PI

1.  What is PI?

PI is the native cryptocurrency of the Pi Network, a blockchain project that aims to make cryptocurrency mining accessible to the general public via a mobile app with minimal energy consumption. Its core vision is to build a peer-to-peer ecosystem where users can spend PI on goods, services, and decentralized apps (DApps). The project was launched in March 2019 and operated in a restricted “enclosed mainnet” phase until February 2025.

PI token’s primary role is to facilitate transactions and support applications within the Pi network ecosystem.

PI market cap as of date is reported to stand at $4.1 billion and ranks no. 33 on Coingecko.

However, PI token remains unlisted on major exchanges like Binance due to transparency and regulatory concerns. It has seen limited trade on platforms like OKX and HTX, and prices on these exchanges have fluctuated dramatically.

2. PI Consensus Mechanism

Pi uses a consensus mechanism based on the Stellar Consensus Protocol (SCP) and an algorithm called Federated Byzantine Agreement (FBA). Stellar Consensus Protocol was designed by David Mazières, a professor at Stanford University.

How it works:

1. Trust-Based Validation: Unlike traditional systems, SCP doesn’t rely on energy-intensive methods (like Proof of Work), or financial collateral (like Proof of stake). Each node (participant) in the network defines a “quorum slice” — a group of other nodes it trusts to reach agreement. A quorum is a larger group of nodes that contains enough overlapping quorum slices to reach consensus.

This may raise concerns about Sybil attacks (fake identities), so Pi uses methods to confirm trustworthiness, like KYC verification, and overseeing the integrity of the network by the Pi Core Team, which introduces some centralization.

2. Voting Mechanism: When a node proposes a transaction, it sends a message to its trusted nodes, seeking their approval. Nodes communicate through multiple rounds of messaging to reach consensus on which transactions to validate and what the next block should be.

3. Use Cases of Pi Blockchain

   1. Peer-to-Peer Transactions: Pi enables individuals to conduct payments and money transfers without intermediaries. This is the primary promoted use case. However, most transactions currently take place within closed Pi ecosystem apps, rather than on an open, public blockchain.
   2. E-Commerce and Online Marketplaces: The network supports the exchange of goods and services through Pi-powered platforms. Examples include Daabia Mall and the freelancing platform Workforce Pool. These platforms mostly support small-scale, peer-driven commerce, with no significant adoption by major merchants or brands.
   3. DeFi: But this is a limited activity as reflected in the platform’s minimal Total Value Locked (TVL)[1].

4. Use Cases of PI token:

The Pi token functions primarily as a payment token, intended to be used as digital currency within the Pi ecosystem. Its use cases—such as payments for goods and services, peer-to-peer transfers, and potential utility within Pi-based apps—all fall under this general role.

5. Shariah Screening

• The legitimacy

This section is the cornerstone of the Sharia stance on PI token, as there are doubts about Pi network.

1. Codebase and Auditing: As of now, no public, third-party audit of the Pi blockchain or smart contract infrastructure has been released. The core software and blockchain code remain partially closed-source, limiting external scrutiny. This lack of auditability raises concerns about trust and long-term security.

Additionally, Pi Network has a Skynet page with a 62% score, but it is not audited by CertiK, and the information there is based on third-party sources without official verification.

2. Adoption: Despite strong community support, Binance refrains from listing PI token, citing its lack of transparency, ongoing closed mainnet, insufficient maturity and regulatory uncertainty.

Meanwhile, Bybit’s CEO Ben Zhou publicly called Pi Network a scam, referencing a Chinese police warning about fraudsters using Pi’s name to deceive vulnerable individuals. This serious allegation, along with regulatory concerns, led Bybit to reject the listing entirely.

Pi Network has nevertheless gained a large following. But this is mainly through its referral-based mining system and promises of free tokens (Pi Network offers a 25% bonus on mining rates for each referred user who mines concurrently). The model heavily depends on user recruitment, with limited actual utility, leading many to compare it to Ponzi-like schemes, where growth relies more on hype than real value[2].

3. Regulatory and Legal Status: Pi has not publicly clarified its legal or regulatory framework, and its prolonged use of a “test” or “enclosed mainnet” model has raised concerns about whether it is being used to delay regulatory scrutiny. Pi also has no verifiable market capitalization or TVL, leaving its financial status unclear.
4. Team: The Pi Network is led by a team of Stanford graduates, notably Dr. Nicolas Kokkalis and Dr. Chengdiao Fan, which lends academic credibility to the project.
5. Transparency & Particular violations: A major concern with Pi Network is the migration from the closed to the open mainnet, which requires users to complete KYC verification. Due to limited KYC slots, many users couldn’t migrate their tokens, leading to unequal access and broken expectations. Additionally, numerous users reported losing their tokens during this phase, with conflicting figures and little transparency.

For these reasons, the network is considered of low legitimacy and too risky.

• The project

Pi Network aims to make cryptocurrency mining and usage accessible to the general public by allowing users to earn Pi tokens through a mobile app that consumes minimal device resources. The broader technological goal is to build a decentralized ecosystem where users can use PI as a unified global currency for peer-to-peer transactions, e-commerce, and decentralized applications (DApps), without needing technical expertise or specialized hardware.

This goal doesn’t conflict with Shariah. However, the breadth of this goal, combined with the apparent lack of sufficient means —such as a strong technology, widespread trust, and legal or financial systems to support worldwide adoption, all raise doubts about the feasibility of this goal.

• Underlying relationships

As defined in the Pi Network white paper, users can take on different roles in the system, all of which are considered “miners” under Pi’s broad definition. These roles include:

• Pioneers, who log in daily to prove they are real users or to make transactions.
• Contributors, who build a trust graph by listing users they trust.
• Ambassadors, who invite new users to the network.
• Nodes, who run Pi software on computers to support the network’s consensus protocol.

Each role contributes differently but is rewarded with newly minted Pi tokens, as long as the user is active on that day. This system forms the basis of the network’s operation and the relationships between its users and the platform.

• • Relationship between Pi network and pioneers

The relationship between Pi network and pioneers has two main aspects:

• • The use of the network to submit transactions.
  • The rewards granted for daily login via the mobile app.

This section will address the first aspect, while the second will be discussed separately in the rewards section.

When a user submits a transaction on Pi network, the transaction is implemented, and recorded according to the network’s protocol. In return, Pi charges gas fees for each transaction. This relationship is simply an Ijara إجارة contract between both parties, where a service (processing the transactions) is provided in exchange for a pre-determined fee (gas fees). This is valid from a Shariah standpoint, with the condition that the application for which the transactions are processed is valid. Consequently, if the application is prohibited, the processing and validation Ijara contract will be haram and the payment of PI for that will accordingly be Shariah non-compliant.

• • Relationship Between Pi Network and Contributors

Contributors in the Pi Network help build the “trust graph” by listing users they know and trust. This graph is used to support the consensus mechanism that secures the network.

From a Shariah perspective, this relationship fits the structure of a Juʿalah  (جعالة)contract. In this contract, a reward is promised in return for completing a certain task, but the work is not assigned to a specific Contributor.

This arrangement is generally Shariah-compliant.

• • Relationship Between Pi Network and Ambassadors

Ambassadors earn PI tokens by inviting new users to the network. This relationship appears to be a Ju‘alah arrangement as the previous one, but it’s important to note that these rewards are taken as a percentage of what the invited users earn. This shifts the matter into the realm of network marketing, which has been deemed impermissible by Shariah scholars, for taking a portion of the successive layers of invitees’ commissions without any real work or service provided to them in return.

• • Relationship between Pi Network and Nodes

Nodes in the Pi ecosystem validate transactions and support the consensus algorithm by running the network software. They rely on the trust data provided by Contributors. This relationship is an Ijara إجارة contract between both parties, where a service (running Pi software on computers) is provided in exchange for a pre-determined fee. It is valid from a Shariah standpoint, with the condition that the application for which the transactions are processed is valid.

• Rewards

In the Pi Network, users can earn several types of rewards through various activities and contributions within the ecosystem. Here is a breakdown of the different types of rewards.

1. Mining Rewards

Definition: Users earn mining rewards by simply participating in the network and confirming their presence daily through the Pi app.

Types:

• Pioneers: Users who log in daily to validate their activity.
  • Shariah ruling: prohibited, because the benefit being rented (opening the app daily) is not considered a valuable usufruct (منفعة متقومة), nor is it commonly compensated with money. A valuable benefit is a strict condition for a valid Ijara and the related fees.
• Ambassadors: Users who invite new members into the network.
  • Shariah ruling: prohibited, for the prohibition of paid network marketing, as outlined before.
• Contributors: Users who help build a trust graph by identifying trusted Pioneers.
  • Shariah ruling: Permissible.
• Nodes: Users who run node software on their computers, contributing to network security and processing transactions.
  • Shariah ruling: Permissible as long as they do not support a prohibited activity.

2. Developer Rewards

Definition: Additional Pi minted to support ongoing development of the network.

Shariah ruling: Permissible in principle, as long as they do not support any impermissible activity.

3. App Usage Rewards

Definition: Rewards earned by users who interact with decentralized applications (DApps) within the Pi ecosystem.

Shariah ruling: Permissible in principle because they are considered as promotion gifts, with the condition that the apps they interact with are halal.

Conclusion of Shariah Opinion

This report has conducted a comprehensive Shariah analysis of the PI token. PI is the native cryptocurrency of the Pi network, a blockchain project that allows users to mine tokens through a mobile application with low energy consumption. The report has analyzed the network’s purpose, structure, mechanisms and legitimacy.

The general Shariah ruling on exchanging the PI token or dealing with the Pi platform is prohibition, due to the strong doubts surrounding its integrity. These entail excessive uncertainty “Gharar” (غرر) in the network’s transactions, making its token a potential waste of money and a likely cause for disputes, which is forbidden in Shariah. Furthermore, the protocol involves many Shariah non-compliant types of rewards such as Pioneers and Ambassadors’ rewards, though some rewards are deemed halal, such as Contributors’ rewards. Given this situation, it is impermissible to engage with the platform in any way that involves supporting it.

This Shariah opinion is subject to review, particularly in relation to updates conducted by the platform that may change its legitimacy and integrity.

^[1] There are currently 20 DApps running on PI network, you can explore the ecosystem from this link: https://ecosystem.pinet.com/
^[2] Review this article for more details: https://cryptotechinsights.com/why-did-bybit-ceo-called-pi-network-a-scam/?utm_source=chatgpt.com.