Pi Network Guide 2021 — What is Pi?
A brief introduction to the fastest growing cryptocurrency in the world.
You might or might not have heard about Pi, the fledgling cryptocurrency that as of February 2021 has 13 million members and is growing rapidly. Pi (minePi.com) is a new kind of cryptocurrency that can be mined by anyone, anywhere, on their phones. This is ground-breaking compared to old ‘proof of work’ currencies like Bitcoin and Ethereum, and opens up the world of crypto to ordinary people like you and me. The value that cryptocurrencies capture is now available to everybody thanks to this innovation. Nobody can accurately predict what the price of Pi will be, but everyone expects it to be huge. So, how does it work? What makes it unique? And how can you get involved if you want to?
What is a cryptocurrency?
To understand what Pi is, we need to take a step back and find out what a cryptocurrency actually is. Many people, friends of mine included, get a bit spooked when they hear the word ‘cryptocurrency’. They think about Bitcoin, Dogecoin, the stock market and the wild price fluctuations these currencies and others have seen recently. The misconception is that cryptocurrencies are only something to invest in, and this investment is very risky because the prices are so volatile. While this is true, this isn’t at all what cryptocurrencies are about, and it is not why they were developed.
Cryptocurrencies are meant to be an answer to the growing centralization of wealth and the control of money. When money is transferred online, traditionally there is a trusted intermediary, such as PayPal or a bank or banks, which maintain a record of the transfer of money from one person to another. The problem is that these intermediaries capture an enormous amount of wealth and have an enormous amount of power simply by being the ones who record these transactions (see the section in the Pi White Paper for more detail). The aim of a cryptocurrency is to eliminate this power imbalance by implementing a distributed ledger which is filled in by many different people, not just one. This kind of ledger is also known as a blockchain, which you may have heard of.
All cryptocurrencies employ some sort of blockchain, which is updated and validated by the people who maintain the cryptocurrency network. The algorithms and protocols used to do this ensure that the ledger cannot be faked or falsified, so they are completely secure, and the people who run these protocols to maintain the network are rewarded with the cryptocurrency for their service. This earning of the currency is called ‘mining’.
This means that, whenever any transaction is done with a cryptocurrency, there is no middleman. There is no third party who stands to benefit from the exchange, monetarily or otherwise. Bitcoin’s vision was to become a “peer to peer electronic cash system”, with members being able to trade Bitcoin for goods and services online the same way you pay a plumber cash-in-hand to fix your sink. It was this revolutionary new concept that has sent Bitcoin’s value skyrocketing, and it is this ethos that all other cryptocurrencies share. They are meant to be the true democratisation of money.
What makes Pi special?
According to MarketCoinCap.com, there are currently 8,534 cryptocurrencies being traded right now, with an unknown number in the pre-market phase like Pi (this means it is currently being mined, but cannot be traded, bought or sold). So, what is different about Pi?
To begin with, Pi is the first cryptocurrency that can be mined on a phone, by anyone. Mining Pi doesn’t require ‘proof of work’ like mining Bitcoin does, so it doesn’t use any power on your phone and you can even close the app or turn off your phone and it will continue to mine. Instead, by mining Pi you are proving that you are a real person, not a bot, and helping grow the Pi Network. To mine, you simply go into the app once a day and press the lightning bolt symbol and your new mining session will begin. The app has bot detection algorithms, so this must be done by a real person. The benefit of mobile mining is that Pi is available to everyone. This is crucial in building the Pi Network, because it is this network that will give Pi its value once the crypto goes live, and so members of the Pi Network, called Pioneers (get it?) are rewarded with Pi for helping it grow.
The other innovation that Pi can claim is something called a ‘trust graph’. Once you have been mining Pi for three days or more, you can add between three and five people to what is called your Security Circle. In adding these people to your security circle, you are vouching that they are real humans (not bots) and that you believe they will not take part in fraudulent activities. In other words, you’re saying “I trust these people”. Your circle on its own means very little, but the intersection of millions of security circles creates what the Pi Core Team have described as a global ‘trust graph’. This is a network that shows who trusts whom and the more circles different people are a part of, the more trustworthy they are. Once established, this trust graph can be directly leveraged to create value within the Pi Network. The Pi White Paper describes it like this:
The Pi Network’s global trust graph will facilitate transactions between strangers that would not have otherwise been possible. Pi’s native currency, in turn, allows everyone who contributes to the security of the network to capture a share of the value they have helped create.
While the paper describes a few other ways in which the structure of the Pi Network is leveraged to make the Pi currency valuable, the trust graph is the cryptocurrency’s main innovation. If you want to learn about the other ways that the Pi Core Team plan on adding value to Pi, such as the ability to barter for people’s attention with Pi; using the Pi app as a virtual storefront for goods and services; and enabling developers to write decentralised apps that leverage Pi’s existing infrastructure, take a read of my article that discusses how value will be created within the Pi Network.
So how does it actually work?
Very simply, in fact. First, you can only join the Pi Network via a direct referral by someone who is already in the network. If you want to join, just click the referral link minePi.com/TheHilbo and use the referral code ‘TheHilbo’. Then, when you have joined, you simply open the app and press the lightning bolt symbol, as shown in the screenshot below.
This starts a mining session that lasts 24 hours and mines at your current rate, given in an amount of Pi per hour. Once the session has finished, the app will send you a notification. You can then re-open it and press the button again to begin the next session. Mining doesn’t use up your battery either — as stated above, you can even close the app or turn your phone off and it will continue to mine.
The rate at which you mine is based on your roles in the network. There are four roles you can hold in the network, and you can have any number of them at once. How they work and their effect on mining rate is described below.
Pioneer — Everyone in the network is a Pioneer. The contribution to your mining rate from being a Pioneer is half the current base mining rate. This will steadily fall as the network increases, but as of writing the base rate is 0.2 Pi/hour, so half this is 0.1 Pi/hour.
Contributor — You become a Contributor when you populate your security circle. Your circle can have between three and five members, and each member increases your mining rate by 10% of the base rate. Therefore, if you have five members in your security circle, you’ll be mining at the full base rate (50% from being a Pioneer, and 10% from each member of your circle).
Ambassador — You are an Ambassador if you invite new people to join the Pi Network. Whenever you are mining and someone you invited is mining at the same time, your mining rate increases by 25% of whatever your combined Pioneer plus Contributor rate is. As an example, if you have three people in your security circle, the rate you mine at from being a Pioneer and a Contributor is 0.2 Pi/hour times 50% + 30%, which is 0.16 Pi/hour. So each person you invited will increase your mining rate by 25% of 0.16 Pi/hour, or 0.04 Pi/hour, if they are mining at the same time. All of this is also true for the person who invited you. The people you have invited plus the person who invited you make up what is called your ‘Earning Team’.
Node — A Node is a Pi Network member who runs the Pi Node software on a computer, which is the backbone of the Pi blockchain. Currently, this software is in development and there is no additional mining rate contribution for being a Node.
Currently, Pi has not gone to market (what’s called ‘mainnet’), so the Pi currency is currently not worth anything. Mainnet is scheduled for the end of 2021/beginning of 2022, and when it goes live Pi will be able to be traded and it will have value. So the more Pi you mine before then, the more money your Pi wallet will be worth once mainnet goes live.
Free money? What’s the catch?
If you were getting something for nothing, that would be too good to be true. But, in mining Pi, you aren’t getting something for nothing. The difference is you aren’t paying money in exchange for Pi, but you are providing something else valuable to the network.
First, as a Pioneer, by pressing the lightning bolt button each day you are proving that you are a real person. This is the first step that needs to be taken for Pi to have any value, because if it is able to be mined by bots then one person could artificially mine thousands or millions of Pi, drastically reducing its value. By proving you aren’t a bot, you are contributing to the integrity of the network.
Next, as a Contributor you are adding your security circle to the trust graph. As described earlier, this trust graph is a key component of the Pi Network. It is how the blockchain algorithm will ensure the accuracy of the distributed ledger, and it is one of the main ways that the network, and therefore the currency itself, will have value. By telling the Pi Network who you trust, you are giving the vital information that is needed for the cryptocurrency to function.
Finally, as an Ambassador you are actively growing the network. The Pi currency will only be worth something if there are enough people in the network. If the network is large enough, then that will be an audience companies will want access to. This will give value to the network and therefore value to the currency as the only means of exchange within the network. This is why you only benefit if your invitees are actively mining, as the network needs engaged members to be fruitful. By bringing others into the network, you are increasing the chances of the cryptocurrency being successful.
It is completely true that there is no such thing as a free lunch, but the Pi you get for mining isn’t actually free. Instead, you are ‘paying’ for it with information rather than money.
Get your slice of Pi
There is a lot more depth and detail to the Pi Network and how it works, both technically and economically, but above is the bare-bones of it. So if you like the sound of Pi and want to join — either because you’re interested in the technology, you’re interested in democracy and the freedom that cryptocurrencies allow, or you simply like watching a little number tick up — then click the link given at the start of the previous section or just go to minepi.com, download the app and use the invite code ‘TheHilbo’ to join the party. Don’t miss out on your slide of the Pi!