We don’t normally write about B2C topics but we make an exception in case of topics where we looked for answers and couldn’t easily find them. And this is an investment related topic so please read this claimer.
We don’t expect anyone except the founders to benefit from PI Network in a significant way because:
• Users are currently putting value in the app without tangible (except maybe psychological) benefits:
◦ The app does not provide any utility to its users beyond functionality like in-app messaging. Most users hold on to it with the hope that they will sometime convert their virtual coins to actual value
◦ The app works like a direct selling or affiliate marketing system, promising future rewards to users for bringing in new users. Some users put in additional time and effort to attract new users, such as numerous users adding their codes as comments to this article. We find it similar to Multi Level Marketing since it includes direct selling and provides increased potential benefits to early users (i.e. earlier users mine at an increased rate), however affiliate or direct selling are possibly better analogies.
• We find it unlikely for the app to create value in the future unlike its claims:
◦ The app creates limited value. Users create no value except for providing their information to the mobile app, viewing ads or messaging other users. The value of these activities is unlikely to generate significant wealth for the large user base.
• Some of its current practices are also used in scams:
◦ Founders are already benefitting from the app. They launched optional video ads at launch to monetize the active user base. The app also has a KYC process of collecting passport information. Having a verified audience through a KYC process would increase advertising revenues. We are not against ad funded businesses, we are also such a business, we provide insights and our audience views ads on our pages. However, when businesses that are expected to launch additional features (e.g. launch coin on exchanges), start monetizing their audience, that can create a conflict of interest.
◦ Their marketing emphasizes the academic credentials of their users. Very similarly, a blockchain scam without blockchain infrastructure, OneCoin, relied on the McKinsey experience of its founder in its marketing.
After sharing these with Pi Network enthusiasts, I frequently hear that I do not get cryptos. For clarity, I have been investing in cryptos since 2017 and I am reviewing new developments the crypto space. For example, here are our recommendations on cryptoexchanges.
For more info:
How does Pi Network work?
It is an app where users
• Login every day and click a button to get digital currency. There is no proof of work being performed, they just login and click a button. This currency is not traded yet so currently holds no value.
• Level up by inviting more users to the platform. This makes them gain more digital currency per day. This is a common model in Pyramid Schemes and Multi level marketing.
Could Pi Networks’ currency be valuable in the future?
Of course. We have done an evidence based analysis here and there are also evidence that show that PI Networks is at least attempting to build something of value:
• They have published a high level whitepaper outlining their ambitions without providing technical details on how their Pi Stack would work. One of their aims is to have others build apps on PI network to benefit from PI network users’ attention. This reminded us of the pay to surf models of the dot com boom where companies installed software on user devices and acted as middleman between users and advertisers without generating substantial benefit to either party.
• They are working towards building a developer community to build apps on their platform which can add value to the platform. Given the value of developer time and the current test status of the Pi Network, it will be challenging for them to get attractive 3rd party apps built on the platform. However, they are clearly trying it by running a hackathon and releasing a Software Development Kit (SDK) for 3rd party applications to initiate Pi coin transactions. We will check out the hackathon winners and update here accordingly in October.
• They claim to have run a pilot in 2020 for people to exchange goods and services using Pi. Instead of running pilots, they could have listed their coin on an exchange as it has been done by companies like electroneum. Pi users claim that Pi team’s approach of forking the open source Stellar blockchain to build their implementation requires significant effort due to various reasons and that this is the reason for the delay. We will not know until we see the mainnet and the criteria for launching the mainnet remains vague in the whitepaper. Mainnet will be launched once the community feels that it is the time and sufficient testing has been completed.
• According to their Linkedin page, they have 70 employees as of 2021. However, many of the people that list themselves as working there are app users with titles like “Cryptocurrency Trader”. We haven’t analyzed each profile but there seems to be a group of people working towards building something there. It could be the next version of the app or the blockchain network, that is hard to verify from outside the company. What we can see is
◦ They have launched a test version of their blockchain
◦ Users claim that they have shared some of their code on github
• Its founders were educated at and worked at Stanford. Though this is certainly a good thing, people rarely notice that Warren Buffet, Jeff Bezos, the writer of this article and numerous business founders were educated at reputable universities (e.g. Ivy League universities for these examples). This is because their companies rarely use these facts. Based on our observations, business success is far more important and a better predictor of successful enterprises than academic credentials. And successful companies tend to speak about their business success rather than their founders’ academic credentials.
• They have had significant growth. They have ±250k reviews and a good rating on Google Play Store. However, models similar to MLM tend to generate fast growth.
Could Pi Network make you rich?
Unlikely. For us, the question is why they don’t already launch the blockchain and the exchange. These are trivial engineering tasks. We have two theories:
• They may be waiting for the user base to reach enough scale so they can generate value for advertisers. However, we are sceptical that large advertisers will show ads in a network where users login to make money by seeing ads. The concept isn’t new. Such websites existed since the early days of internet. However, none of them reached mass adoption. This is because it is more valuable for advertisers to advertise in websites which are used since they provide some value to users (e.g. information, connecting with friends etc.).
• As some commenters like Jennifer Vanessa Kaiser highlighted, the founding team may be concerned that once the coin is published on an exchange, there would be a selling frenzy. Then, the coin would not be valuable enough for people to keep on logging in to click. Dreams are better motivators than actual value:
So what should you do?
I wouldn’t bother installing the app. You can always make the argument that you only lose time by giving the app a try. However, this belief would lead the believer to follow any dishonest actor who promises future value. There is no scarcity of empty promises in the world, we try to spend our time more carefully.
However, if you already have the app, you can wait to see if the founders actually build something of significant value.
Finally, if you came across this because you are looking for ways to become wealthy without putting significant effort, we recommend you to look for other ways. As Buddha said, “Our mere existence is suffering” and as Karl Marx is claimed to have said “Life is struggle”. We don’t see shortcuts but consistent effort by flexible and open minds tend to pay off. Instead of such schemes, you could look into learning new skills which tend to pay off better.
What does the Pi Network team say about this?
Nothing until now. We asked for comments via their contact us form. The community has been contributing in the comments and they helped make this article more accurate.