Pi Network is one of the most hyped projects of 2023. Its creators claim that they started a revolution in the mining industry, but some crypto community members believe it is nothing more than a scam.
In this article, using a good example, we will show you how to conduct your own research and try to find out whether Pi Network is a technological breakthrough or a fraudulent scheme.
What is the Pi Network
The Pi Network offers a revolutionary approach to cryptocurrency mining. That is how its inventors present it. All you need to mine coins is download the mobile app, create an account, and press the mine button every day. Pi coin is a reward users can get for mining. System transfers coins directly into the wallet that is available inside the app.
For clarity, let us compare traditional Bitcoin mining with Pi mining:
The project was developed in 2018 by Dr. Nicolas Kokkalis and Dr. Chengdiao Fang. The Pi Network white paper was published in 2019. Since then, the project has been actively promoted through popular crypto bloggers and participation in various crypto events. As a result, the project's Twitter account alone already has 2.3 million subscribers.
The Pi Network founders Dr. Nicolas Kokkalis and Dr. Chengdiao Fang. Source: Medium.
On the web, there are many groups and individual pages dedicated to the Pi Network, with enthusiastic posts about the Pi mining simplicity and achievements. Here is an example of a post where the author tells us about mined coins. Another example: a picture from Pi miners meeting in Indonesia, who came together to talk and share their achievements.
The Pi Network at a project development event in Oakland, USA. Source: twitter.
Scam on the crypto market
BitConnect, OneCoin, and SQUID Token are just a few examples of fraudulent projects, so-called rug pulls, people have faced in the digital asset market. It might be assumed that over the years, the crypto community has learned to distinguish between scams and worthwhile offers. In reality, despite the experience, investors regularly fall into the scammers' traps. Scammers, for example, pocketed $3.5 billion from the cryptocurrency community in 2022 alone. For comparison, a year earlier, it was just about $680 million of losses. It may be assumed that crypto investors will continue to lose money as scammers regularly drop new projects.
In 2023, after the "crypto winter" of 2022, which will be remembered for the large crypto company collapses, the US Securities and Exchange Commission (SEC) decided to tighten control over the digital asset market. According to its chairman, Gary Gensler, the crypto industry must become completely transparent in order to survive. Full disclosure also means weeding out fraudsters from the market. That's why the SEC has taken the crypto market under special control. We don't know exactly when the watchdog's target will be reached, which means that so far there are no guarantees of security.
Here are the main scam signs:
π€₯ An outright deception (which is not always easy to recognize). If the developers promise one thing, but in reality users get something completely different, there is reason to think about whether it is worth having a deal with such a team. For example, the creators of the token based on the TV series The Squid Game, promised their investors access to a thematic game. In fact, the only thing users received was disappointment. The advertised token cannot even be sold after purchase. Typical exit scam.
π€ A hidden deception. On the cryptocurrency market, scams can take a variety of forms. For example, developers can brainwash investors with promises to launch a DeFi or Yield Farming project for years but in fact use the money for completely different purposes. You can also face platforms that earn not from investments but from other resources: for example, they may receive income from the sale of user data or through cryptojacking. The last one means the hidden mining of cryptocurrencies by intercepting the computing power of mobile phones or other devices. It is possible to face such applications even on popular marketplaces.
πΈ Token-price fraud. This type of scam is widespread too. Coins that were sold or given away to investors can have no real value and no practical usage. At the same time, the project team may try to artificially inflate the token's value in order to make them more attractive in the eyes of market participants.
There are some other points that should arouse suspicion: the lack of real value of the company's products, lack of liquidity, the usage of Ponzi schemes and network marketing tools, and a large number of negative reviews.
You also might be interested: Crypto scam: how to protect yourself?
Does Pi Network have scam signs?
From the Pi Network's very beginning, many members of the crypto community have expressed concerns about its legitimacy and security, because of the potential signs of a scam in it. Here, for example, is a thread with a discussion of the project on the bitcointalk crypto forum. Many experienced crypto community members who are suspicious of the project left their comments. However, it is difficult to call Pi Network an outright fraud since the project exists within a legal framework and does not require users to pay for access to its services. Another question is whether users should expect easy money.
Let's look at the possible reasons why the Pi Network will not be able to meet the expectations of some users.
1. Pi coins are worthless π·
Despite the fact that the project was born in 2018, its main network has not yet been launched. This is how the developers explain the absence of Pi listings. It turns out that the application to mine coins has been running for years, but users can't withdraw the cryptocurrency and sell it. It all means that Pi tokens as of the beginning of March 2023 are worthless.
Pi Network community members are continuing to work having a hope of the main network launching. In this case, in theory, they will be able to withdraw the coins from the app and sell them if the coin will be listed. No one knows the mainnet launch date or whether the event will occur at all. There is also no official information about the timing of the official Pi listing.
At the end of 2022, unknown individuals listed their Pi cryptocurrency version on a number of exchanges, including Huobi. Pi Network claims that they have nothing to do with this coin.
Crypto exchanges that listed Pi. Source: CoinMarketCap.
Despite the Pi Network team's calls not to conduct business with fake Pi, the fake token continues to be traded.
Pi cryptocurrency chart. Source: CoinMarketCap.
2. The project is an MLM π
MLM is short for multi level marketing. The principle is simple: the more a user attracts people to the project, the higher his potential income will be. The Pi Network splits users into levels, which are called "roles'' in the project:
- Pioneer. You need to get into the application within three days to receive a level.
- Contributor. To reach this level, you need to attract at least five new active users. Contributors have access to an increased Pi mining speed.
- Ambassador. To reach a level, you need to attract at least 23 active users. The "ambassadors" have access to another increase in Pi mining speed.
There is also a role called "node" on social media, but it is not available yet. Supporters might later launch a network node to maintain the project's network.
Pi Network user levels. Screenshot from the Pi Network mobile app.
The MLM scheme explains a large number of positive reviews. Thanks to them, Pi Network users attract new users in order to increase their rating and earn more coins in the hope of being able to sell them someday.
Pi Network review. Source: Play Market.
3. The real application operating principles are far from the promised ones π
You can see the Pi Network and its miners' reality in the app reviews. Users complain that the Pi Network application does not actually mine cryptocurrency but instead raises money through advertisements and also by stealing data. Thus, the project organizers might have turned their huge audience into a source of income, which, chasing the promised Pi coins, continues to grow.
Users of the Pi Network app discovered that Pi coins are magically mined even when there is no internet connection. At the same time, reviews say that it is easy to lose access to your hard-mined coins.
Pi Network app reviews. Source: Google Play and App Store.
Complaints about data and money leaks, as well as technical problems the device's owner faces, should be the main reasons to stay away from the apps to keep your KYC safe and maintain digital hygiene, because nobody is going to pay you data leak insurance.
DYOR: how to identify scam
Do your own research (DYOR) is a popular phrase in the crypto community to determine red flags. The point is that you should not rely on the developers' or even advertising's word. To make sure that the project has prospects, you need to study all the details by yourself. Here are the points to pay attention to:
π§βπ» Developers. Discover if the developers already have successful projects behind them. That would be a huge plus. Also check the official website to find transparent legal documentation, it should always be there. Make own audit. By the way, developers anonymity can be a sign of scam.
βοΈ The project's mechanics. Fraudsters usually drop completely non-original projects whose analogues have already existed on the market for years. Fierce competition decreases their chances for survival. If the project's mechanics seem original, it is worth finding out the details. At first glance, the Pi Network appears to be a revolutionary idea (the rejection of complex mining in favor of a simplified scheme accessible to all). However, researching its background leaves questions. Perhaps there is no mining, but the developers just decided to make money selling ads? To understand the project's essence, it is worth diving into the documentation, reading reviews, and visiting forums. For example, discussions can be found on BitcoinTalk and Reddit.
πΊοΈ The roadmap and how close it is to the minimum viable product (MVP) stage. Violating deadlines is a red flag that should warn the investor about possible problems in the future. For example, a six-month delay in the project's mainnet launch can be critical in some cases. The level of readiness is important because developments that are close to entering the market have a higher chance of surviving than projects that are just taking on their final shape.
A friendly advice
Do not trust attractive advertising, even if it's a project with a multi-million audience. There have already been numerous revelations of hyped platforms that turned out to be another scam. Π‘heck all the project's details independently and extremely meticulously. A complex risk assessment should be a key decision-making factor. Use all of the available sources of information, check the reality and the possibility of fulfilling the declared promises based on objective data. Dive yourself into crypto forums to study real user reviews as well as experts opinions. It is not easy to find a high-quality project in a ton of scams, but the ability to highlight the indirect fraud signs and correctly analyze information reduces the risk of becoming a victim. Also avoid FOMO and use due diligence.
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This material is not an investment recommendation. The financial and other transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about conducting any operations with cryptocurrency and / or tokens.
