There are tens of thousands of cryptocurrency projects in existence, although most struggle to get enough attention from the non-crypto community. One blockchain project that's trying to make crypto mining as easy as possible, especially for non-crypto veterans, is the Pi Network.
Despite being newer to the crypto scene, the Pi Network has attracted a noticeable fanbase since its founding in 2019. However, that hasn't stopped it from attracting its fair share of controversy as well. Many have even claimed that the Pi Network is a scam.
Here's what you need to know about the Pi Network, its Pi Network coin, whether it's legitimate, and how it operates.
What Is The Pi Network?
The Pi Network is a blockchain network that allows anyone to mine cryptocurrency (in this case, the Pi coin) on their smartphones. Pi was founded back in 2019 by four Stanford graduate students: Nicolas Kokkalis, Chengdiao Fan, Vince McPhilip, and Aurélien Schiltz.
Just a few months after launching on March 14 of that year, the Pi Network grew to over half a million users. As of March 2022, the total user base officially surpassed 33 million.
Like most cryptocurrencies, the Pi coin isn't run by a bank, government or any centralised entity. Also, while mining popular cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH) is daunting for most people, the Pi Network aims to make crypto-mining as effortlessly simple as possible.
How Does The Pi Network Work?
The Pi Network works by using a simple consensus method where smartphone users can vouch for each other as being trustworthy. Instead of relying on more energy-intensive methods like Proof-of-Work (PoW), which Bitcoin uses, Pi secures its ledgers using a peer validation process. This process is known as the stellar consensus protocol (SCP).
SCP Process Is Much Less Resource Intensive
By comparing and contrasting the most trustworthy participants throughout multiple social circles via SCP technology, the Pi Network can determine who is trustworthy to record transactions. This is much less energy-intensive.
This means that instead of needing a graphics card or an advanced computer to mine crypto, users can contribute to crypto mining directly from a less powerful device, like a smartphone. Although users can't withdraw or exchange their Pi coins yet, the currency is stored within a unique Pi wallet that requires a passphrase to access.
Why Is The Pi Network So Popular?
The Pi Network is trying to tackle a couple of big problems in the world of digital currencies. The biggest of which is the centralisation of crypto mining and power consumption. Back in the early 2010s, when few people were mining cryptocurrencies like Bitcoin, it was easy for new participants to mine from their computers and earn a decent return.
However, as Bitcoin began to grow in popularity, miners realised they could earn even more if they had more than one computer. As prices for Bitcoin rose, the world eventually saw the rise of entire mining pools or mining farms, representing hundreds and thousands of computers using specialised mining equipment, like ASICs.
At that point, it became difficult for the majority of users to contribute to the network and get rewarded. At the same time, Bitcoin's rising popularity started becoming a drain on the global power grid. Bitcoin mining alone consumes 91 terawatt-hours of power each year, more than entire countries like Finland.
Pi Network strives to solve both of these problems by letting people mine crypto on their smartphones, opening up crypto mining to the average person. The Pi Network enforces a strict verification system where only one device can ever be registered per person, linking each account to a mobile phone number or Facebook account.
Without the need for demanding consensus algorithms, like PoW, the Pi Network uses significantly less energy than BTC mining.
Pi Network Mining Explained
Mining on the Pi ecosystem involves downloading the smartphone app via the google play store or ios app store, creating an account, and activating the app once every day.
The network has a strict rule that only one device can be used per person while preventing fake accounts and bots from accessing the network (using Google's ReCaptcha and other technologies). Otherwise, the Pi Network doesn't have the same know-your-customer (kyc) protocols that some other blockchain apps and dapps require.
Multiple Earning Levels
There are multiple earning levels in the Pi Network. The first level is called pioneer, which are active users that open the app every 24 hours.
The next level is called a contributor. This level is available after three days on the network, which allows the user to vouch for high-trust individuals, referred to as a security circle. The maximum number of security connections is five.
Above that, there's an ambassador level, which provides a bonus multiplier of 25% for each subsequent individual the user refers who signs up using a referral code.
The Pi Network offers a higher mining rate to the earliest backers of the platform. The mining rate during the testnet was around 0.2 Pi per hour. Following the mainnet's launch, the mining rate fell to 0.1 Pi per hour.
What Is The Pi Coin?
The Pi Coin, also referred to as the Pi cryptocurrency, is the flagship native token on the Pi Network. Users can earn Pi cryptocurrency by mining on their smartphone, although it's currently not available for trading on any crypto exchange as of March 2022.
Popular tokens like Bitcoin have a hard-coded limit to the number of coins that could be minted. The same applies to the Pi Network coin, which confirmed there would be a total of 100 billion coins. However, a big portion of this total is allocated for future mining.
The Pi network creates a Pi crypto supply for each person who joins the network up to the first 100 million users. This predetermined Pi supply gets slowly released over the lifetime of that member, depending on their engagement and contribution to the network's security.
Pi network coin is also distributed on a referral basis. Users who refer new members onto the Pi platform receive a referral bonus, as does the referee. This Pi cryptocurrency bonus can be accessed by both parties as a multiplier to their current mining rate.
Is the Pi Network Mainnet Live?
The Pi network operated primarily on a testnet, letting users mine Pi coins, but with little means of selling or trading it. Only as of summer 2022 has the Pi network mainnet been activating, giving users a way to migrate pi tokens mined on their phones and successfully registering it on the primary Pi blockchain.
This also means users need to follow know-your-customer (KYC) protocols to successfully register onto the blockchain and transfer their Pi coins onto the mainnet. While Pi coins aren't available for trade against other cryptos as of July 2022, the launch of the Pi mainnet is a big step in that direction.
Pi Coin Price Predictions
The Pi Network coin isn't available for trading yet, which means the price of Pi is zero as of this writing (July 2022).
Pi Network still hasn't attracted mainstream popularity just yet, too, and there aren't many experts making predictions on the Pi cryptocurrency. Crypto website DigitalCoinPrice predicts Pi coin could trade for around US$0.007, or less than a penny. There's also no information about how many Pi coins are currently floating around on the platform itself until it goes public via an exchange.
The project's management has insisted that Pi coin isn't "free money" but rather a long-term project whose success depends on the growth of its collective network.
However, users hope that the platform's flagship token will be listed on a big exchange like Binance. According to the project's roadmap whitepaper, now that the mainnet has gone live, the next big goal for management is to deploy Pi onto an exchange, as per its phase 3 deployment plan.
While popular altcoins have earned billion-dollar valuations, a successful Pi Network launch probably won't get the same attention that it may have seen a few years ago. Crypto is in a lull in 2022. Also, investors are more worried about future rate hikes from the Fed and rising inflation, which means speculative assets, such as the Pi coin, will struggle to receive attention.
It's possible that Pi coin could see a market cap between US$50 million to US$100 million within its first year of going public—due almost entirely to its 33 million strong user base. It's worth noting that the Pi Network had a user base of 29 million in November 2021, so that's 4 million new users in less than six months during a crypto bear market.
Is The Pi Network A Scam?
Pi Network isn't technically a scam, but it has been accused of being a scam by some. Given that the Pi Network coin isn't available for an exchange yet and the platform grows through referrals, many critics have referred to the Pi Network as a glorified Ponzi scheme or a multi-level-marketing (MLM) scam.
Technically this isn't correct. The Pi Network is a free platform to use, and participants aren't investing any of their money. What they are investing, however, is their time on their mobile phone while they're mining on the mobile app, even if it's only to turn the app on briefly.
However, the Pi Network does strongly encourage recruiting, as seen by its ambassador role. Hardly any other popular digital currency platform offers a similar type of recruiting incentive as the Pi Network does.
Does The Pi Network Show Ads?
The biggest criticism regarding the Pi Network is that the developers show advertisements to the 33 million users of the platform. That means that while Pi Network's users are mining on the platform and receiving a cryptocurrency that can't be exchanged for fiat currency, the developers are supposedly making money by showing the ads. There's also not much other functionality to the Pi Network as of yet.
This criticism becomes moot once the Pi Network coin becomes available on mainstream exchanges. This way, participants can exchange their Pi digital currency for Bitcoin or Ethereum and then sell that for USD or any other fiat of their choice. The more popular Pi coin gets, the more people will expand its functionality and use it for other kinds of transactions, like buying non-fungible tokens (NFT).
While the Pi Network has a noble goal, letting everyone mine cryptocurrency and making blockchain technology more accessible, there's been a lot of controversy surrounding it.
The strong incentive structure heavily rewards recruiting, while miners are paid in a native token that has no value at the moment.
On the flip side, users don't need to pay anything to get involved with the Pi Network. All they need to do is download the Pi app on their Android or iOS device and activate it once a day. There's also a chance that Pi could list on a big exchange like Binance, which would make it much more popular. In the future, the Pi coin could even be used to buy goods and services, NFTs, etc. In some areas, such as Vietnam, people are already transacting in Pi coin instead of fiat, although this is still far from mass adoption.
All of this is still speculation, but the Pi Network's massive user base means the project has a lot of potential.
FXCM Research Team
FXCM Research Team consists of a number of FXCM's Market and Product Specialists.
Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.
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