The Pi Network listing model on cryptocurrency exchanges is a form of debit trading. Users exchange virtual currency that is not real, based purely on pump and trust.
The essence of Pi Network listing
On December 29, two cryptocurrency trading platforms, XT.com and Huobi, officially announced the listing of Pi (Pi Network) on the spot market. This information surprised both the Pi mining community in Vietnam and cryptocurrency traders. The reason is that the Pi Network is still not officially operational. At the same time, Pi coins mined on mobile phones cannot currently be transferred out to buy and sell.
In fact, the listing model of XT.com or Huobi applied is IOU (I owe you – I owe you). In essence, this is a debt contract, established for a future transaction. This form is not a new invention in the cryptocurrency industry.
According to Jenny Nguyen, co-founder of crypto investment fund Kyros, trading platforms repeatedly apply this trick to the types of assets of interest. “The hard-fork of BTC to BCH in 2017 or ETHW from ETH recently also made this kind of thing appear. Exchanges open trading for cryptocurrencies 2-3 weeks before they are created,” explained Jenny Nguyen.
In such cases, the platform opens trading early to take advantage of investors' interest in a new asset class to earn trading commissions.
Pham Dong, community manager of Saigon Tradecoin, thinks that Pi on XT.com or Huobi is like a form of “scoring”. The expert said that the asset class named Pi on this platform is neither a coin nor a token, unrelated to blockchain technology.
In essence, buying and selling Pi at the exchange does not operate on the blockchain. Users hold Pi on Huobi, XT.com is the creditor of the platform. After Pi Network goes into operation, the exchange will have to return the coins as committed.
Big risks from Pi Network's debt buying model
Similar in name to an IDO or an IEO (common forms of initial coin offering), the buyer of the IOU does not actually own the token or coin. Therefore, the risk of entering a trade is many times higher.
Early purchase of digital currencies when new IDO is inherently risky, warned by the exchange. Because the prices of these assets, when listed, often fluctuate strongly. However, in these cases, the user still actually owns the digital currency on the blockchain. Customers have the right to deposit and withdraw this crypto asset to the storage wallet.
According to Ms. Jenny Nguyen, the purchase of IOU Pi Network does not guarantee the return of the property. Therefore, this form is more dangerous. The recent case of FTX bankruptcy is an example of not storing cryptocurrencies on centralized platforms.
Meanwhile, Mr. Nguyen Trong Tuyen, founder of the GTA cryptocurrency investment fund, said that Pi Network on newly listed exchanges could be an inflated game of “sharks”, aiming to profit from investors. . This coin is currently only traded internally, with a fairly low volume. Therefore, it can be easily manipulated, pushed the price, sold out.
After only a few hours of listing, the price of Pi on Huobi has reached 62 USD . Therefore, FOMO investors, buying coins at the top price may incur losses.
Disavantage with the true value of Pi
The fact that exchanges list IOU Pi also creates confusion in the community about the true value of this digital currency. Assets traded on Huobi, XT.com for 60 USD are not coins that users receive from taking attendance on the mobile app.
Specifically, Pi Core Team, the project development team, announced Pi Network with a total supply of 100 billion dong . With a price of 62 USD , the total capitalization of the project will reach 6.2 trillion USD . Meanwhile, the capitalization of the entire cryptocurrency market is currently only at the $800 billion mark . Therefore, the real value of Pi when issued on the blockchain is unlikely to reach this level.
In fact, after 3 years of operation, the price of Pi is still zero, according to the announcement from the project homepage. The team said that the conversion to fiat or other coins and tokens will be done after the mainnet. This process started in June, with the mainnet closed in the network. Therefore, the converted value of Pi has not yet formed.
Therefore, it is not feasible to put Pi mined from the phone to exchanges like XT.com for sale. In addition, the number of KYC (identity verification) accounts, eligible to bring Pi from the phone to the mainnet, reached about 1.5 million. This is a fraction of the 35 million users the team has announced.
The conversion and trading of Pi is still done in the form of OTC (users themselves negotiate and agree on prices). At the same time, some promote the purchase and sale of goods, paid in Pi.