Is PI Network a scam providing no value to users? Possibly yes

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.
- Users are putting value into the app. There are hundreds of posts online saying PI Network can not be a scam because users do not put any money it. Users’ time and data are valuable to those users and they are spending these on the app. For more, you can see our analysis of the app’s privacy policy, its data collections, permissions and the 3rd party software included in the app.
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:

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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 Network 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 have built:
- a test version of their blockchain and later released the production version (i.e. mainnet). However, as of Jan 2022, mainnet is not open to outside (i.e. enclosed network) so users can not yet exchange their Pi coins with fiat currency on exchanges. This enclosed network state was not previously mentioned in their documentation as far as we have seen and presents another waiting duration for users looking to exchange their Pi coins to fiat.
- users claim that they have shared some of their code on github
They are working towards building a developer community to build apps on their platform which can add value to the platform. They have run a hackathon and released a Software Development Kit (SDK) for 3rd party applications to initiate Pi coin transactions. The hackathon winners include apps like an e-commerce store and a marketplace to match freelancers to tasks. These apps will start to generate value once the mainnet is opened up. After that event, the price of Pi and the metrics of these apps would be relevant metrics regarding the success of the project.
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 open mainnet and the date for opening up the mainnet is not yet finalized.
According to their Linkedin page, they have 170 employees as of Jan 2022. However, many of the people that list themselves as working there are app users with titles like “Cryptocurrency Trader”.
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 ±430k reviews and a good rating on Google Play Store as of Jan 2022. 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. 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:

As of Jan 2022, the founding team claims that they are waiting for KYC processes to be completed.

In short, your coins can be worth some value but don’t get your hopes up. Other experiments like ETN only made their users a few euros per month.

Are there free apps that pay users?

Yes, the Brave browser replaces ads on websites with its own ads and shares the value with its users. There are also other free-to-use apps which provide virtual currency. However, we did not come across any of them that currently provide a tradable coin for free. ETN used to do this.

Bee Network

It is a clone of the Pi Network concept with even less transparency. Just skip it unless you like providing data to anonymous people. For more, feel free to read why we think it is likely to be a dangerous scam.

Electroneum ETN

Pi network as a concept is a clone of ETN without a tradable coin. However, ETN launched its coin on exchanges and has been tradable since 2017. It no longer provides free coins. Feel free to read more about it to see how Pi Network could develop.

We have reviewed a few other similar cryptos using a consistent set of metrics. We also evaluated Bitcoin’s state as of 2010 using the same metrics to give an idea of how we would have evaluated it. Of course hindsight is perfect but we believe that our criteria for crypto evaluation are comprehensive and have a chance of having predictive power.

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.

We do not cover many such topics but

And if you are interested in finding other hyped-up companies that attract users in search of untold riches, check out our article on Earth 2.

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.

How you can contribute to this discussion?

Please leave a comment, we are open to all view points. I am still learning about crypto and this is only an attempt to help people make informed decisions about their time. We publish comments as long as they do not:

contain pi-network codes. If we let that happen, the comments below would be filled with codes that don’t add any value to the discussion. If anyone wants to find codes, they can google them.
repeat already discussed points
use inappropriate or immature language
include major spelling mistakes
ask for us to update the article. We update it at our pace. We have higher priority work that pays the bills and this was an article we wrote because we looked for these answers and couldn’t find them.

We sometimes make exceptions to the last 2 points and make grammatical changes to comments or remove immature language if a comment includes a relevant detail.

Cem Dilmegani

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 55% of Fortune 500 every month.

Cem’s work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE and NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and resources that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised enterprises on their technology decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem’s work in Hypatos was covered by leading technology publications like TechCrunch like Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.