What Is Pi Network? The Controversial Mining App

Pi Network is a decentralized cryptocurrency project that allows users to mine Pi Coin (PI) via a smartphone instead of using mining rigs, which is more energy efficient.

This model lowers the entry barriers, presenting itself as a more user-friendly alternative for cryptocurrency adoption compared to those that use Proof-of-Work (PoW) like Bitcoin.

This article delves deeply into Pi Network to provide a clearer understanding of this project, which has recently generated controversy in the crypto community.

What is Pi Network?

Pi Network enables users to mine PI on their smartphones or mobile devices. The app can be downloaded from either Google Play or the App Store. However, once downloaded, users must verify their identity through the Know Your Customer (KYC) process, which will request their personal information.

Moreover, when creating an account, new users will notice that Pi Network incorporates an advertising system within its ecosystem, which is unusual for a decentralized application.

The platform features a network called the Pi Ad Network, where advertisers can use Pi to place ads within the ecosystem. This confirms that advertising is one method Pi Network employs to generate revenue.

Some users have reported encountering fake advertisements within the app that lead to phishing links. Others recommend disabling the ads in the app’s settings. However, this must be done consistently, as Pi Network does not control the advertising network but rather a third-party entity, which has caused frustration.

How does Pi Network work?

Pi Network bases its consensus on a modified version of the Stellar Consensus Protocol (SCP)—yes, the same algorithm used by Stellar Network (XLM)—which is based on the Federated Byzantine Agreement (FBA) model.

In simpler terms, Pi Network’s SCP relies on trust relationships. Each node selects a set of reliable peers, known as a “quorum slice,” to validate transactions. As several of these groups overlap, a global consensus is formed without the need for massive computational power.

These groups are called Security Circles and constitute Pi’s distinctive contribution to this architecture. They group together a small number of users based on trust (generally three to five) who, collectively, contribute to the overall security of the network.

In the Pi Network ecosystem, these circles function as lower-level participants supporting higher-level nodes (which use desktop hardware) responsible for transaction validation. Essentially, “trust” is distributed among thousands of phones and computers, which, according to Pi Network, is how they maintain a sufficient level of decentralization and avoid single points of failure.

How does mining work in Pi Network?

Mining in Pi Network consists of logging into the mobile app daily and pressing a button that confirms the user is active. Pi categorizes participants into four roles that help maintain and expand the network:

Pioneers: The everyday miners of PI Coin.
Contributors: Those who create Security Circles by adding trusted contacts.
Ambassadors: Participants who refer other users.
Node Operators: Users with technical expertise capable of running validation software.

This mechanism differs from PoW blockchains, where miners solve complex cryptographic puzzles.

By shifting the burden from hardware to user participation, Pi aims to form a broad base of individuals who collectively secure the network.

Who Founded Pi Network? Histori of the PI Ecosystem

Pi Network was founded in 2019 by Nicolas Kokkalis and Chengdiao Fan, both Stanford graduates and Vincent McPhillips, who also served as CEO but later left the team due to disagreements.

According to the project roadmap, Pi Network began with a Beta phase in 2019, followed by a Testnet phase in 2020, during which distributed nodes helped test and refine the network’s operations. In December 2021, Pi Network introduced what it called the “Enclosed Mainnet,” a live blockchain with activity confined within the network.

On February 20, 2025, Pi transitioned to its open network, the “Open Mainnet,” removing those internal restrictions and enabling external trading. The total supply of Pi tokens is capped at 100 billion coins, of which theoretically 80% is reserved for the community for mining rewards, ecosystem growth, and liquidity, while the remaining 20% is allocated to the core team.

Following the launch of its Open Mainnet, Pi Coin began trading on various exchanges and reached a market capitalization of approximately USD 12 billion on March 12, 2025, positioning it among the top cryptocurrencies by market cap.

Risks and Criticisms: Is Pi Network a Scam?

Many users and analysts have raised concerns about Pi Network amid accusations of inflated metrics, a limited node infrastructure, and a high degree of centralization that contradicts its decentralized claims. Although the platform began trading on various exchanges in February 2025, doubts about its long-term stability and legitimacy persist.

Researchers have noted that the core team holds about 82.8 billion Pi Coins—82% of the total supply—raising serious questions about decentralized governance.

Additionally, the referral-based expansion model has drawn comparisons to a multilevel marketing or Ponzi scheme, as it prioritizes sheer registration numbers over genuine user engagement.

Another major concern is the limited validator set. According to PiScan, the network operates with only 43 nodes and three validators globally, starkly contrasting the thousands found in more established blockchains. This reduced number increases the risk of collusion or manipulation, as a small group could exert disproportionate influence over transaction verification.

Ben Zhou, CEO of Bybit, has publicly labeled Pi Network as a scam, noting that Chinese officials have classified the platform as a pyramid scheme.

1. Here is a official police warning of $Pi from Chinese police back in 2023 warning to the public that it’s a scam targeted towards elderly folks https://t.co/LaGJqXSOXR which leaks their personal data and loss of their pension. There are multiple other reports out there… https://t.co/gkEu2wZwfo
— Ben Zhou (@benbybit) February 20, 2025

Closing Thoughts

Overall, while Pi Network aspires to evolve into a decentralized ecosystem enabling direct transactions, purchasing, and application development, its success will depend on addressing these centralization issues, regulatory concerns, and challenges with user adoption—factors that observers will be watching closely in the coming months and years.