Topics Blockchain
Bybit Learn
Bybit Learn
Intermediate
Jun 17, 2022

Pi Network: The New Bitcoin — Or a Scam?

The cryptocurrency world is moving faster than ever, with new coins and tokens being introduced daily. This can be quite confusing, especially to the average investor. It can also be difficult to tell whether new cryptocurrency projects are simply ways of making money, or just scams. One of these is Pi Network.

With 33 million “Pioneers” spanning the globe, the Pi Network is nothing less than a wildfire. Active users of the Pi Network have grown from 1,000 to millions in a mere three years. Just what is Pi Network, and why is it so popular? One main reason is that unlike traditional blockchains such as Bitcoin, Pi tokens can be mined with a single click. Yet there are some uncertainties surrounding the coin. For one, the Pi coin still has no value — as it hasn’t yet been listed on any exchange. Its model is also undeniably similar to multi-level marketing (MLM) and pyramid schemes.

Want to understand more about the workings of this mysterious network? Then read on to find out more about it and decide for yourself if it’s legitimate or a scam.

What Is Pi Network?

The Pi Network is designed to be a revolutionary decentralized network in which its currency is mined on smartphones, rather than energy-intensive ASICs or GPUs. Founded by Stanford researchers Nicolas Kokkalis and Chengdiao Fan, Pi Network strives to be a more efficient and accessible way of conducting transactions. As compared to traditionally established networks like Bitcoin, which require energy intensive machines, the Pi Network is easy to operate and claims to be energy efficient. It’s still in its initial stages of development, but the team intends to make it the go-to currency for transactions.

It should be noted that the Pi Network’s coin is different from the Pi Network DeFi token. The Pi Network DeFi aims to smoothen capital flow by allowing people to lend and borrow freely around the world. It runs on the Binance (BNB) blockchain, and is currently listed on a few DEXs, such as PancakeSwap.

The Pi Network is a new crypto asset based on blockchain technology. It has garnered a wide user base in the initial phase of its launch. Pi Network is different from many other cryptocurrencies because it uses a unique algorithm known as Stellar Consensus Protocol that allows users to earn rewards for participating in the network.

Stellar Consensus Protocol

The Stellar Consensus Protocol provides a meritocratic-based algorithm that incentivizes users to contribute to the network by verifying transactions and blocks. This means the amount of Pi coins they earn is proportional to the effort they put in. The more users contribute to the Pi ecosystem, the more rewards they earn. This simple model enables people to earn tokens with one click of a button on their mobile phone.

Pi Network app on the mobile phone

Source: Minepi.com

The innovative Stellar Consensus Protocol (SCP) has the potential to revolutionize the way we achieve consensus in distributed systems. The Pi ecosystem is based on a novel approach called the Federated Byzantine Agreement (FBA), which allows a network of computers to come to a consensus without needing a central authority. The SCP is designed to be secure, scalable, and faster than other protocols like proof of work (PoW) and proof of stake (PoS).

Differences Between PoW and SCP

The differences between proof of work (PoW) and Stellar Consensus Protocol (SCP) are explained below.

PoW is the most well-known and widely implemented consensus algorithm, used by renowned cryptocurrencies like Bitcoin and the current version of Ethereum. It’s a mechanism that rewards miners for solving a complex mathematical problem in a block. The first node that solves the problem and validates the transaction is rewarded with cryptocurrency. While it is a very secure mechanism, as the blockchain expands it has become increasingly energy intensive.

SCP is energy efficient in comparison to PoW, as rewards can be easily mined on smartphones at low energy cost. Furthermore, unlike PoW, all contributors have distributed rewards according to the amount of effort they put to validate transactions. This makes for an even more decentralized protocol, as large organizations will not form mining pools to ensure they get rewarded.

Pi Network: How it Works

The SCP algorithm is the heart of the Pi Network protocol and manages the network topology. It is a distributed algorithm that runs on each node of the network. The algorithm is designed to converge in a finite number of steps, regardless of the network size or the number of nodes. This makes the Pi network secure, decentralized and energy efficient.

This peer-to-peer network allows users to earn rewards by participating in its consensus process through the simple tap of a button. The tokens mined go into the Pi app, which also functions as a crypto wallet. It’s currently in its beta phase, and is open to anyone who wants to join and help grow this enclosed network that will eventually move to an open network.

Pi Network App Features

Source:minepi.com

Here’s how you can be a part of the Pi Network:

  1. Potential participants need to submit their "Know Your Customer" (KYC) information, such as copies of their government-issued identification, before they can trade on future apps released on the Pi Network.
  2. Signed-up members just need to click a lightning button on the Pi Network app to start mining Pi. After 24 hours, miners need to tap the button again to continue mining Pi coins.
  3. Users can have four roles on Pi:
    1. Pioneer: Miners who tap the lightning button to mine Pi.
    2. Contributor: Participants who provide a list of trusted users to the network, for which they’re rewarded with an incentive.
    3. Ambassador: Participants who introduce new users to the network through their referral code and earn a bonus.
    4. Node: Participants that run the Pi node software on their personal computers.
  4. Users have leverage to hold multiple roles at a single time to make the most of the Pi Network.

How Much Is the Pi Coin Worth?

The Pi coin is the native cryptocurrency of the Pi Network. It’s used to secure the network and power any decentralized applications (DApps) that run on it. Currently, there isn’t yet much purpose or value in holding the token as it hasn’t been listed on any exchanges yet.

The token's maximum supply is based on the Bitcoin model of halving the mining reward. While the Pi coin may not have any value now, it could see exponential growth once it launches. This is because, like Bitcoin, the mining rate of Pi will be halved every four years. This will cause the supply of Pi to decrease over time, while the demand for it will increase. This could lead to dramatic Pi price increases.

Is the Pi Network Legit — Or a Scam?

Available both as a Pi app and as a Pi browser, the network is gaining widespread adoption in the crypto space. The Pi Network allows users to easily earn cryptocurrency by participating in its unique mining process. All you need is a mobile phone and an internet connection. While the mining process does consume some of your phone's battery life, it’s not nearly as intensive as Bitcoin’s mining.

On paper, Pi Network seems like a promising project. The big question is whether or not the Pi Network is truly legitimate. Afterall, crypto scams are commonplace, due to the popularity of crypto as an investment.

Why Pi Network Could Be a Scam

While it may be too early to conclude whether Pi Network is a scam, there are some red flags that concern people:

  • Pi Network operates similar to a multi-level marketing (MLM) or pyramid scheme, in that participants are rewarded for inviting more participants to join.
  • Although one of its self-stated goals is to be a utility-based system, the network currently provides no utility.
  • Its white paper charts a plan for deployment of its open mainnet launch and coin listing, but hasn’t committed any dates so far.
  • The users are the product, in the sense that they input value in the network by sharing their personal information without getting anything in return.
  • The founders are already making profits through opt-in video ads, even though the coin is still not listed.

Why Pi Network Could Be Legit

The other side of the coin suggests a few key factors that make Pi Network seem legitimate:

  • The team behind the Pi blockchain is ostensibly highly experienced, and includes Stanford University graduates.
  • Pi Network aims to have a strong community of users and backers, which increases the chance of success for the Pi coins.
  • The network is actively building a strong developer community to create more valuable apps for their platform via a hackathon.
  • The development team has successfully launched an enclosed mainnet and a Pi Wallet in December 2021, which highlights that they’re actively working on improving their blockchain.
  • The Pi coin has no value, so there’s literally nothing for the network to scam — except people’s time and private information.

Pi Coin Price Prediction 2022–2025

It’s difficult to do a Pi coin price prediction as it hasn’t been listed on any exchanges yet. However, some experts believe that the price of Pi Coins could be between $0.1 and $2 sometime in 2022 — once it’s been listed on major exchanges. By the end of 2023, the price of Pi Coins is expected to continue to increase to $5, as more use cases are developed. The Pi price prediction up till 2025 is highly optimistic, with their value forecasted to touch a milestone of $60.

The main reason for Pi coin's potential price increase is its limited supply. Only a finite number of Pi coins will ever be created, which means that as the demand for this currency grows, its price will continue to rise. Additionally, the Pi coin is backed by a strong development team constantly working on improving the currency. These advantages suggest that the Pi coin is likely to become popular in the coming years, driving its price even further.

On the other hand, CoinMarketCap has indicated Pi coin’s status as an untracked listing. It further highlights that it’s vital to DYOR (do your own research) before investing because of the controversies surrounding Pi Network. This suggests that it may be a high-risk investment with a correspondingly high chance of failure.

There’s no denying that Pi Network price predictions are pure speculation. However, it doesn't mean one shouldn’t be inclined to invest in it. Since it’s free to mine Pi coins, if they get listed on major exchanges, all Pi miners will be able to reap instant profits. Moreover, its limited supply and the fact that it’s led by reputable Stanford graduates make it a very promising investment once it gets its full launch.

That said, again, it's vital to DYOR before investing — as is the case with any altcoin investment.

Final Thoughts

On the surface, there are a lot of advantages to the Pi Network. Its innovative combination of blockchain and peer-to-peer technology enables it to be used by anyone, anywhere in the world. This decentralized network also has no fees, and is faster and more energy efficient than traditionally operated blockchain systems.

Yet, Pi coin currently has no value, and its creators are already profiting from the network. That said, investing in it for now only costs you your time and your privacy, not money. So if you have the time —and don’t mind revealing your personal information — you can choose to download the app and earn tokens with a simple click.