DIGITAL CRYPTO
What is Pi Network and is it a scam?
PI Network is one of the newest digital coins to attract attention among cryptocurrency investors.
We explain what you need to know about it and whether it's legitimate.
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You can't put cash in the digital currency yet, but once it's possible, be aware that making money on any investment is never guaranteed.
In other words, you should never invest more money than you can afford to lose and steer clear of anything you don't understand.
Cryptocurrencies are especially volatile, and their values can make large swings with no notice.
Newer cryptocurrencies are also even riskier than more established ones, such as Bitcoin, and make you more open to scams.
5 risks of crypto investments
BELOW we round up five risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
What is Pi Network?
Pi Network claims to be the first and only digital currency that you can mine on your phone.
Cryptocurrency mining is a hugely energy intensive process and requires a lot of computer power in order to solve complex mathematics puzzles.
Through a complex computer programme, Pi Network instead uses a series of votes and exchanges of data to verify transactions.
Pi Network claims users can mine the currency through the mobile app "without draining their phone battery".
This makes the process available to anybody, in theory, Myron Jobson, personal finance campaigner of Interactive Investor, told The Sun.
Pi Coin is the cryptocurrency that runs on the Pi network, but it remains in pre-release mode.
Pi Network is currently in the second phase of the project, but it's not yet known when Phase 3 will launch.
How much is Pi Network worth?
As Pi can't yet be traded, it currently holds no value, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
However, the app claims to offer users the ability to boost their mining rate by inviting friends and family to join the project.
Earlier members of the network also mine at a higher rate than those that come after them, according to the project website.
Yet Mr Jobson added: "It is difficult to see where the value is for the users.
"At present, users are wasting their mobile phone battery life to mine ‘Pi Coin’ which is worthless and can't be spent at present.
"Users hang on to it in hope that it will one day be worth something.
"The only thing of discernible value is the user data.
"A key risk to people getting involved is the handling of the project’s data collections, permissions and third party software included in the app."
Is Pi Network legitimate or a scam?
As with all new cryptocurrency and digital coin projects, it's difficult to know for sure whether it's legitimate or a scam.
In other words, be careful about handing over more personal data than you're comfortable sharing.
The app is also built on "highly nascent and unproven technology", Ms Streeter added.
She said: "Although lofty promises are made there is zero guarantee this network will have a future.
"It is far too early to tell if the coins being earned will be worth anything.
"Because of this users should be wary of committing too much time to the app and be happy with the level of personal data they are handing over."
Mr Jobson added that the combination of the need for recruitment and promises of future riches is a classic sign of a pyramidal structure.
However, Pi Network "can't technically be described as a pyramid scheme" as no money has changed hands yet.
He said: "The adage, 'there's no such thing as a free lunch' is also worth remembering here. It pays to take a step back and scrutinise the proposition.
"If you're serious about investing, you should do so for the long term in quality companies, funds, investment trusts and markets."
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