We have already discussed the preface, introduction, problem, and solution. Now, let's go to Pi’s economic model.

However, before I proceed to the whitepaper, I just want to introduce an insightful article published on November 17, 2024, at Hokanews. I stumbled upon this article while preparing my fourth post about Pi Network's whitepaper.

Source

This is how ChatGPT summarized the content of the above article:

The article highlights the challenges most cryptocurrencies face in achieving long-term success due to weak ecosystems and a lack of real-world utility. However, Pi Network is taking a different approach by focusing on building a strong, user-friendly ecosystem with practical applications. With a focus on real-world impact, scalability, and security, Pi Network aims to reach billions of users, positioning itself as a major player in the future of digital currencies.

The above article identifies Pi Network's focus on ecosystems and real-world utility. To achieve this vision, Pi's economic model attempting the balance between access and scarcity plays a significant role. How does the whitepaper explain the balance between access and scarcity?

Scarcity

The problem with the current monetary system, called fiat currency, is abundance. In economics, there is this so-called law of demand and supply. When there is too much supply, meaning an abundant supply of a particular good or product and little demand, the tendency is for the price to drop. This law is also applicable to money supply.

Let us take the COVID-19 experience as an example. To give financial assistance to the people during COVID-19, many governments in the world provided subsidies by printing money. At that time, everyone was happy. No one thinks of the long-term consequences of such an act. After several years, we feel the long-term effect of inflating the money supply. The purchasing power of fiat currency decreased.

This is the beauty of cryptocurrency. The supply is limited; that's what scarcity means.

Let us take Bitcoin as an example. The total number of BTC is 21 million, both those in circulation and those still to be mined. In addition to its utility as an alternative to the existing monetary system, its scarcity is the reason why the price of Bitcoin keeps increasing. Moreover, Bitcoin is not only a cryptocurrency; it is also a financial technology.

Imagine the world's population is 8 billion, but bitcoin is only 21 million. So, it's also one of the reasons that many of us don't have Bitcoin because of its scarcity, and 87% is already held by 1%. Thus, Bitcoin passed the scarcity test but failed when it came to accessibility. This is where Pi comes in. Its supply is limited to 100 billion. Mining will stop sometime in the future. If I am not mistaken, I read somewhere that the goal is to reach 100 million pioneers. Once that goal is achieved, mining will stop. Though the maximum supply is huge, the point is that compared to fiat currency, its quantity is limited. So, Pi passed the scarcity test even though its supply is bigger than Bitcoin and other cryptocurrencies.

Accessibility

When it comes to accessibility, Pi, though not the pioneer in mobile mining, is the network that popularized this method of token distribution. Utilizing a desktop or a laptop has limitations because not everyone owns these gadgets. But when it comes to mobile phones, it is more affordable for regular people to own them. By utilizing this method, the Pi network doesn't want to repeat what happened to Bitcoin, where only a small number owns a huge portion of the total supply. This is what the white paper says:

Pi, on the other hand, seeks to strike a balance between creating a sense of scarcity for Pi while still ensuring that a large amount does not accumulate in a very small number of hands.

I think we need to interpret these sentences:

In contrast to Bitcoin, which created a fixed supply of coins for the entire global population, Pi creates a fixed supply of Pi for each person that joins the network, up to the first 100 million participants. In other words, for each person that joins the Pi Network, a fixed amount of Pi is pre-minted. This supply is then released over the lifetime of that member based on their level of engagement and contribution to network security.

If I understand that paragraph correctly, Pi doesn't seem to have any plans to remain temporary but to be part of the real economy.

With a global population of 8 billion, Bitcoin has a supply of 21 million. In Pi's case, the supply for the 100 million pioneers is fixed. Because everyone is still mining, we do not know the precise number of that set supply. The quantity of coins in Pi is determined by the number of pioneers, in contrast to other cryptocurrencies that have a fixed supply.

Even though the supply of Pi coins isn't concentrated in a small number of hands, the early pioneers now own a greater number of coins. Pi Network is using this to recognize the contributions of early users.

So that's how I summarized Pi's economic model: balancing access and scarcity. For you to have more accurate content, you can just digest slowly the white paper. Sorry if it's a bit oversimplified. I did it for the sake of my team members. I acknowledged that people’s reading comprehension is not the same. For those who can understand the material well, it's better if you go straight to the white paper.

If you are curious about Pi Network, you can download the app by following this link. You also need to have a Bitget account where you can transfer your Pi from your Pi wallet to a crypto exchange and exchange it for your currency.

Grace and peace!

Note:

Joining Hive in August 2021, I stumbled upon this idea that the abundance of money supply is not the problem. The important thing is how such an abundance is being utilized to create more opportunities for investments and how they are used to grow the economic pie. Hence, the debate between inflationary and deflationary monetary policy continues even in the cryptocurrency space. I have to admit that I am puzzled about this for the digital space, and the digitalization of the real world economy seems limitless and abundant. The idea of scarcity appears not applicable in this space. Nevertheless, though I prefer a monetary policy that applies the mechanics of scarcity, I am also open to the idea that abundance in the money supply has a place, provided that it corresponds to the growth of goods and services.

Check other Pi Network-related articles:

Pi Network’s Open Mainnet: Hype, Price Speculation, and Reality Check

Pi Network's Open Mainnet: Reality vs. Hype and My First Pi Trade

Pi Network Defies Expectations: Open Mainnet, Price Surges, and Community Reactions

The Pi Anomaly: A Market Oddity and the Rise of Mobile Mining Apps

Revisiting Pi Network: Reflections on Its Journey Since July 2021

Understanding Pi Network: A Simplified Breakdown of Its White Paper

Breaking Barriers: How Pi Network Democratizes Cryptocurrency