The Pi Network launched in March 2019 and, even though still on testnet, has managed to recruit close to 20 million users, and is still counting. All one needs to join the network is installing an app and getting a referral code from someone already a member.
It is now nearly impossible for the person on the street to mine early cryptocurrencies. With blockchains that use the Proof of Work consensus algorithm, such as Bitcoin, one needs to accumulate a significant amount of computing power.
Meanwhile, for those that use the Proof of Stake consensus mechanism, one must already have a substantial amount of the native coins. For example, to run an Ethereum node, you will at least need 32 ETH (about US$80,000).
Therefore, it is an attractive idea when a new project comes into the scene and promises to make mining crypto on a smartphone possible. That is precisely what Pi Network has done.
Pi Network promises that by activating their accounts, users are supposedly assigned a native digital currency known as Pi Coin based on the continuous activity of their phone.
According to its white paper, the network is expected to support third-party applications when it is fully operational. Besides mining, users will apparently be paid with Pi Coin to watch ads by marketers on the platform.
Concerns about the project
Many have described Pi Network as yet another crypto pyramid or even Ponzi scheme. That is because users join the network by being invited by others through referral codes.
To be fair to the project’s founders, unlike the pyramids we have seen in the crypto space, Pi Network does not ask users to pay any money to join or participate.
However, even though recruits are not asked to pay, and the project could turn out to be legit in the long term, it raises a few red flags that shouldn’t be ignored.
The following are a few of the red flags that stand out:
1. Onboarding users to a testnet
A testnet is where the code and protocol of a project are tested to catch and fix errors or shortcomings before they are put into actual use. On the tesnet, there is no risk to user data or assets.
Oddly, Pi Network went ahead to aggressively onboard millions of users onto a testnet. It is especially worrying with all the promises being made to those who join. This recruitment takes the focus away from what should be happening at a testnet phase, testing and fine tuning the protocol.
2. The need for personal data
Almost every app we are using is indeed harvesting our data. We are using our data to pay for all kinds of services online. But that does not adequately explain why we should turn a blind eye to a new aggressive app gathering our data. Moreover, besides a promise for digital tokens in the future, Pi Network does not seem to provide any meaningful service.
Besides, by harvesting personal data, Pi Network goes against one of the core values of blockchain. And that is empowering users to be anonymous when using the internet.
3. The PI coin is not listed on any exchange
Proponents and supporters claim the Pi coin will be listed on exchanges once the project moves to the mainnet. However, the date when this will happen is not confirmed.
This is not a deal-breaker, especially because there is a promise of listing later on. However, it is a concern that a project that is actively marketing itself has not listed its coin on any reputable exchange.
4. Little is known about the founders
Many successful projects in the crypto space, including Bitcoin itself, have been by unknown individuals.
Pi Network founders, Chengdiao Fan, Nicolas Kokkalis, Aurélien Schiltz, and Vince McPhilip, chose to out themselves. However, little is known about them beyond them being Stanford graduates.
5. Aggressive marketing
Most successful and credible crypto projects had to market themselves. However, especially considering it is in the testnet phase, the Pi Network seems to go overboard with its marketing campaign.
In particular, content online seems to preempt concerns about the project being a scam. Legit projects tend not to have content designed to overcome the scam tag.
The fact that no money is required to join the Pi Network makes it easier to try it. However, you should be aware that you could be giving out great value in the form of your data.