Understanding the Impacts of Pi Network on Users and Their Relationships

While cryptocurrencies can offer opportunities for profit, they may also lead to addiction, straining personal relationships.

A South Korean student, YSM, who chose to remain anonymous, shares his family’s challenges stemming from their involvement with an app named Pi Network.

Despite YSM’s skepticism regarding the project’s validity, his father, who operates a fried chicken restaurant, firmly believes that Pi could become as valuable as Bitcoin.

“Whenever I visit my parents, my father constantly encourages me to download the app and use his invite code to start mining Pi, which often leads to disputes,” YSM explains.

The Pi Network has faced various allegations of operating a scam or pyramid scheme, although it does not request any monetary investment from users.

Critics highlight the atypical Know Your Customer (KYC) requirements and the lack of a tradable product on the market, questioning the intentions of the founders, Stanford alumni Nicolas Kokkalis and Chengdiao Fan.

Participants can earn the Pi cryptocurrency through a gamified system that includes tapping screens, watching videos, and inviting friends for rewards.

Users can mine Pi by clicking a “mine” button at least once a day, and the mining rate increases by inviting others or completing designated tasks, such as downloading a separate web browser app.

Currently, Pi is not available on any centralized or decentralized exchanges, though some versions exist that the Pi Network disavows.

According to analysis by South Korean crypto expert Coin Lupin, Pi functions as a simple reward mechanism rather than a legitimate cryptocurrency.

“Mining typically denotes the creation of blocks; Pi didn’t have a blockchain upon its inception,” Coin Lupin remarks.

Mining on Pi became available shortly after the app launched in 2019, prior to the announcement of its “enclosed mainnet” in December 2021.

Contentions About Pi Mining and Potential Scams

Users of Pi aren’t the average cryptocurrency traders or tech-savvy investors; this group, known as “Pioneers,” includes many older individuals. The app has found substantial popularity in Asia.

“Pi has gained significant traction in China,” comments Cos, founder of cybersecurity firm Slow Mist.

“Interestingly, none of my friends are participating in Pi, yet I often hear stories about those outside of our circle who are,” he notes.

“It feels as though we inhabit entirely different worlds.”

Pioneers often encounter negative feedback about their involvement with Pi, with critics drawing parallels to fraudulent schemes.

The Pi Network has not responded to inquiries for comment, and it has reportedly shut down communications on some social media platforms.

In defense, community members assert that since they are not investing actual money, they have little to lose—they merely log in and tap a button to mine Pi.

Mining involves watching advertisements each time a Pioneer clicks the “mine” button.

“Scams can be defined beyond financial loss; they can also involve taking precious time without offering anything tangible in return,” notes Cem Dilmegani, principal analyst at AIMultiple.

The primary Pi team purportedly benefits from user engagement by generating ad revenue from their mining activities.

Users are asked to undergo KYC checks to “migrate” their Pi to the enclosed mainnet, which entails sharing sensitive personal information like passport data.

Additionally, users must verify their accounts using a phone number or social media profiles.

As per research from Dilmegani and AIMultiple, a verified KYC audience can boost advertising revenues.

The Duality of User Experiences and Business Impacts

While many Pioneers assert they incur no financial losses from the app, YSM, however, paints a contrasting picture.

His family’s restaurant has experienced decreased revenues since his father opted to accept Pi as a payment method.

“In the evenings, my father’s Pioneer companions come to the restaurant, socialize extensively, indulge in drinks, and pay using Pi,” YSM explains.

“This strain has led to frequent arguments in our family, as we cannot use Pi for anything tangible, yet my father believes in its future value.”

YSM’s father is convinced that his connection with the Pi community has positively impacted business, attracting more customers who wish to pay with Pi.

In South Korea, 59 businesses currently accept Pi as a payment method listed on a community site, but without a cryptocurrency market, each business sets its own conversion rates.

One business, a photography studio, charges 20,000 Korean won (approximately $15) per Pi.

Most establishments accepting Pi, including YSM’s family restaurant that sells fried chicken for around 20,000 won, set their conversion at 10,000 won per Pi.

Coin Lupin summarizes, “While there are exchanges among Pi believers, it resembles trading stones in practical terms.”

Community Dynamics and Validation Processes

The Pi Network allows users to enhance their mining rates by inviting others to the platform, a model often associated with pyramid schemes or multi-level marketing tactics, according to analyst Dilmegani.

AIMultiple reports that the number of employees listed by Pi on LinkedIn rose from 170 in January 2022 to 393 by August 23, 2024.

However, many of these accounts are not official employees but rather community members acting as “Pi Network ambassadors” or “KYC validators.”

This setup raises concerns about privacy, as members reviewing each other’s personal documents increase the risk of data exposure.

Prospects of an Open Mainnet

While Pi Network may not align completely with conventional definitions of a cryptocurrency scam, its peculiar requirements sow suspicion regarding the authenticity of the product being marketed to users.

“They cleverly disguise themselves as a blockchain endeavor while continually referencing Bitcoin, hinting at possible profits down the road,” Coin Lupin adds.

“They maintain a low profile within the community and continually encourage users to engage with their app with the promise of future market listings.”

The community has awaited updates regarding the anticipated launch of an open mainnet for nearly three years—a development expected to allow trading of Pi on exchanges.

Up to now, no functional open blockchain or tradable cryptocurrency has emerged.

YSM, who has owned a fractional Bitcoin since 2020, hopes for a breakthrough that would render Pi valuable and alleviate his family’s financial challenges.

The Pi team claims an open mainnet is expected to launch by the end of 2024.

Nonetheless, skepticism remains regarding its viability. Dilmegani concludes, “Numerous coins operate similarly (i.e., earning money through ads), yet such coins have generally depreciated in value.”