The Pi Network & Pi Token - A Daily Clicking Scam or HUGE airdrop? (Explained with Animations)

Mining is how crypto enthusiasts describe the process of solving complex math problems to validate transactions and secure a blockchain network. The first person to solve these puzzles gets rewarded with cryptocurrency. The most famous example is Bitcoin, which uses something called proof of work. But many other blockchains also rely on mining. The catch? Mining isn't cheap. It requires expensive hardware and eats up a ton of energy. For most people, the upfront cost to start mining just isn't worth it. Some projects have tried to fix this by making it possible to mine on your smartphone. Since phones are powerful mini computers anyways that are often sitting around doing nothing, people thought, why not use them for mining? Early attempts drained batteries and burned through data plans. That's where the Pi network comes in. They've developed a way to let you mine using your phone without the heavy energy cost, and they're promising to launch their long-awaited mainet in early 2025. There are a lot of people who think this project is a scam, though, and for good reason. Welcome to Whiteboard Crypto, the number one YouTube channel for crypto education. Here we break down cryptocurrency topics using analogies, stories, and examples so anyone can understand. In this video, we'll be explaining what the Pi network is, how it works, and some of our concerns about the project. First off, what is the Pi network? The Pi network calls itself a freeto mine cryptocurrency that aims to make financial independence accessible to everyone. It was founded in 2019 by a group of Stanford PhDs. And here's how it works. You download the Pi Network app, open it up daily, and tap a button to mine Pi tokens. That's it. Mining on Pi literally takes seconds. The more consistent you are, the more Pi tokens you can earn. But as of January 2025, the Pi token has no realworld value. It's not tradable on any exchanges, and there's no mainet network operating to support it yet. And currently, the only way you can get it is through mining Pi in the app. All right. So, how does Pi mining work? Pi uses a unique consensus mechanism inspired by the stellar consensus protocol and something called the federated Bisantine agreement. Instead of relying on proof of work like Bitcoin does, Pi uses a trust graph to validate transactions. Here's a simplified breakdown. You mine Pi by opening the app daily and interacting with the app. You can invite your friends to it and together you form part of the trust graph. Your activity is then sent to desktop node operators. These are people running Pi's node software on computers. They verify transactions and submit them to the network. After that, super nodes finalize the process. Super nodes double check that all the nodes agree on the transaction validity and record the data to the blockchain. As it stands, anyone can apply to run a node, but the PI core team decides who gets approved, meaning that it is permissioned. And on top of that, there's two types of nodes. regular nodes which verify and submit transactions and then also super nodes which do everything regular nodes do plus participate in the consensus process and share the official blockchain data with the network. Now at this point in the video you might be wondering why hasn't Pi launched yet? Pi's mainet was originally planned for 2021 but it's been delayed multiple times. The reasons or excuses include the technology development taking longer than expected, a lack of liquidity, the delay in ensuring KYC regulatory compliances in every country they operate, and kind of oddly they keep delaying due to unfavorable external environments, stuff like pandemics or wars that might hinder the success of open network. The core team or the original creators has set three conditions for launching the open network and this is what they're calling the public mainet which is not to be confused with the open network where ton we have a video about that in the description below. Anyways, here's the three conditions. The first one is that the technology legal framework and business strategies must be ready. Number two is that at least 15 million users must complete KYC verification with 10 million migrated to mainet and they must have 100 apps available to use. And requirement number three is that the external environment must be favorable. Something to note here, this vague criterion is up to the core team's discretion. And speaking of KYC, PI requires all users to verify their identity. The app uses a mix of machine learning and human review to confirm that you're actually a real person. This process includes uploading a photo ID and completing a video verification. PI says they redact sensitive data where possible, but that your information may be shared with their human verifiers unredacted if the automated system struggles to verify it. Something else that is useful to know is that despite no mainet, the Pi network app has over 100 million downloads on the Google Play Store. This is probably partly due to their referral system, which rewards users for inviting others in what is basically a pyramid scheme. The more active your referrals are, the more Pi you can mine. And to keep users engaged, Pi also has introduced built-in apps created by the community. One example is Map of Pi, which lets businesses willing

to accept Pi list themselves for users to find. Again, their long-term goal is ambitious to create a global economy where Pi tokens are used as currency for goods and services. They've already launched a Pi browser app with a non-custodial wallet, allowing users to send Pi within the ecosystem. But until mainnet launches, Pi can't be traded for cash or other cryptocurrencies. Next up, let's discuss the tokconomics. Pi runs on its own blockchain and is considered a layer 1 network. The total supply is capped at 100 billion tokens allocated as following. 65% for miners, 10% for community building, 5% for exchanges, and the last 20% for the team. To avoid a token dump, when Pi eventually launches, they've introduced a lockup period in which users can opt to lock up a portion of their rewards in exchange for higher mining rates. Now, we get to the fun part of the video, concerns and criticisms. The Pi network has faced skepticism about how it plans to sustain itself financially. Basically, how are they going to make money? They've stated that they don't accept fundraising from users or investors, leading some people to speculate that they might sell that user data they've been collecting. According to the Google Play Store, the app does collect personal information like names, email addresses, and locations. And while Pi says this data is encrypted during transit, they also admit that it may be shared with third parties. Another challenge is whether Pi will maintain user interest long term. Clicking a button daily might lose its appeal if there's no real world value or utility for the token. For example, if you think clicking a button daily will result in $10, you might keep doing it. However, if you think it earns a tenth of a penny, you're probably going to stop. I think Pi developers know this and they hope that their ecosystem apps will keep users engaged. The other concerns revolve around the continual delay of the mainet. And it isn't even clear how Pi tokens will have value if it ever does launch, largely because there's not anywhere near enough money in the ecosystem to support the hundreds of millions of miners around the world that are mining essentially for free. Another concern is the pyramid scheme based referral system. Pi claims that this is not a multi-level marketing scheme, which is basically just a nicer term for a pyramid scheme because the bonuses are shared evenly between the referer and the referee. Hm. Okay, fine. But people are still rewarded increasingly for every person they invite. So this is kind of a moot point. Lastly, honestly, no matter how much research we did, we could not figure out how tapping a button actually does any work relevant to mining or rather securing the network. Basically, Pi tokens are just generated every hour and given to active users every 24 hours, which is why it doesn't use any of the phone's battery. There isn't actually any work being done here. This could all be centralized. And because of this constant token generation, it also means the Pi tokens will eventually be inflated away. Wrapping this up, despite all of the concerns I just mentioned, the fact that no one is really losing any money by getting involved in this is actually a relief. It doesn't cost anything to participate other than time and effort. Here at Whiteboard Crypto, we just hope that the people building in this ecosystem get fairly rewarded for their work. The Pi network's goal of financial inclusion is noble, and its simple approach to mining has attracted millions of users. But without a public mainet, liquidity, a clear monetization strategy, a heavy referral system, and infinite inflation, Pi's future remains uncertain. Anyways, thank you so much for watching. I hope you enjoyed this video. I really hope you've learned something, and most of all, I hope to see you in our next video.