In my four-year journey with Pi Network, I have observed that many of the confusions about the token are the result of a lack of understanding of the content of the whitepaper. Perhaps reading the whitepaper is too time-consuming and complicated for many. This is the reason why, in July 2021, I attempted to simplify its content.
What I did was that I divided the whole white paper into several parts and explained each part piece by piece.
Though the document is only 16 pages, in a visual generation with a short attention span, reading the whole paper is almost an impossible task. However, in understanding Pi Network, there is no better place to start than to read its official document, for it contains all the details about Pi.
Though the scam stigma is no longer as strong as before, it is still good to use the white paper as a basis to counter fake social media posts out there.
Let's start with the overview of the white paper. These are the contents:
Preface
Introduction
Problem
Solution
Economic Model
Utility
Governance, and
Roadmap or Deployment Plan.
The Preface
Let's start with the preface.
I understand that most members of my team are not Computer Science or Computer Programmer graduates, so the words in the white paper are alien jargon to them. No wonder misinterpretation and speculation are widespread.
In the preface, 2 things are mentioned: mission and vision.
Pi Network's mission is to create a cryptocurrency for the masses. To accomplish that mission, it is important to understand the meaning of "smart contracts."
This is the definition of a smart contract, according to Investopedia:
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.
Let's break down that definition.
Some parts of the sentence are difficult to simplify. The important thing to understand in smart contracts is the role of computer codes. These codes are decentralized and spread across the web, meaning no single individual or institution controls them. This code can be tracked if there is an anomaly. Once the contract is executed, it cannot be changed. So bad elements can't cheat this smart contract. That's what I know. I might be mistaken in my interpretation.
As for Pi Network's vision, it is to create a kind of web marketplace that does not exclude the majority. In this market, Pi will play a big role. The dream is for Pi to be used in real transactions by common people anywhere in the world.
To many, such a dream sounds like a scam. They say a dream is free, but reality is different. A dream is indeed different from reality. However, for the Pi network, it doesn't just dream; the community also builds infrastructure to achieve that dream.
The dream may or may not come true. The important thing is that even if the dream is in the clouds, Pi is not just looking at it. Instead, the project has remained consistent for the last six years, and we saw how the crypto market reacted on its launch day last February 20.
Introduction
The introduction shows the importance of cryptocurrency. We can appreciate its importance by comparing two types of financial systems: the traditional system we have today and cryptocurrency.
According to the white paper, the current financial system has 5 limitations.
In our system right now, there is always a third party. In a relationship, we don't want a third party, for such a party usually ends up destroying the relationship. Of course, if the third party is God, that's the best.
Applying this idea of a third party to finance, yes, they provide useful services, and in return, they reap huge rewards or profit. They benefit from the exchanges between buyers and sellers like us. In cryptocurrency, the 3rd party is eliminated as well as the unnecessary expenses. So, in cryptocurrency, the winners are the buyers and sellers.
There are 2 examples of 3rd parties mentioned in the white paper: banks and online payment systems such as PayPal.
When you make a deposit in the bank, or you borrow money, or the bank lends money to a businessman, what the bank does is make a record of this transaction to make the transaction reliable and secure. It's the same with PayPal. When Juan buys a product from Pedro, Paypal's record will show the money deducted from Juan and money coming in from Pedro. So far, so good. That is the purpose of those financial institutions. And by doing that, they maintain order.
However, these financial institutions are limited when it comes to 5 areas:
First, "unfair value capture." What does "unfair value capture" mean? These institutions rake in a lot of money as a result of their services. It was mentioned in the white paper that PayPal, for example, had a market capitalization of 130B USD in July 2021. In PHP, that's worth 6.5T. Imagine, in a simple transaction, that's how much money comes in to them. That's what cryptocurrency will take away. If taken away, then where will this money go? The answer is obvious.
Second, fees. That's self-explanatory.
Third, censorship. What does censorship mean? For example, you have savings. The question is, where do you put it? For the sake of illustration, let's assume that the interest per annum is 1.5%, but the inflation rate is 4.1%, which means that instead of increasing your savings after a year, it is reduced by 2.6%. Of course, the nominal value of your money in the bank has not changed, but its real purchasing power is not what it used to be last year. There is less to buy because of the inflation rate. What will you do now? For most of us who don't have much savings, that's not a big deal. But for those who have a lot of savings, they tend to withdraw their money from the bank and put it somewhere else that will give a bigger yield.
Currently, although risky and there are many scammers, in cryptocurrency, high annual percentage yields such as 20%, 30%, and others are normal. For example, you thought of lending your money to a crypto company, and it made a huge profit. How about if the Central Bank of the Philippines suddenly issued a memorandum saying that all bank accounts connected to crypto should be frozen? Even if it's your money, you can't move it.
Fourth, these financial institutions act as gatekeepers. They may or may not allow entry.
Fifth, the meaning of "pseudonymous" is somewhat difficult to explain. Just check it in the dictionary. In my simple understanding, this is what that means. Nowadays, privacy is a growing issue. Even if it's your money, if the government tells the bank to disclose all transactions, there's nothing you can do.
So, those are the 5 limitations of the current financial institution that cryptocurrency wants to change.
This was proven by Bitcoin in 2009. Unfortunately, Nakamoto Satoshi's vision to make Bitcoin a medium of exchange didn't happen because the top 1% has already hijacked 87% of the total supply of Bitcoin. That was the case in 2021. Since the entry of Blackrock and other big names in the succeeding years, I think the percentage in 2025 will be higher. So, this is where Pi comes in.
By the way, just a disclaimer. I am not against capitalism. I support the free market. The kind of economic system that we have right now has an outward appearance of capitalism, but in reality, it is not. In true free-market capitalism, the consumer is sovereign. The distinguishing features of capitalism include freedom, mass production, mass consumption, and social mobility. The social ladder is still open somehow but is gradually narrowing due to the amount of regulations and laws that are strangling the market.
I think that's enough for now. The next topic is about the problem and the solution.
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.