What is Pi Network? Is Pi Network a Scam?
Pi Network is a controversial cryptocurrency project that has been making the rounds in the crypto industry for the past few weeks after being listed on some crypto exchanges, including the popular trading platform Huobi.
Since its inception four years ago, the project has attracted millions worldwide, as users can earn and earn their own native token called Pi by completing simple tasks.
Some experts have raised concerns about the legitimacy of Pi Network, claiming that the project is nothing more than a classic Ponzi scheme that seeks to defraud investors in the long run. But is this true? Let’s take a look.
This article reveals everything about the Pi Network, from its inception to its controversial final list.
What is Pi Network?
Pi Network is a cryptocurrency project that allows users to mine via their smartphones. The platform is designed to include everyone in the crypto space, regardless of whether they are familiar with digital assets or not.
Pi Network is the brainchild of Stanford University graduates Nicolas Kokkalis, Chengdiao Fan, Aurélien Schiltz and Vince McPhillips. The team started developing the project in 2018, but they published the whitepaper and launched the app a year later, on March 14, 2019.
Miners on the Pi Network are rewarded with Pi coins, which the project’s creators claim will gain value once the protocol launches on the mainnet.
Unlike Bitcoin miners, people who mine on the Pi Network are called Pioneers. The project claims to simplify the mining process, as Pioneers only need to tap one button every 24 hours to conduct mining activities via their smartphones. Mining is done in the Pi Network application, which is available on Android and iOS devices.
The project uses a multi-level marketing (MLM) approach to grow its user base. For clarity, an MLM, similar to a pyramid scheme, is a controversial marketing strategy in which existing users are rewarded for inviting new users into the ecosystem. New members are recruited, in turn, to recruit more people.
In the case of the Pi Network, existing users (referrers) receive more Pi coins for inviting new ones (referees) to join the network. Once the referrer joins the platform and becomes active, the referrer receives a certain percentage bonus on daily mining.
This plan greatly facilitated the growth of the project’s customer base. The ecosystem is currently advertised as having over 35 million active global users.
Pi Network, unlike other decentralized mining protocols, requires users to complete a Know Your Customer (KYC) process. Here users will provide personal information about themselves. According to the project, this process helps prevent users from creating multiple accounts.
How Does Pi Network Work?
Pi Network claims to use a consensus mechanism called Stellar Consensus Protocol (SCP). SCP is an algorithm that allows users to receive rewards for contributing to the network. The project claims that SCP is faster, more secure and more scalable than other consensus mechanisms such as Proof-of-Work (PoW) and Proof-of-Stake (PoS).
The Pi Network community consists of four roles:
- Pioneers (Miners)
- Contributors (Security Providers)
- Ambassadors (Distributors)
- Nodes (Validators)
- Pioneers (Miners)
Pioneers
These are users who perform mining activities on the Pi Network. Users in this category verify that they are humans and not robots by clicking a button on the Pi network app every 24 hours to conduct mining activity. Currently, according to reports prepared by the project itself, the total number of pioneers in the network is approximately 35 million.
Although Pi Network claims to carry out mining activities, the truth is that no real mining activity takes place. How? Cryptomining often involves processing and verifying transactions by solving complex computational math problems. Once transactions are verified, they are added to a distributed ledger built on the blockchain. Miners are then rewarded with newly minted digital assets for their contributions to the network.
The Pi Network does not currently have a functional blockchain network. This means that no transactions occur on the platform, so there is no use of miners in the protocol.
In an effort to launch a blockchain network (mainnet), the project’s developers announced the launch of a closed mainnet in late December 2021. This network layer is designed for testing and collecting data before the future launch of its mainnet. According to the developers, the Pi Network mainnet will be released once the Open Mainnet is ready. Open Mainnet does not currently have a launch date.
Contributors (Security Providers)
Pioneers become eligible to become Contributors after actively mining for three days. Contributors are Trailblazers who belong to a security circle of three to five users. Becoming a network Participant provides a Pi coin reward of one to higher.
A Security Circle is a group of three to five users who trust each other on the Pi network.
It is noteworthy that a user can be added to more than one security circle.
Ambassadors (Distributors)
Users become Ambassadors (distributors) when they invite new people to the Pi Network through referral codes. Ambassadors receive a 25% increase in earnings for every user they invite to join the network. This means that the higher the number of guests, the higher the winning rate for the Ambassador.
Unlike the Contributor category, where users can be added to multiple security circles, an invitee can only join one Ambassador’s winning team.
Nodes (Validators)
Pioneers can become validators on the network by running a Pi software node on a desktop or personal computer. Validators are rewarded with an additional boost to their Pi mining process by running a node.
The network currently has more than 10,000 active testnet nodes. The creators of the project claim that nodes will join to secure the Pi blockchain once the mainnet Open Network goes live.
Pi Coin Controversial Lists: Where Can You Trade Pi?
As of January 18, 2023, there is no fixed date when the Pi coin will be listed for trading. Since its launch in 2019, the project has failed to capture value for the cryptocurrency.
Pi Network’s roadmap consists of three stages. The team has completed the first two phases: project design, deployment, trust graph bootstrapping, and testnet.
According to the white paper, the Pi blockchain will be launched when Phase 3 of the mainnet goes live.
In December 2022, several crypto exchanges, including Huobi, BitMart, and XT.com, listed a synthetic version of the Pi coin with the PI/USDT trading pair. However, it is worth noting that the digital asset labeled Pi coin on these exchanges are I-owed-to-size (IOU) tokens that users can use to speculate on the price movement of Pi. This means Pi holders cannot deposit or sell their accumulated tokens on these exchanges.
In a frenzy sparked around the supposed launch of the long-awaited Pi coin, the project developers announced that they do not approve of any Pi listing conducted by any exchange. The team added that users “should not interact with any of these exchanges or third-party actors as their actions are not linked to the Pi Network.”
Is Pi Coin Scam?
Since Pi Network started gaining traction, experts have raised concerns about the project’s legitimacy, security, and potential for fraud. However, it is difficult to label Pi Network as an outright scam, as the project does not require users to pay to access the platform’s services.
However, it is worth noting that users’ time may be stolen, as the activities they perform on the platform may not provide profit in the long run.
Solution
In a nutshell, Pi Network is a crypto project that allows users to mine through their smartphones and earn rewards in the form of Pi coins, the network’s native cryptocurrency. A group of Stanford University graduates created the platform to make it easier for anyone to get involved in the crypto world.
While the project attracted the attention of many users around the world, some experts questioned the legitimacy of the platform and whether it was a Ponzi Scheme. The recent listing of a synthetic version of the Pi coin on some popular exchanges has also made the project controversial as Pi developers have warned users to desist from trading the coin on such platforms.
