Redefining Xterio with AI: The Netflix Moment for Games

Author: Alice, Foresight Ventures

As the year draws to a close and the Christmas spirit quietly settles in, I finally picked up my PS5 and completed *Black Myth: Wukong*. The top-tier experience delivered by this game is truly extraordinary, sparking deep reflection on the future trajectory of Web3 GameFi.

Compared to Web2 games, Web3 games hold inherent technical advantages: blockchain-based asset ownership, player-driven economies, and open ecosystems. However, it's undeniable that current Web3 games still fall short of matching top-tier Web2 titles in gameplay depth and immersion. Yet, the rise of AI Agents is beginning to shift this dynamic.

a. The Rise of AI Agents in Gaming

The AI Meme trend has significantly accelerated the convergence of crypto and AI, driving technological advancements and capturing substantial market attention. To provide context, here’s a brief recap from our previous research report:

Key Milestones for AI Agents

• Early 2024: Li Fei-Fei and her team at Stanford University released the paper "AI Agent: A Survey on Multimodal Interaction Frontiers," exploring how AI agents can make autonomous decisions and take actions based on diverse environmental data. This sparked strong academic and industry interest, laying the theoretical foundation for future AI agent development.

• July 2024: The debut of Terminal of Truths (ToT), an AI model that gained widespread attention through its humor and creativity. It interacted with users via social media and even secured funding from A16Z co-founder Marc Andreessen. This event ignited discussions around AI autonomy and governance, marking a pivotal turning point in the AI Agent narrative and dramatically boosting public interest.

Key Web3 Projects

1. Luna (AI K-pop Idol):

• An AI idol built on the Virtuals Protocol, amassing 6 million followers on TikTok. She interacts with fans in real time, redefining traditional fan-idol engagement and showcasing AI's potential in creating virtual celebrities within entertainment.

• Capable of conducting transactions on social platforms, offering new perspectives on AI’s role in digital economies and its influence on consumer behavior.

2. AI16Z (AI Venture Capital Fund):

• Leverages AI for investment decision-making, using big data analytics and market forecasting to enhance efficiency and accuracy while minimizing human bias.

• Operates as a DAO, allowing community members to influence investment decisions by holding its token, thereby establishing a unique investment ecosystem and governance model.

3. AIXBT (AI Crypto Market Analyst):

• Specializes in providing cryptocurrency market analysis and insights. In the volatile crypto landscape, it helps users stay updated in real time and supports informed investment decisions—offering high practical utility.

• Active on Twitter and other social platforms, disseminating analytical results efficiently and demonstrating AI’s ability to communicate effectively with humans. Also incorporates technical frameworks like Eliza for building encrypted AI agents.

4. Zerebro (AI Artist):

• Generates diverse artistic content including music, memes, and NFTs, highlighting AI’s creative potential and blurring the lines between human and AI-generated art.

• Collaborates with human creators on artworks, showing AI’s capacity as a collaborative tool to expand creative boundaries. Built on the open-source ZerePy Python framework, it enables non-programmers to deploy AI agents easily, democratizing access to AI-powered art creation.

The organic integration of AI and GameFi could become the key inflection point enabling Web3 games to surpass their Web2 counterparts—ushering in a “Netflix moment” for gaming.

AI Agents bring multiple advantages to Web3 gaming, including:

• AI-Powered Asset Issuance and Circulation: AI Agents can act as traders conducting on-chain asset transactions, interacting with both human players and other AI agents. Additionally, AI itself carries unique meme culture value and can issue its own tokens, enhancing liquidity and tradability of AI-related assets and injecting vitality into in-game economies.

• Dynamic Storylines: AI Agents can generate personalized, adaptive narratives tailored to individual players, delivering truly unique experiences and overcoming the problem of homogenized game content.

• Enhanced Player Interaction: NPCs powered by AI exhibit high flexibility and adaptability, dynamically adjusting their behavior based on player styles to create realistic, engaging interactions that enrich the overall gaming experience.

• Cross-Platform Integration: AI Agents excel naturally at cross-platform operations. Whether moving across different gaming platforms or various blockchain networks, AI executes transactions faster and more securely than humans, reducing risks such as phishing attacks. This significantly lowers barriers for players and enables smoother, more efficient cross-platform gameplay.

• Decentralized AI Model: Blockchain ensures transparency and fairness in AI Agent operations, mitigating potential biases and fostering a more equitable gaming environment.

b. Xterio: A Pioneer Empowering GameFi with AI

As a trailblazer in the AI + GameFi space, Xterio has led the way in deeply integrating AI with blockchain technology.

Xterio is a Web3 gaming platform and publisher aiming to build an interconnected, full-lifecycle “gaming industry chain”—offering one-stop ecosystem services covering game publishing, virtual asset trading, and derivative value-added services.

1. Top-Tier Team & Backing from Funplus

Xterio’s founding team comprises veterans from leading game developers such as FunPlus, Electronic Arts, Zynga, Activision Blizzard, Krafton, Jam City, and NetEase, with members averaging over 15 years of industry experience.

A key highlight is Xterio’s parent company, Funplus—the global leader in the strategy game (SLG) genre. According to data.ai’s annual list of overseas revenue for Chinese game publishers, Funplus has dominated for five consecutive years, once placing three titles among the top 10 mobile games globally: *State of Survival*, *King of Avalon*, and *Evony: The King's Return*. In 2024, Funplus achieved nearly $400 million in revenue, with a valuation reaching $8 billion, ranking alongside ByteDance and miHoYo among the world’s top 10 gaming unicorns.

Xterio’s CEO, Michael, previously served as Chief Strategy Officer (CSO) at FunPlus and spent 22 years as COO and Executive Chairman at NetEase Games. He is a veteran figure in the Web2 gaming world, comparable in stature to Elon Musk or Jack Ma within the gaming industry. Despite his prominent position, Michael boldly transitioned into Web3 entrepreneurship. As he put it: “I'm not good at being ‘rational.’ To me, rationality is almost synonymous with boredom. While many see it as a positive trait, I prefer embracing an ‘irrational’ approach to life. It's precisely these seemingly ‘irrational’ moments that ignite the spark of my entrepreneurial journey.”

Backed by a powerhouse parent company, Xterio benefits from a stellar team, extensive game development expertise, and strong R&D capabilities. Notably, Funplus began exploring AIGC applications in gaming as early as 2023, laying a solid technical foundation for Xterio.

In the primary market, Xterio raised an $80 million seed round led by Funplus, followed by funding from top-tier investors including Binance Labs, Makers Fund, and Foresight Ventures.

Source

2. Dual Rollup Architecture on Ethereum and BNB Chain

Technically, Xterio L2 adopts a dual Rollup architecture leveraging both Ethereum and BNB Chain to build a dedicated gaming Layer 2. In April 2024, Xterio partnered with BNB Chain to use BNB as the gas token on Xterio Chain and operate as a settlement execution layer on BNB Chain, utilizing OP Stack for its Rollup framework, with EigenDA serving as the data availability layer.

On the Ethereum side, Xterio collaborates with AltLayer and EigenLayer to launch a Restaked Rollup specifically designed for gaming. This Rollup leverages the security of ETH restaked through EigenLayer, making it the only game-focused AVS (Actively Validated Service) currently available—a perfect fit for the restaking narrative and strengthening Xterio’s position in security and decentralization.

On the BNB Chain side, Xterio has developed a mature product matrix ecosystem, launching three proprietary AAA games—*Age of Dino*, *Palio*, and *Overworld*—and partnering with over 70 additional game projects. On-chain metrics show over 140 million total transactions and more than 16 million active user addresses, with growth continuing rapidly.

3. Overview of Xterio’s Ecosystem Games

Xterio has launched three core ecosystem games:

1. Age of Dino: A flagship AAA strategy mobile game that has surpassed 10 million total users.

2. Palio: An innovative AI-driven game developed by Xterio featuring an “Emotion Engine” designed to give NPCs human-like empathy and interactivity. Users can create AI agents and form evolving emotional bonds with them.

3. Overworld: A Western-oriented ARPG open-world game available on Mobile and PC, inspired by *Genshin Impact* with a Marvel-style anime aesthetic. Core gameplay includes open-world exploration, PVPVE combat, weapon forging, social interaction, and base building. The Overworld NFT collection has exceeded 10,000 ETH in total trading volume.

c. Xterio’s Vision for AI in Gaming

In the AI gaming space, Xterio’s core value proposition centers on three pillars:

1. AI Engine and Toolkit Built for Games

Xterio focuses on three key areas of technical innovation to deliver an AI toolkit with broad applicability in gaming:

• Human-Centric General AI Agents

Xterio is developing highly human-like AI Agents capable of seamlessly integrating into various aspects of user life—from monitoring on-chain activity to executing trades on behalf of users. These agents are designed to be portable across different games, ensuring consistent and continuous service experiences for players.

• Xterio Emotional Intelligence Chat Engine

Co-developed with Reka (Reka.ai, a company founded by former researchers from DeepMind, Google Brain, and FAIR), this engine goes beyond standard LLMs by accurately detecting and responding to human emotions, delivering warmer, more personalized interactions. This advanced technology powers both Xterio’s AI agents and specific in-game characters, deepening emotional connections between players and virtual entities.

The Emotional Intelligence Chat Engine debuted during the *Meet Your Anima* event in April 2024, achieving impressive results: over 72 million on-chain transactions, processing approximately 1 billion input requests, and generating 300 million output responses.

• Graphics Modeling Technology

Xterio’s proprietary graphics engine offers developers a cost-effective solution for producing visually stunning game assets. This toolset was successfully used to create @PalioAI’s Gen0 NFT series—the largest AI-generated game NFT collection to date. PalioAI, Xterio’s flagship AI gaming product, appears from official teasers to be a pixel-farm game similar to *Pixels*, infused with AI elements. Players may eventually delegate resources and wallets to AI agents for automated management strategies. Although the NFT blind boxes have not yet been revealed, the project’s innovative design and gameplay have already generated significant anticipation.

(Palio game interface sneak peek)

2. Cross-Platform Game Publishing

Xterio is one of the few studios in the industry capable of building cross-platform games spanning PC, mobile, and web. Through AI integration, Xterio provides developers with a comprehensive suite of publishing tools:

• Launchpad and Ecosystem Support: Streamlines game launches and includes built-in community engagement tools.

• NFT Marketplace: AI-enhanced solutions for creating and trading blockchain-secured game assets.

• Cross-Chain Capabilities: Enables seamless deployment across Ethereum, BNB Chain, Optimism, and other blockchains.

3. Transforming Game Mechanics with AI Agents

Xterio is revolutionizing game mechanics using AI Agents. The recently launched *Befriend AI* campaign exemplifies this innovation.

A collaboration between Xterio and AI startup Reka, the campaign features a cutting-edge emotional AI engine that allows users to interact with AI characters, experience emotional companionship, receive dynamic feedback, and earn final pre-TGE airdrop rewards of $XTER. Key features include:

• AI Oracle Interaction Mechanism: Users engage in daily emotional conversations with the AI Oracle, which responds empathetically and adapts content based on user input.

• Daily Task System: Completing tasks and inviting others increases scores, unlocking new scenes and bonus rewards.

• Technical Edge: The jointly developed emotional AI engine deeply understands user sentiment, delivering highly personalized interactive experiences.

This marks the first innovative experiment embedding AI agents directly into the game world. Looking ahead, we can anticipate AI NPCs that dynamically adapt to player strategies, introducing greater challenge; storylines generated by AI that evolve in real time based on player choices; and custom AI companions that guide players through expansive game worlds, offering real-time insights and strategic support...

d. Community Growth and Achievements

Xterio’s leadership in the AI + Web3 gaming space is strongly supported by community metrics:

• Over 8 million users and more than 100 million cumulative transactions.

• Ranks third in active user wallets (UAW) among all gaming sectors on Layer 2 chains, with over 1 million ETH staked.

• Launched the first AI-driven asset generation engine successfully integrated into its ecosystem.

• Its Launchpad has raised over 5,000 ETH through NFT sales, reflecting strong community confidence and providing robust financial backing for future growth.

e. Strategic Rationale for Investing in Xterio

From an investor perspective, Xterio is not just a Web3 gaming company—it is also an infrastructure enabler shaping the future of AI + GameFi. By building robust AI engines and frameworks, Xterio empowers countless developers to participate directly in this gaming revolution. Our investment thesis rests on four pillars:

• AI-Driven Game Transformation

The rise of AI Agents represents a breakthrough moment for GameFi—a true “Netflix moment” for the gaming industry. AI brings dynamic interactivity, personalization, and deeper immersion to Web3 games, poised to reshape the entire sector. As one of the few studios capable of building cross-platform games (PC, mobile, web), Xterio has deeply integrated AI technologies and offers developers a full-stack publishing toolkit—including a universal AI Agent framework, emotional intelligence chat engine, and cost-efficient graphics modeling tech—establishing high technical moats and first-mover advantages.

• Strong Backing and Elite Team

Fundamental support comes from parent company FunPlus, a $8 billion-valued global SLG leader and top-10 gaming unicorn. Michael, formerly CSO at FunPlus and a seasoned executive at NetEase, brings invaluable experience and visionary leadership, greatly bolstering investor confidence.

• Diversified Game Portfolio

Xterio has successfully launched three distinct ecosystem games: *Age of Dino*, an Eastern AAA strategy title; *Palio*, the first AI game with an “Emotion Engine”; and *Overworld*, a Western anime-styled ARPG open-world game. This diversified portfolio caters to varied player demographics, reduces reliance on any single title, and strengthens ecosystem resilience and long-term sustainability.

• Vibrant Community Ecosystem

Xterio has cultivated a thriving community with over 10 million users, over 100 million transactions, ranking third in active wallets among all L2 gaming ecosystems, and securing over 1 million ETH in staking.

For Foresight Ventures, Xterio embodies the foundational logic of the future gaming industry: AI-powered, user-centric, and community-built. Backing Xterio reflects not only trust in its technological and market execution but also our firm conviction in the AI Agent + GameFi paradigm.

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