic, and low user participation thresholds, making it a potential sector that everyone wants to share in, regardless of the cycle. Coupled with the trending AI concept and the advantages of integrating a fair and transparent economic incentive model in Crypto, any one of these narratives could serve as the main narrative for a project.

What is even more commendable is the natural and clever integration of these three narratives by CharacterX: on one hand, relying on its strong team and technical advantages, it introduces multi-sensory technologies such as 3D and AR, allowing the project to stand out in product experience; on the other hand, by incorporating ERC-6551-based NFTs and a dual-token economic model design, the originally static project ecosystem is revitalized, ensuring the sustainable development of the project system through an incentive mechanism that benefits every participant.

CharacterX is a low-key pioneer, having already accumulated a high volume of active users and good user stickiness in North America, Vietnam, and other emerging markets: not only does it have over 100,000 daily active users with a retention rate of 60%, but it also boasts an average daily usage time of 50 minutes. The market increment and product explosion after on-chain deployment are worth looking forward to. Web3 needs solid products to bridge the connection and interoperability with the Web2 world.

Although the integration of AI + Crypto is still in a very early stage, the emergence of products like CharacterX, which possess the quality of traditional AI projects while also embodying a decentralized attitude towards Crypto, is already enough to make one look forward to the development of AI + Crypto in specific application scenarios during this bull market.

Undoubtedly, at the beginning of this bull market, AI + Crypto has already become an investment target that many people believe should not be missed in 2024. With the favorable conditions of airdrop expectations and the realization of various milestones, facing market opportunities and challenges, we look forward to the outstanding performance of CharacterX and the entire AI + Crypto sector in 2024.