What is Pi Network - Rating & Analysis

What is Pi Network?

Pi Network is a decentralized network based on Stellar Consensus Protocol, initially started in 2019. It launched its enclosed mainnet in December 2021. However, it has not officially launched an open mainnet until now. Stellar Consensus Protocol was originally proposed in 2015 by Stellar's co-founder, David Mazières, who is also a computer scientist. Stellar consensus protocol differs from PoW and PoS consensus mechanisms in that the validators validate transactions through voting, rather than arithmetic mining or staking assets. The Stellar consensus mechanism is relatively less decentralized, while the validation speed is higher and the energy consumption is almost non-existent.

To solve the low decentralization problem, Pi Network has developed an application validator node application on mobile to attract more validators. This is also one of the reasons for the Pi Network's popularity. Users do not need to purchase mining equipment or a large amount of network native assets to become a validator and validate the network to receive rewards. They can accomplish this only by downloading the mobile application and completing the KYC process.

According to disclosure, Pi Network supports smart contracts. However, we have not found any information about the virtual machine or programming language used by Pi Network. But for sure, Pi Network has developed Pi Browser and Pi SDK to help developers build their ecosystems on Pi Network.

What Is TokenInsight's Rating for Pi Network?

TokenInsight has rated Pi Network's current performance with a CC and a negative outlook. It ranks low on the list of public chain and smart contract platform projects. Similar projects with a CC rating include Bitcoin Gold, Terra Luna Classic, and others.

The breakdown of the rating results is scored as follows.

• Underlying Technology & Security 36.7%
• Roadmap & Progress 38%
• Token Economics 27.47%
• Token Performance 15.4%
• Ecosystem Development 43.05%
• Team, Partners & Investors 43%

Underlying Technology & Security (36.7%)

Pi Network has publicly released its code base on GitHub, which includes the Pi browser and Pi Network-related documentation. However, it does not include the code of its core project, which is the code of its mobile app validator node. In other words, the node validate software used by Pi Network validators is closed-source.

Pi Network also does not audit its code or run any bug bounty program at this time.

Furthermore, in December, Pi Network experienced network validation issues due to node upgrades, despite being in the enclosed mainnet phase.

Roadmap & Progress (36%)

Pi Network launched its testnet in March 2020 and launched the enclosed mainnet in December 2021. The closed mainnet means that the network is restricted to early adopters who passed KYC and the network is isolated by a firewall. Therefore, users of Pi Network cannot communicate with the out-network. The Pi Network team hopes to use this enclosed mainnet to help more users pass KYC, and give the community more time to test, collect data, and develop Pi-based DApps.

In March 2022, Pi Network published an announcement to the public. In that, Pi Network mentioned it planned to launch its open mainnet in March-June 2022. At that time, users would be able to communicate with the out-network. However, as of January 2023, Pi Network has not launched its open mainnet yet. According to the report, the core team of Pi Network is still working out issues with the KYC certification. In the latest Tweets comments on Pi Network's official Twitter, we can see many users complaining that their KYC applications have not been reviewed for a very long time. As of January 2023, the Pi Network team has not yet announced when the KYC issue will be resolved or when the open mainnet will be officially launched.

Token Economics (27.47%)

Pi Network expects to issue $PI as its native token, mainly for maintaining network security and used as gas fees. The total supply of $PI is $100 billion, of which 20% will be allocated to Pi Network's core team and the remaining 80% will be allocated to the entire Pi ecosystem through mining rewards and other methods. The detailed allocation plan of $PI is shown below.

According to the disclosed token economics of $PI, due to $PI's max supply limitation, the mining reward mechanism of $PI is designed similarly to the reward halving mechanism of Bitcoin. Specifically, the mining reward rate for $PI after the open mainnet launch will be adjusted annually based on a given formula.

However, the mining reward mechanism before open mainnet is different from the one after. Specifically, the mining reward before open mainnet consists of a base reward and an extra reward. The base reward rate is determined by the number of validators, the demand and supply of validations, and others. It is adjusted monthly. The extra reward rate is the additional bonus that each validator can earn by completing different tasks, including inviting new users, participating history in validation, and mining rewards lock-up.

Pi Network also incentivizes validators to lock up their rewards by extra rewards. The higher the percentage of rewards locked up and the longer the lockup time, the more extra rewards validators can receive before the open mainnet launch. Through this, Pi Network wishes to reduce the initial circulation as much as possible and maintain Pi Network's security.

The vesting period of Pi Network's core team will be the same as the vesting period of the ecosystem. In other words, for each percentage of tokens allocated to the ecosystem released, a corresponding percentage of tokens allocated to core team will also be released.

Token Performance (32.67%)

Since Pi Network's open mainnet is not live yet, users can not actually trade $PI on the secondary market. However, on December 29, Huobi announced $PI would be listed for spot trading. But it will keep the deposit and the withdrawal functions closed until the open mainnet is successfully launched. Therefore, the $PI listed on Huobi is similar to a kind of future, because it is not a real spot, but a voucher guaranteed by the exchange and can only be exchanged for a spot after Pi Network open mainnet launched. Thus, the delivery date of this future product is also uncertain due to the uncertainty of Pi Network's open mainnet launch date.

Then, on December 30, Bitmart announced the opening of $PI's "spot" trading. As of January 5th, $PI is listed on several centralized exchanges, including Huobi, Biconomy, BitMart, etc. The price of $PI varies widely from exchange to exchange because of the inability to transfer between exchanges via Pi Network. For more details, please refer to Pi Network's details page on TokenInsight.

On January 5, $PI's 24h trading volume was about $36 million, of which about 80% was from Huobi, so we'll use Huobi's $PI price as a benchmark. After $PI went live on Huobi on December 29th, the price fluctuated around $40 and spiked to a high of $322 on the 30th. Then, $PI's price gradually dropped to around $100, with a nearly 70% drop in price from ATH.

Ecosystem Development (43.05%)

Pi Network has a very large user base, with 33 million validators on enclosed mainnet as of March 2022, according to Pi Network. At the same time, Pi Network has more than 2 million followers on Twitter and over 20,000 average interactions for tweets. Noteworthy, Ethereum has 3 million Twitter followers, but its average interaction of tweets is only about 1,000.

Pi Network is also trying to attract more developers to help prepare more projects in its ecosystem. According to Pi Network, Pi Network has held 2 hackathons since 2021. However, due to the delay of Pi Network open mainnet, we will not able to know the real situation of these projects at this time.

Closing Thoughts

Overall, Pi Network's biggest problem is that it is developing too slowly. After 1 year of its enclosed mainnet's operation, we are still not able to know the exact date of Pi Network's mainnet launch. Without an official launch, works on token economics or ecosystem seems doesn't really matter to users. Although Pi Network has a large and highly active user base, the launching of its open mainnet has been continuously delayed. This will eventually and inevitably make users lose patience during the long waiting period and lead to losses of users.

In addition, the current hot situation of Pi Network's secondary market cannot represent the real situation after Pi Network's mainnet launched. We believe that if Pi Network does not go live as soon as possible, continued user loss might be the next major problem Pi Network will face.

Based on the above information, TokenInsight has rated Pi Network's current performance with a CC rating and a negative outlook.