Is This Cryptocurrency A Scam?

What is Pi Network?

Launched in 2018 by Nicolas Kokkalis and Chengdiao Fan, Pi crypto was invented as an attempt to simplify the accessibility of cryptocurrency and introduce more people to cryptocurrency through a simple crypto mining and management system. 

The most appealing feature of Pi cryptocurrency at launch is its mobile mining feature. Using the Pi mobile application, users can mine Pi coins on their mobile devices. Participating in the mining program was solely by invitation. 

The Pi mobile application can be installed on Android and iOS devices. After installing and setting up the application, users can mine Pi coins on their devices with a single click. Members of the Pi network are popularly known as Pioneers. Since its launch, Pi network has garnered a large social media following and has seen incredible growth in participation with a reported 33 million members as of 2022.

Network participants can play a number of roles including running a node on their personal computers, referring new members, or mining Pi coins on their mobile devices. These roles are rewarded with Pi coins.

How Pi Network Works

For the Beta stage of the project, the mobile application simulates the mining system which will be properly launched when the mainnet is fully functional. The mobile application users take part in block validation and receive rewards in Pi cryptocurrency. 

When active, miners on the mobile app connect to one or more nodes. When connected, mobile miners inquire if the transaction has been recorded on the ledger. They also get the most recent block number and the hash value of that block.

Rewards for mining the block are distributed to the node owners and the mobile miners.

Consensus Algorithm

Pi network runs the Stellar Consensus protocol (SCP). SCP was developed by David Mazières, Chief scientist at Stellar Development Foundation for the Stellar blockchain. It uses a novel mechanism called Federated Byzantine Agreements to ensure that updates to a distributed ledger are accurate and trustworthy. 

The SCP protocol employs a real voting system. Nodes on the network vote on the validity of a block and the next block to be mined. A block is only mined when a majority of the nodes agree that it should be mined next and also confirm its validity. The nodes that participate in this consensus are elected by the creator of the system. The SCP is energy-friendly but is criticized for being centralized.

Tokenomics and Reward System

Pi coin is the native token of the Pi network. Users on the Pi network earn Pi coins through mining. Holders can use their Pi coins to pay transaction fees and also perform transactions on applications and marketplaces built in the Pi ecosystem. Pi coin supply system is guided by activities on the network and distributed solely as user rewards. 

There was no official pre-mine but users who participated in the beta mining program can port their tokens to the mainnet. Unlike many other cryptocurrencies, it doesn’t have a fixed total supply.

Each user that joins the Pi network (by creating a Pi account) and is allocated a pre-determined number of Pi coins. This allocated amount is mined over time. That is, the user can only mine this allocated number of tokens throughout their lifetime. This allocation is made only to the first 100 million users on the Pi network. A reward system also exists for users who refer new members to the Pi cryptocurrency project.

The Pi coin mining protocol mints an extra Pi coin for every coin minted for a member or referral reward. This extra coin is reserved for compensating developers on the network. The total Pi coin supply is a sum of the member, referral, and developer reward.

Governance Model

Pi network operates a ‘Semi-DAO’ governance model. In contrast to the widely known decentralized governance system, Pi network adopts a governance system that keeps a central team in charge while the community forms a strong force that contributes to the project’s decision-making. The governance model system varies; a two-phase plan that depends on the number of active network users. 

If the number of active users on the Pi network is less than five million, the team directly solicits inputs from the general community on proposals. Through the project’s forum built on the mobile mining application and other engagement media, the project team opens up conversations with the community. Inputs from the rest of the community are considered before making the final decision. The team ultimately decides the next line of action. As the community grows and exceeds five million active participants, the second phase of the governance system is employed. The team sets up a committee consisting of known contributors from the community. The Committee is in charge of developing proposals and organizing community contributions. The Pi network forum is still open to contributions from the community. The committee proceeds to make a final decision using contributions from the community members.

Testnet and Mainnet System

Pi network was launched as a research project and operated its Beta phase as early as 2018. The Testnet was launched about two years later and allowed developers on the Pi network to test certain features before they were finally deployed on the mainnet.

After much anticipation, Pi network launched its mainnet in the last quarter of 2021. The mainnet provides a platform for pioneers to create a proper wallet and port their mined Pi cryptocurrency to their wallet and perform peer-to-peer transactions.

The mainnet migration features a KYC verification process and a list of to-dos that qualifies users to own and operate a proper wallet. 

Check out this video tutorial to learn how you can create a Mainnet wallet and transfer your Pi coins.

Is Pi Network a Scam?

If you picked up the slightest interest Pi cryptocurrency, the higher chance is that this interest gets dashed by statements regarding the value of Pi coins and the credibility of the project. 

Pi crypto applications require no extra installation cost and are pretty easy to run, yet the ‘Scam’ statements were very popular; they still are. This is mainly due to the delay on the mainnet and listing of the Pi cryptocurrency on exchanges.

Thanks to users’ inability to move their mined Pi coins and the general sentiment on Mobile mining, Pi network was banded a ‘high-level’ marketing scheme and predicted to end ultimately as a scam. The continuous growth of the Pi network community and the delay in making the mined cryptocurrencies further intensified these statements.

With recent developments, the Pi crypto team is proving otherwise. With the launch of the mainnet, it now allows users to spend their Pi cryptocurrency and several marketplaces are rumoured to accept payments in Pi coins.

PCM does not participate in pricing. We also do not interfere with sellers’ pricing. However, we will monitor the barter closely. Fraudulent behavior will be punished. You can view the relevant content in the Pi Chain Mall User Agreement. pic.twitter.com/kge0yfLqN1

— PiChain International (@pichainmall) August 25, 2022

The PiChain International is reportedly being developed to allow merchants to create stores and accept payment in Pi coins. Social media updates suggest the marketplace is actively being developed and nearing its initial release.

Notwithstanding, compulsory KYC is still a topic of popular discussion, and the project has been accused of complete centralization.

What is the Value of Pi Network?

As of this writing, Pi cryptocurrency is yet to be listed on any crypto exchange (Distinguish the original Pi cryptocurrency from the other fake Pi tokens minted on other blockchains). However, there have been reports of trading activities amongst peers. With the mined coins now transferrable, several analysts have offered predictions for the value of Pi coins.

The Pi network community have also made several predictions and quotation for the Pi cryptocurrency. Digital Coin Price predicts Pi coin to trade at around $0.007 at the end of 2022. The Pi community quotes even higher values for the Pi coins.

These are pure speculations, and the real value of Pi network will only develop after exchange listing and resumption of trading activity. The real value could vary significantly from these speculations. Investors should endeavour to do their own research while working with these speculations.

Final Thoughts

The big question remains about the authenticity of Pi cryptocurrency and if it will be valuable. Despite the plausible technological developments and the huge community, the project has managed to build over the past four years, its reputation is still in question. 

Considering the rigorous computational protocols involved in cryptocurrency mining, Pi network provides an incredibly easy way to earn cryptocurrency and has seen a positive reception from enthusiasts who fancy the idea of earning cryptocurrency with minimal effort.

Sceptical about the legitimacy of this process and the value of Pi network, a majority of the cryptocurrency community still doubts the intentions of the project. Even with the launch of the mainnet and some serious developments and adoptions going on in the Pi community, these sentiments haven’t changed too much.

Apart from proposed listing on exchanges, the Pi crypto community is developing media to utilize the Pi coin in direct commodity purchases and other peer-to-peer exchange facilities. However, just like every other cryptocurrency venture, investors are advised to apply caution. Cryptocurrencies are still high-risk investments and Pi coin is no exception.