Cryptocurrencies can be fun and profitable, but they can also be addictive. They can sometimes consume an investor’s life and strain relationships with friends and family.
YSM, a South Korean college student who spoke to Magazine on the condition of pseudonymity, shares that his family has been grappling with an app called Pi Network.
While YSM harbors doubts about the project’s legitimacy, his father, who owns a fried chicken restaurant, is convinced it is the next Bitcoin.
“Whenever I visit my parents, my father keeps urging me to install the app and start mining Pi using his invite code, which leads to arguments and fights,” YSM tells the Magazine.
Over the years, the project has faced scam and pyramid scheme accusations, even though it does not solicit any financial investment from its users.
Instead, critics scrutinize the network’s unusual Know Your Customer requirement and the absence of a tradable product on the open market, raising questions about the motives of the project and its founders, Stanford University graduates Nicolas Kokkalis and Chengdiao Fan.
Pi Network has a cryptocurrency called Pi, which can be earned through a process now popularized by viral Telegram crypto games: tap your screen, watch some videos, invite your friends and then receive rewards.
Users mine Pi by tapping a “mine” button at least once daily on the Pi app. The mining rate can be increased by inviting others to join the app or completing specific tasks, such as downloading their separate browser app.
Pi is currently not listed on any centralized or decentralized exchanges, although there are some versions that the Pi Network disclaims as not being theirs.
According to South Korean cryptocurrency analyst Coin Lupin, Pi operates as a simple reward system and does not qualify as a cryptocurrency.
“Mining isn’t just about receiving rewards; it’s about producing blocks. Pi didn’t even have a blockchain when it started,” Coin Lupin tells Magazine.
Pi mining was available soon after the app’s launch in 2019, even before the network announced the launch of its “enclosed mainnet” in December 2021.
Pi miners argue that they can’t be scammed because they haven’t invested anything
Pi users aren’t your typical crypto enthusiasts, tech-savvy investors or millennial degens.
Known as “Pioneers,” this group often includes older individuals and boomers. Pi’s popularity is particularly strong in Asian countries.
“Pi is very popular in China,” Cos, founder of security firm Slow Mist, tells Magazine.
“Interestingly, none of our friends are involved with Pi, but we occasionally hear about people outside our industry who are,” he adds.
“It feels like we are two different worlds.”
Pioneers frequently encounter warnings and criticisms about their beloved project, with skeptics like Cos comparing it to a scam.
Pi Network did not respond to Magazine’s request to comment. In some social channels like Facebook, it has shut down communications.
Meanwhile, community members counter these accusive labels by arguing that they have nothing to lose since they aren’t investing any money; they’re merely logging in daily and tapping a button to mine Pi.
Each time a Pioneer clicks a “mine” button, they need to watch an ad.
“The meaning of scam is broader than purely financial investment scams,” Cem Dilmegani, principal analyst at AIMultiple, tells Magazine.
“It is taking away people’s time which is a valuable resource. So far, it gave them nothing measurable in return.”
The core Pi team allegedly profits from their users’ daily mining activities by collecting ad revenue.
The app requires users to complete a KYC verification to “migrate” their Pi to the enclosed mainnet. To do this, users hand over passport data and valuable personal information.
Additionally, Pioneers must “secure” their accounts with phone number verifications or Facebook accounts.
According to research by Dilmegani and AIMultiple, having a verified KYC ad audience can increase advertising revenue.
This process is not a usual requirement for mining or holding other tokens in the industry.
“KYC is processed in exchanges or wallets but there’s no other case of a crypto coin firm itself conducting this,” Coin Lupin says.
Pi Network’s X account claims that 13 million users have passed KYC verification.
They also have massive social media followings across various platforms.
On X, Pi Network has 3.4 million followers, which matches the Ethereum Foundation, the nonprofit developing Ethereum and the world’s second-largest cryptocurrency by market cap, Ether.
Businesses can suffer financial damages for Pi reliance
While Pioneers say they have not suffered any financial losses by interacting with the app and engaging with the community, YSM disagrees.
His parents own a fried chicken restaurant in South Korea. Their revenue has dipped since his father started accepting Pi as payment.
“At night, my father’s Pioneer friends come to the shop and eat for hours, drink a lot, then they pay with Pi,” YSM says.
“This has caused tension between my parents and they fight often because we can’t use this Pi for anything, but my father keeps arguing that it will be very valuable in the future.”
In fact, YSM’s father believes that his interaction with the Pi community has led to a boom in his business as more customers visit his restaurant to pay with Pi.
In South Korea, there are 59 businesses that accept Pi for payments listed on a Pi community site. There is no crypto market trading that determines the price of Pi, so these businesses set their own exchange rates.
One business, a professional photography studio, tells Magazine that it charges 20,000 Korean won ($15) per Pi.
Most businesses accepting Pi — such as YSM’s family restaurant that charges about 20,000 Korean won for their crispy fried whole chicken— take 10,000 Korean won per Pi.
“There are several cases where people who believe in Pi’s value trade among themselves, but in reality, it’s no different from trading stones,” Coin Lupin says.
The community validates each other’s personal documents
The project allows users to increase their mining rate by inviting more users to the platform, a common model found in pyramid schemes or multilevel marketing scams, according to Dilmegani.
AIMultiple found that Pi Network listed 170 employees on its LinkedIn page by January 2022. This number had grown to 393 as of August 23, 2024.
A closer analysis of the accounts associated with the Pi Network reveals that Pi contributors aren’t employed by the company.
Several accounts are listed as “Pi Network ambassadors” or “Pi Miners.”
Some accounts are even listed as “KYC validators.”
This process implies that users who submit their personal data are evaluated by fellow Pioneer community members, which opens up further data risks by allowing users to view each other’s information.
Pi claims it is launching an open mainnet
Pi does not fit the typical description of a cryptocurrency scam, which usually involves rug pulls and pump-and-dump schemes. However, the suspicious requirements raise doubts about whether the core team is genuinely marketing its product to the community.
“They cleverly disguise themselves as blockchain-related and continuously mention Bitcoin, promoting it as if there are potential future profits,” Coin Lupin says.
“They stay hidden within the community and keep urging users to use their Pi app by suggesting that it will be listed on an exchange soon.”
The Pi community is nearing three years for an update on the launch of an “open” mainnet, which they hope would allow them to start trading their Pi on exchanges.
So far, they haven’t delivered a functioning open blockchain or tradable cryptocurrency.
YSM, who has held a small fraction of a Bitcoin since 2020, has his fingers crossed that the Pi team will pull through on their promise to deliver a valuable cryptocurrency and resolve his family’s financial woes.
The Pi team claims that their open mainnet is scheduled to launch by the end of 2024.
But even if Pi can launch an open chain to shush its critics, Dilmegani doesn’t believe in its potential.
“There are already a bunch of coins that follow the same model (i.e. watch ads to get money). However, the value of all such coins collapsed,” he says.
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