Pi Network: Accessible Mobile Mining or Security Concern?

• Pi Network was launched by a group of Stanford graduates in 2019.
• The network has amassed reportedly over 60 million users worldwide.
• Pi Network has raised questions of legitimacy and security.

Pi Network is a cryptocurrency project launched in 2019 that allows users to “mine” Pi coins from their smartphones. The network has seen immense success from users attracted to its accessibility and ease of use, but the project has raised questions about its security and legitimacy.

CCN’s latest report “Pi Network: Why Your Coins May Be Worthless” seeks to answer an essential question: Is Pi Network a genuine opportunity or a cleverly disguised illusion? It examines three key aspects: Investment potential, time commitment, and security risks.

What Is Pi Network?

Developed by a group of Stanford graduates, Pi Network aims to create a more inclusive and user-friendly approach to cryptocurrency. Rather than having to solve complex equations, people can tap a button on a mobile phone app to mine the system’s native token, known as PI.

Nicolas Kokkalis, Chengdiao Fan, and Vince McPhillip of Stanford University founded Pi Network in 2019. According to the project’s site, it officially launched on March 14—the so-called Pi Day.

The network allows users to “mine” its native currency directly from their smartphones without draining battery life or consuming excessive resources, unlike traditional cryptocurrency mining which requires high expertise, specialized hardware and significant amounts of electricity.

Accessible Mobile Mining

Pi Network claims to be the first platform to allow users to mine directly from their smartphone, massively lowering the barrier to entry for crypto mining.

Traditional mining, especially for established coins like Bitcoin (BTC), requires powerful computing rigs and significant energy consumption, making it impractical for the average person.

The network’s mobile mining approach allows anyone with a smartphone to participate.

“We define ‘mining’ more broadly than its traditional meaning equated to executing a proof-of-work consensus algorithm as in Bitcoin or Ethereum,” Pi said in its white paper.

However, some experts believe that crypto mining is already well-defined, and Pi’s rebooted definition could be used to serve its own views.

Security Concerns

Pi adopts its consensus mechanism from Stellar’s Federated Byzantine Agreement, which is different from traditional Proof of Work (PoW) or Proof of Stake (PoS) systems used by other cryptocurrencies.

Bitcoin’s PoW requires miners to solve complex cryptographic puzzles, ensuring security through computational resources. Ethereum 2.0’s PoS relies on validators holding and staking coins to secure the network.

However, Pi’s ethos relies on users creating trust circles by adding people they know. This system swaps out computational power for trust-based quorums, where nodes rely on the trustworthiness of their peers instead of raw computational effort. When a sufficient number of trusted nodes agree, the transaction is confirmed.

Since Pi’s security depends on the integrity of personal networks, there is the risk that malicious actors could infiltrate or manipulate the network by creating fake trust circles or convincing users to validate them.

Pi Networks’ know-your-customer (KYC) processes also raise concerns, as it allows users to act as validators. This means personal identification information (PII) such as names, addresses, and IDs, could be handled by random individuals.

Pi Network takes it a step even further by making KYC mandatory for transferring tokens. Users who complete KYC can transfer their balances to Mainnet, but they are confined to Pi’s ecosystem. Over 12 million Pi’s users are currently KYC-verified.

The network also requests a myriad of permissions from its mobile application, including access to users’ personal information.

Pi has  been unavailable on the open market for over five years since it was first announced. The PI token is currently worth around $34 and is not publicly tradeable on any exchange.