Pi White Paper

Preface
As the world becomes increasingly digital, cryptocurrency is a next natural step in the
evolution of money. Pi is the first digital currency for everyday people, representing a major
step forward in the adoption of cryptocurrency worldwide.

Our Mission: Build a cryptocurrency and smart contracts platform secured and operated by
everyday people.

Our Vision: Build the world’s most inclusive peer-to-peer marketplace, fueled by Pi, the
world’s most widely used cryptocurrency

DISCLAIMER for more advanced readers: Because Pi’s mission is to be inclusive as

possible, we’re going to take this opportunity to introduce our blockchain newbies to the
rabbit hole :)

Introduction: Why cryptocurrencies matter

Currently, our everyday financial transactions rely upon a trusted third party to maintain a
record of transactions. For example, when you do a bank transaction, the banking system
keeps a record & guarantees that the transaction is safe & reliable. Likewise, when Cindy
transfers $5 to Steve using PayPal, PayPal maintains a central record of $5 dollars debited
from Cindy’s account and $5 credited to Steve’s. Intermediaries like banks, PayPal, and
other members of the current economic system play an important role in regulating the
world’s financial transactions.

However, the role of these trusted intermediaries also has limitations:

1. Unfair value capture. These intermediaries amass billions of dollars in wealth creation
(PayPal market cap is ~$130B), but pass virtually nothing onto their customers - the
everyday people on the ground, whose money drives a meaningful proportion of the
global economy. More and more people are falling behind.
2. Fees. Banks and companies charge large fees for facilitating transactions. These fees
often disproportionately impact lower-income populations who have the fewest
alternatives.
3. Censorship. If a particular trusted intermediary decides that you should not be able to
move your money, it can place restrictions on the movement of your money.
4. Permissioned. The trusted intermediary serves as a gatekeeper who can arbitrarily
prevent anybody from being part of the network.
5. Pseudonymous. At a time when the issue of privacy is gaining greater urgency, these
powerful gatekeepers can accidentally disclose -- or force you to disclose -- more
financial information about yourself than you may want.

Bitcoin’s “peer-to-peer electronic cash system,” launched in 2009 by an anonymous

programmer (or group) Satoshi Nakamoto, was a watershed moment for the freedom of
money. For the first time in history, people could securely exchange value, without requiring
a third party or trusted intermediary. Paying in Bitcoin meant that people like Steve and
Cindy could pay each other directly, bypassing institutional fees, obstructions and intrusions.
Bitcoin was truly a currency without boundaries, powering and connecting a new global
economy.

Introduction To Distributed Ledgers

Bitcoin achieved this historical feat by using a distributed record. While the current financial
system relies on the traditional central record of truth, the Bitcoin record is maintained by a
distributed community of “validators,” who access and update this public ledger. Imagine the
Bitcoin protocol as a globally shared “Google Sheet” that contains a record of transactions,
validated and maintained by this distributed community.

The breakthrough of Bitcoin (and general blockchain technology) is that, even though the
record is maintained by a community, the technology enables them to always reach
consensus on truthful transactions, insuring that cheaters cannot record false transactions or
overtake the system. This technological advancement allows for the removal of the
centralized intermediary, without compromising transactional financial security.

Benefits Of Distributed Ledgers

In addition to decentralization, bitcoin, or cryptocurrencies in general, share a few nice
properties that make money smarter and safer, although different cryptocurrencies may be
stronger in some properties and weaker in others, based on different implementations of
their protocols. Cryptocurrencies are held in cryptographic wallets identified by a publicly
accessible address, and is secured by a very strong privately held password, called the
private key. This private key cryptographically signs transaction and is virtually impossible to
create fraudulent signatures. This provides security and unseizability. Unlike traditional bank
accounts that can be seized by government authorities, the cryptocurrency in your wallet can
never be taken away by anyone without your private key. Cryptocurrencies are censorship
resistant due to the decentralized nature because anyone can submit transactions to any
computer in the network to get recorded and validated. Cryptocurrency transactions are
immutable because each block of transactions represents a cryptographic proof (a hash) of
all the previous blocks that existed before that. Once someone sends you money, they
cannot steal back their payment to you (i.e., no bouncing checks in blockchain). Some of the
cryptocurrencies can even support atomic transactions. “Smart contracts” built atop these
cryptocurrencies do not merely rely on law for enforcement, but directly enforced through
publicly auditable code, which make them trustless and can potentially get rid of middlemen
in many businesses, e.g. Escrow for real estate.

Securing Distributed Ledgers (Mining)

One of challenges of maintaining a distributed record of transactions is security --
specifically, how to have an open and editable ledger while preventing fraudulent activity. To
address this challenge, Bitcoin introduced a novel process called Mining (using the
consensus algorithm “Proof of Work”) to determine who is “trusted” to make updates to the
shared record of transactions.

You can think of mining as a type of economic game that forces “Validators” to prove their
merit when trying to add transactions to the record. To qualify, Validators must solve a series
of complex computational puzzles. The Validator who solves the puzzle first is rewarded by
being allowed to post the latest block of transactions. Posting the latest block of transactions
allows Validators to “mine” a Block Reward - currently 12.5 bitcoin (or ~$40,000 at the time
of writing).
This process is very secure, but it demands enormous computing power and energy
consumption as users essentially “burn money” to solve the computational puzzle that earns
them more Bitcoin. The burn-to-reward ratio is so punitive that it is always in Validators’ self-
interest to post honest transactions to the Bitcoin record.

Problem: Centralization of power and money put

1st Generation Cryptocurrencies out of reach
In the early days of Bitcoin, when only a few people were working to validate transactions
and mining the first blocks, anyone could earn 50 BTC by simply running Bitcoin mining
software on their personal computer. As the currency began to gain in popularity, clever
miners realized that they could earn more if they had more than one computer working to
mine.

As Bitcoin continued to increase in value, entire companies began to spring up to mine.

These companies developed specialized chips (“ASICs”) and constructed huge farms of
servers using these ASIC chips to mine Bitcoin. The emergence of these enormous mining
corporations, known drove the Bitcoin Gold Rush, making it very difficult for everyday people
to contribute to the network and get rewarded. Their efforts also began consuming
increasingly large amounts of computing energy, contributing to mounting environmental
issues around the world.

The ease of mining Bitcoin and the subsequent rise of Bitcoin mining farms quickly produced
a massive centralization of production power and wealth in Bitcoin’s network. To provide
some context, 87% of all Bitcoins are now owned by 1% of their network, many of these
coins were mined virtually free in their early days. As another example, Bitmain, one of
Bitcoin’s biggest mining operations has earned billions in revenue and profits.

The centralization of power in Bitcoin’s network makes it very difficult and expensive for the
average person. If you want to acquire Bitcoin, your easiest options are to:

1. Mine It Yourself. Just hook up the specialized hardware (here’s a rig on Amazon, if
you’re interested!) and go to town. Just know that since you’ll be competing against
massive server farms from across the world, consuming as much energy as the country
of Switzerland, you won’t be able to mine much
2. Buy Bitcoin on an exchange. Today, you can buy Bitcoin at a unit price of $3,500 / coin
at the time of writing (note: you can buy fractional amount of Bitcoin!) Of course, you
would also be taking on substantial risk in doing so as the price of Bitcoin is quite
volatile.

Bitcoin was the first to show how cryptocurrency could disrupt the current financial model,
giving people the ability to make transactions without having a third party in the way. The
increase in freedom, flexibility, and privacy continues to drive the inevitable march toward
digital currencies as a new norm. Despite its benefits, Bitcoin’s (likely unintended)
concentration of money and power present a meaningful barrier to mainstream adoption. As
Pi’s core team has conducted research to try to understand why people are reluctant to
enter the cryptocurrency space. People consistently cited the risk of investing/mining as a
key barrier to entry.
Solution: Pi - Enabling mining on mobile phones
After identifying these key barriers to adoption, the Pi Core Team set out to find a way that
would allow everyday people to mine (or earn cryptocurrency rewards for validating
transactions on a distributed record of transactions). As a refresher, one of the major
challenges that arises with maintaining a distributed record of transactions is ensuring that
updates to this open record are not fraudulent. While Bitcoin’s process for updating its
record is proven (burning energy / money to prove trustworthiness), it is not very user (or
planet!) friendly. For Pi, we introduced the additional design requirement of employing a
consensus algorithm that would also be extremely user friendly and ideally enable mining on
personal computers and mobile phones.

In comparing existing consensus algorithms (the process that records transactions into a
distributed ledger), the Stellar Consensus Protocol emerges as the leading candidate to
enable user-friendly, mobile-first mining. Stellar Consensus Protocol (SCP) was architected
by David Mazières a professor of Computer Science at Stanford who also serves as Chief
Scientist at the Stellar Development Foundation. SCP uses a novel mechanism called
Federated Byzantine Agreements to ensure that updates to a distributed ledger are accurate
and trustworthy. SCP is also deployed in practice through the Stellar blockchain that has
been operating since 2015.
A Simplified Introduction To Consensus Algorithms
Before jumping to introducing the Pi consensus algorithm, it helps to have a simple
explanation on what a consensus algorithm does for a blockchain and the types of
consensus algorithms that today’s blockchain protocols generally use, e.g. Bitcoin and SCP.
This section is explicitly written in a oversimplified manner for the sake of clarity, and is not
complete. For higher accuracy, see the section Adaptations to SCP below and read the
stellar consensus protocol paper.

A blockchain is a fault-tolerant distributed system that aims to totally order a list of blocks of
transactions. Fault-tolerant distributed systems is an area of computer science that has been
studied for many decades. They are called distributed systems because they do not have a
centralized server but instead they are composed of a decentralized list of computers (called
nodes or peers) that need to come to a consensus as to what is the content and total
ordering of blocks. They are also called fault-tolerant because they can tolerate a certain
degree of faulty nodes into the system (e.g. up to 33% of nodes can be faulty and the overall
system continues to operate normally).

There are two broad categories of consensus algorithms: The ones that elect a node as the
leader who produces the next block, and the ones where there is no explicit leader but all
nodes come to a consensus of what the next block is after exchanging votes by sending
computer messages to each other. (Strictly speaking the last sentence contains multiple
inaccuracies, but it helps us explain the broad strokes.)

Bitcoin uses the first type of consensus algorithm: All bitcoin nodes are competing against
each other in solving a cryptographic puzzle. Because the solution is found randomly,
essentially the node that finds the solution first, by chance, is elected the leader of the round
who produces the next block. This algorithm is called “Proof of work” and results in a lot of
energy consumption.

A Simplified Introduction To Stellar Consensus Protocol

Pi uses the other type of consensus algorithms and is based on the Stellar Consensus
Protocol (SCP) and an algorithm called Federated Byzantine Agreement (FBA). Such
algorithms don’t have energy waste but they require exchanging many network messages in
order for the nodes to come to “consensus” on what the next block should be. Each node
can independently determine if a transaction is valid or not, e.g. authority of making the
transition and double spending, based on the cryptographic signature and the transaction
history. However, for a network of computers to agree on which transactions to record in a
block and the order of these transactions and blocks, they need to message each other and
have multiple rounds of voting to come to consensus. Intuitively, such messages from
different computers in the network about which block is the next would look like the
following: “I propose we all vote for block A to be next”; “I vote for block A to be the next
block”; “I confirm that the majority of the nodes I trust also voted for block A”, from which the
consensus algorithm enables this node to conclude that “A is the next block; and there could
be no block other than A as the next block”; Even though the above voting steps seem a lot,
the internet is adequately fast and these messages are lightweight, thus such consensus
algorithms are more lightweight than Bitcoin’s proof of work. One major representative of
such algorithms is called Byzantine Fault Tolerance (BFT). Several of the top blockchains
today are based on variants of BFT, such as NEO and Ripple.

One major criticism of BFT is that it has a centralization point: because voting is involved,
the set of nodes participating in the voting “quorum” are centrally determined by the creator
of the system in its beginning. The contribution of FBA is that, instead of having one centrally
determined quorum, each node sets their own “quorum slices”, which will in turn form
different quorums. New nodes can join the network in a decentralized way: they declare the
nodes that they trust and convince other nodes to trust them, but they don’t have to convince
any central authority.

SCP is one instantiation of FBA. Instead of burning energy like in Bitcoin’s proof of work
consensus algorithm, SCP nodes secure the shared record by vouching for other nodes in
the network as trustworthy. Each node in the network builds a quorum slice, consisting of
other nodes in the network that they deem to be trustworthy. Quorums are formed based on
its members quorum slices, and a validator will only accept new transactions if and only if a
proportion of nodes in their quorums will also accept the transaction. As validators across
the network construct their quorums, these quorums help nodes to reach consensus about
transactions with guarantee on security. You can learn more about the Stellar Consensus
Protocol by watching this short, 7 min explanation video or checking out this technical
summary of SCP.

Pi’s Adaptations to Stellar Consensus Protocol (SCP)

Pi’s consensus algorithm builds atop SCP. SCP has been formally proven [Mazieres 2015]
and is currently implemented within the Stellar Network. Unlike Stellar Network consisting
mostly of companies and institutions (e.g., IBM) as nodes, Pi intends to allow devices of
individuals to contribute on the protocol level and get rewarded, including mobile phones,
laptops and computers. Below is an introduction on how Pi applies SCP to enabling mining
by individuals.

There are four roles Pi users can play, as Pi miners.

Namely:

• Pioneer. A user of the Pi mobile app who is simply confirming that they are not a “robot”
on a daily basis. This user validates their presence every time they sign in to the app.
They can also open the app to request transactions (e.g. make a payment in Pi to
another Pioneer)
• Contributor. A user of the Pi mobile app who is contributing by providing a list of
pioneers he or she knows and trusts. In aggregate, Pi contributors will build a global
trust graph.
•
• Ambassador. A user of the Pi mobile app who is introducing other users into Pi
network.
•
• Node. A user who is a pioneer, a contributor using the Pi mobile app, and is also
running the Pi node software on their desktop or laptop computer. The Pi node software
is the software that runs the core SCP algorithm, taking into account the trust graph
information provided by the Contributors.

A user can play more than one of the above roles. All roles are necessary, thus all roles are
rewarded with newly minted Pi on a daily basis as long as they participated and contributed
during that given day. In the loose definition of a “miner” being a user who receives newly
minted currency as a reward for contributions, all four roles are considered to be Pi miners.
We define“mining” more broadly than its traditional meaning equated to executing proof of
work consensus algorithm as in Bitcoin or Ethereum.

First of all, we need to emphasize that the Pi Node software has not been released yet. So
this section is offered more as an architectural design and as a request to solicit comments
from the technical community. This software will be fully open source and it will also heavily
depend on stellar-core which is also open source software, available here. This means that
anyone in the community will be able to read, comment and propose improvements on it.
Below are the Pi proposed changes to SCP to enable mining by individual devices.

Nodes

For readability, we define as a correctly connected node to be what the SCP paper refers to
as an intact node. Also, for readability, we define as the main Pi network to be the set of all
intact nodes in the Pi network. The main task of each Node is to be configured to be
correctly connected to the main Pi network. Intuitively, a node being incorrectly connected to
the main network is similar to a Bitcoin node not being connected to the main bitcoin
network.

In SCP’s terms, for a node to get correctly connected means that this node must chose a
“quorum slice” such that all resulting quorums that include this node intersect with the
existing network’s quorums. More precisely, a node v is correctly connected to a main
n+1

network N of n already correctly connected nodes (v , v , …, v ) if the resulting system N’ of

1 2 n

n+1 nodes (v , v , …, v ) enjoys quorum intersection. In other words, N’ enjoys quorum

1 2 n+1

intersection iff any two of its quorums share a node. -- i.e., for all quorums U and U , U ∩U ≠
1 2 1 2

∅.

The main contribution of Pi over the existing Stellar consensus deployment is that it
introduces the concept of a trust graph provided by the Pi Contributors as information that
can be used by the Pi nodes when they are setting up their configurations to connect to the
main Pi network.

When picking their quorum slices, these Nodes must take into consideration the trust graph
provided by the Contributors, including their own security circle. To assist in this decision, we
intend to provide auxiliary graph analysis software to assist users running Nodes to make as
informed decisions as possible. This software’s daily output will include:
• a ranked list of nodes ordered by their distance from the current node in the trust graph;
a ranked list of nodes based a pagerank analysis of nodes in the trust graph
• a list of nodes reported by the community as faulty in any way a list of new nodes
seeking to join the network
• a list of most recent articles from the web on the keyword “misbehaving Pi nodes” and
other related keywords; a visual representation of Nodes comprising the Pi network
similar to what is shown in StellarBeat Quorum monitor [source code]
• a quorum explorer similar to QuorumExplorer.com [source code]
• a simulation tool like the one in StellarBeat Quorum monitor that shows the expected
resulting impacts to this nodes’ connectivity to the Pi network when the current node’s
configuration changes.

An interesting research problem for future work is to develop algorithms that can take into
consideration the trust graph and suggest each node an optimal configuration, or even set
that configuration automatically. On the first deployment of the Pi Network, while users
running Nodes can update their Node configuration at any time, they will be prompted to
confirm their configurations daily and asked to update them if they see fit.

Mobile app users

When a Pioneer needs to confirm that a given transaction has been executed (e.g. that they
have received Pi) they open the mobile app. At that point, the mobile app connects to one or
more Nodes to inquire if the transaction has been recorded on the ledger and also to get the
most recent block number and hash value of that block. If that Pioneer is also running a
Node the mobile app connects to that Pioneer’s own node. If the Pioneer is not running a
node, then the app connects to multiple nodes and to cross check this information. Pioneers
will have the ability select which nodes they want their apps to connect to. But to make it
simple for most users, the app should have a reasonable default set of nodes, e.g. a number
of nodes closest to the user based on the trust graph, along with a random selection of
nodes high in pagerank. We ask for your feedback on how the default set of nodes for
mobile Pioneers should be selected.

Mining rewards

A beautiful property of the SCP algorithm is that it is more generic than a blockchain. It
coordinates consensus across a distributed system of Nodes. This means that the same
core algorithm is not only used every few seconds to record new transactions in new blocks,
but also it can be used to periodically run more complex computations. For example, once a
week, the stellar network is using it to compute inflation on the stellar network and allocate
the newly minted tokens proportionally to all stellar coin holders (Stellar’s coin is called
lumens). In a similar manner, the Pi network employs SCP once a day to compute the
network-wide new Pi distribution across all Pi miners (pioneers, contributors, ambassadors,
nodes) who actively participated in any given day. In other words, Pi mining rewards are
computed only once daily and not on every block of the blockchain.

For comparison Bitcoin allocates mining rewards on every block and it give all of the reward
to the miner who was lucky enough to be able to solve a computationally intensive
randomized task. This reward in Bitcoin currently 12.5 Bitcoin (~$40K) is given to only one
miner every 10 minutes. This makes it extremely unlikely for any given miner to ever get
rewards. As a solution to that, bitcoin miners are getting organized in centralized mining
pools, which all contribute processing power, increasing the likelihood of getting rewards,
and eventually sharing proportionally those rewards. Mining pools are not only points of
centralization, but also their operators get cuts reducing the amount going to individual
miners. In Pi, there is no need for mining pools, since once a day everyone who contributed
get a meritocratic distribution of new Pi.

Transaction fees

Similar to Bitcoin transactions, fees are optional in the Pi network. Each block has a certain
limit of how many transactions can be included in it. When there is no backlog of
transactions, transactions tend to be free. But if there are more transactions, nodes order
them by fee, with highest-fee-transactions at the top and pick only the top transactions to be
included in the produced blocks. This makes it an open market. Implementation: Fees are
proportionally split among Nodes once a day. On every block, the fee of each transaction is
transferred into a temporary wallet from where in the end of the day it is distributed to the
active miners of the day. This wallet has an unknown private key. Transactions in and out of
that wallet are forced by the protocol itself under the consensus of all nodes in the same way
the consensus also mints new Pi every day.

Limitations and future work

SCP has been extensively tested for several years as part of the Stellar Network, which at
the time of this writing is the ninth largest cryptocurrency in the world. This gives us a quite
large degree of confidence in it. One ambition of the Pi project is to scale the number of
nodes in the Pi network to be larger than the number of nodes in the Stellar network to allow
more everyday users to participate in the core consensus algorithm. Increasing the number
of nodes, will inevitably increase the number of network messages that must be exchanged
between them. Even though these messages are much smaller than an image or a youtube
video, and the Internet today can reliably transfer videos quickly, the number of messages
necessary increases with the number of participating nodes, which can become bottleneck
to the speed of reaching consensus. This will ultimately slow down the rate, at which new
blocks and new transactions are recorded in the network. Thankfully, Stellar is currently
much faster than Bitcoin. At the moment, Stellar is calibrated to produce a new block every 3
to 5 seconds, being able to support thousands of transactions per second. By comparison,
Bitcoin produces a new block every 10 minutes. Moreover, due to Bitcoin’s lack in the safety
guarantee, Bitcoin’s blockchain in rare occasions can be overwritten within the first hour.
This means that a user of Bitcoin must wait about 1 hour before they can be sure that a
transaction is considered final. SCP guarantees safety, which means after 3-5 seconds one
is certain about a transaction. So even with the potential scalability bottleneck, Pi expects to
achieve transaction finality faster than Bitcoin and possibly slower than Stellar, and process
more transactions per second than Bitcoin and possibly fewer than Stellar.

While scalability of SCP is still an open research problem. There are multiple promising
ways one could speed things up. One possible scalability solution is bloXroute. BloXroute
proposes a blockchain distribution network (BDN) that utilizes a global network of servers
optimized for network performance. While each BDN is centrally controlled by one
organization, they offer a provably neutral message passing acceleration. I.e. BDNs can only
serve all nodes fairly without discrimination as messages are encrypted. This means the
BDN does not know where messages come from, where they go, or what is inside. This way
Pi nodes can have two message passing routes: A fast one through BDN, which is expected
to be reliable most of the time, and its original peer-to-peer message passing interface that
is fully decentralized and reliable but is slower. The intuition of this idea is vaguely similar to
caching: The cache is place where a computer can access data very quickly, speeding the
average computation, but it is not guaranteed to always have every needed piece of
information. When the cache misses, the computer is slowed down but nothing catastrophic
happens. Another solution can be using secure acknowledgment of multicast messages in
open Peer-to-Peer networks [Nicolosi and Mazieres 2004] to speed up message
propagation among peers.

Pi Economic Model: Balancing Scarcity and

Access

Pros and cons of 1st Generation Economic Models

One of Bitcoin’s most impressive innovations is its marriage of distributed systems with
economic game theory.

Pros
Fixed Supply
Bitcoin’s economic model is simple. There will only ever be 21 million Bitcoin in existence.
This number is set in code. With only 21M to circulate among 7.5B people around the world,
there is not enough Bitcoin to go around. This scarcity is one of most important drivers of
Bitcoin’s value.

Decreasing Block Reward

Bitcoin’ distribution scheme, pictured below, further enforces this sense of scarcity. The
Bitcoin block mining reward halves every 210,000 blocks (approximately every ~4 years.) In
its early days, the Bitcoin block reward was 50 coins. Now, the reward is 12.5, and will
further decrease to 6.25 coins in May 2020. Bitcoin’s decreasing rate of distribution means
that, even as awareness of the currency grows, there is less to actually mine.

Cons
Inverted Means Uneven

Bitcoin’s inverted distribution model (less people earning more in the beginning, and
more people earn less today) is one of the primary contributors to its uneven
distribution. With so much Bitcoin in the hands of a few early adopters, new miners
are “burning” more energy for less bitcoin.

Hoarding Inhibits Use As A Medium Of Exchange

Although Bitcoin was released as a “peer to peer electronic cash” system, the relative
scarcity of Bitcoin has impeded Bitcoin’s goal of serving as a medium exchange. Bitcoin’s
scarcity has led to its perception as a form of “digital gold” or a digital store of value. The
result of this perception is that many Bitcoin holders are unwilling to spend Bitcoin on day-to-
day expenses.
The Pi Economic Model
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 into a very small number of
hands. We want to make sure our users earn more Pi as they make contributions to the
network. Pi’s goal is to build an economic model that is sophisticated enough to achieve and
balance these priorities while remaining intuitive enough for people to use.

Pi’s economic model design requirements:

• Simple: Build an intuitive and transparent model

• Fair distribution: Give a critical mass of the world’s population access to Pi
• Scarcity: Create a sense of scarcity to sustain Pi’s price over time
• Meritocratic earning: Reward contributions to build and sustain the network
•
Pi - Token Supply

Token Emission Policy

1. Total Max Supply = M + R + D

a. M = total mining rewards
b. R = total referral rewards
c. D = total developer rewards

2. M = ∫ f(P) dx where f is a logarithmically declining function

a. P = Population number (e.g., 1st person to join, 2nd person to join, etc.)

3. R=r*M
a. r = referral rate (50% total or 25% for both referrer and referee)

4. D = t * (M + R)

5. t = developer reward rate (25%)

M - Mining Supply (Based on fixed mining supply minted per person)

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. The supply is released using an
exponentially decreasing function similar to Bitcoin’s over the member’s lifetime.

R - Referral Supply (Based on fixed referral reward minted per person and
shared b/w referrer and referee)

In order for a currency to have value, it must be widely distributed. To incentivize this goal,
the protocol also generates a fixed amount of Pi that serves as a referral bonus for both the
referrer and the referee (or both parent and offspring :) This shared pool can be mined by
both parties over their lifetime - when both parties are actively mining. Both referrer and
referee are able to draw upon this pool in order to avoid exploitative models where referrers
are able to “prey” on their referees. The referral bonus serves as a network-level incentive to
grow the Pi Network while also incentivizing engagement among members in actively
securing the network.

D - Developer Reward Supply (Additional Pi minted to support ongoing

development)

Pi will fund its ongoing development with a “Developer Reward” that is minted alongside
each coin that is minted for mining and referrals. Traditionally, cryptocurrency protocols have
minted a fixed amount of supply that is immediately placed into treasury. Because Pi’s total
supply is dependent on the number of members in the network, Pi progressively mints its
developer reward as the network scales. The progressive minting of Pi’s developer reward is
meant to align the incentives of Pi’s contributors with the overall health of the network.

f is a logarithmically decreasing function - early members earn more

While Pi seeks to avoid extreme concentrations of wealth, the network also seeks to reward
earlier members and their contributions with a relatively larger share of Pi. When networks
such as Pi are in their early days, they tend to provide a lower utility to participants. For
example, imagine having the very first telephone in the world. It would be a great
technological innovation but not extremely useful. However, as more people acquire
telephones, each telephone holder gets more utility out of the network. In order to reward
people that come to the network early, Pi’s individual mining reward and referral rewards
decrease as a function of the number of people in the network. In other words, there is a
certain amount of Pi that is reserved for each “slot” in the Pi Network.
Utility: Pooling and monetizing our time online
Today, everyone is sitting on a veritable treasure trove of untapped resources. Each of us
spend hours day on our phones. While on our phones, each of our views, posts or clicks
creates extraordinary profits for large corporations. At Pi, we believe that people have the
right to capture value created from their resources.

We all know that we can do more together than we can alone. On today’s web, massive
corporations like Google, Amazon, Facebook have immense leverage against individual
consumers. As a result, they are able to capture the lionshare of value created by individual
consumers on the web. Pi levels the playing field by allowing its members to pool their
collective resources so they can get a share of the value that they create.

The graphic below is the Pi Stack, where we see particularly promising opportunities for
helping our members capture value. Below, we go into each of these areas in more detail.
Introducing the Pi Stack - Unleashing underutilized
resources

Pi Ledger And Shared Trust Graph - Scaling Trust Across The Web
One of the biggest challenges on the internet is knowing who to trust. Today, we rely on
the rating systems of providers such as Amazon, eBay, Yelp, to know who we can transact
with on the internet. Despite the fact that we, customers, do the hard work of rating and
reviewing our peers, these internet intermediaries capture the lionshare of the value created
this work.

Pi’s consensus algorithm, described above, creates a native trust layer that scales trust on
the web without intermediaries. While the value of just one individual’s Security Circle is
small, the aggregate of our individual security circles build a global “trust graph” that help
people understand who on the Pi Network can be trusted. The Pi Network’s global trust
graph will facilitate transactions between strangers that would not have otherwise been
possible. Pi’s native currency, in turn, allows everyone who contributes to the security of the
network to capture a share of the value they have helped create.
Pi’s Attention Marketplace - Bartering Unutilized Attention And
Time

Pi allows its members to pool their collective attention to create an attention market much
more valuable than any individual’s attention alone. The first application built on this layer
will be a scarce social media channel currently hosted on the home screen of the
application. You can think of the scarce social media channel as Instagram with one global
post at a time. Pioneers can wager Pi to engage the attention of other members of the
network, by sharing content (e.g., text, images, videos) or asking questions that seek to tap
into the collective wisdom of the community. On the Pi Network, everyone has the
opportunity to be an influencer or to tap into the wisdom of the crowd. To date, Pi’s Core
Team has been using this channel to poll the community’s opinion on design choices for Pi
(e.g. the community voted on the design and colors of the Pi logo.) We have received many
valuable responses and feedback from the community on the project. One possible future
direction is to open the attention market for any Pioneer to use Pi to post their content, while
expanding the number of channels hosted on the Pi Network.

In addition to bartering attention with their peers, Pioneers may also opt into bartering with
companies that are seeking their attention. The average American sees between 4,000 and
10,000 ads a day. Companies fight for our attention and pay tremendous amounts of money
for it. But we, the customers, receive no value from these transactions. In Pi’s attention
marketplace, companies seeking to reach Pioneers will have to compensate their audience
in Pi. Pi’s advertising marketplace will be strictly opt-in only and will provide an opportunity
for Pioneers to monetize one of their greatest untapped resources: their attention.

Pi’s Barter Marketplace - Build Your Personal Virtual Storefront

In addition to contributing trust and attention to the Pi Network, we expect Pioneers to be
able to contribute their unique skills and services in the future. Pi’s mobile application will
also serve as a Point of Sales where Pi’s members can offer their untapped goods and
services via a “virtual storefront” to other members of the Pi Network. For example, a
member offer up an underutilized room in their apartment for rent to other members on the
Pi Network. In addition to real assets, members of the Pi Network will also be able to offer
skills and services via their virtual storefronts. For example, a member of the Pi Network
could offer their programming or design skills on the Pi marketplace. Overtime, the value of
Pi will be supported by a growing basket of goods and services.

Pi’s Decentralized App Store - Lowering The Barrier Of Entry For

Creators

The Pi Network’s shared currency, trust graph, and marketplace will be the soil for a broader
ecosystem of decentralized applications. Today, anyone that wants to start an application
needs to bootstrap its technical infrastructure and community from scratch. Pi’s
decentralized applications store will allow Dapp developers to leverage Pi’s existing
infrastructure as well as the shared resources of the community and users. Entrepreneurs
and developers can propose new Dapps to the community with requests for access to the
network’s shared resources. Pi will also build its Dapps with some degree of interoperability
so that Dapps are able to reference data, assets, and processes in other decentralized
applications.
Governance - Cryptocurrency for and by the
people
Challenges w/ 1st Generation Governance models
Trust is the foundation of any successful monetary system. One of the most important
factors engendering trust is governance, or the process by which changes are implemented
to the protocol over time. Despite its importance, governance is often one of the most
overlooked aspects of cryptoeconomic systems.

First generation networks such as Bitcoin largely avoided formal (or “on-chain”) governance
mechanisms in favor of informal (or “off-chain”) mechanisms arising from a combination of
role and incentive design. By most measures, Bitcoin’s governance mechanisms has been
quite successful, allowing the protocol to grow dramatically in scale and value since its
inception. However, there have also been some challenges. The economic concentration of
Bitcoin has led to a concentration of political power. The result is that everyday people can
get caught in the middle of destructive battles between massive holders of Bitcoin. One of
the most recent examples of this challenge has been the ongoing battle between Bitcoin and
Bitcoin Cash. These civil wars can end in a fork where or where the blockchain. For token
holders, hard forks are inflationary and can threaten the value of their holdings.

Pi’s Governance Model - a two-phase plan

In an article challenging the merits of on-chain governance, Vlad Zamfir, one of Ethereum’s
core developers, argues that blockchain governance “is not an abstract design problem. It’s
an applied social problem.” One of Vlad’s key points is that it is very difficult to design
governance systems “a priori” or before observations of the particular challenges arising
from a specific political system. One historical example is in the founding of the United
States. The first experiment with democracy in the United States, the Articles of
Confederation, failed after an eight-year experiment. The Founding Fathers of the United
States were then able to draw upon the lessons of the Article of Confederation to craft the
the Constitution - a much more successful experiment.

To build an enduring governance model, Pi will pursue a two-phase plan.

Provisional Governance Model (< 5M Members)

Until the network hits a critical mass of 5M members, Pi will operate under a provisional
governance model. This model will most closely resemble “off-chain” governance models
currently employed by protocols like Bitcoin and Ethereum, with Pi’s Core Team playing an
important role in guiding the development of the protocol. However,, Pi’s Core Team will still
rely heavily on the input of the community. The Pi mobile application itself is where Pi’s core
team has been soliciting community input and engaging with Pioneers. Pi embraces
community critiques and suggestions, which is implemented by the open-for-comments
features of Pi’s landing page, FAQs and white paper. Whenever people browse these
materials on Pi’s websites, they can submit comment on a specific section right there to ask
for questions and make suggestions. Offline Pioneer meetups that Pi’s core team have been
organizing will also be an important channel for community input.
Additionally, Pi’s Core Team will develop more formal governance mechanics. One potential
governance system is liquid democracy. In liquid democracy, every Pioneer will have the
ability to either vote on an issue directly or to delegate their vote to another member of the
network. Liquid democracy would allow for both broad and efficient membership from Pi’s
community.

Pi’s “Constitutional Convention” (> 5M Members)

Upon hitting 5M members, a provisional committee will be formed based on previous
contributions to the Pi Network. This committee will be responsible for soliciting and
proposing suggestions from and to the wider community. It will also organize a series of on-
and offline conversations where Pi’s members will be able to weigh on Pi’s long-term
constitution. Given Pi’s global user base, the Pi Network will conduct these conventions at
multiple locations across the world to ensure accessibility. In addition to hosting in-person
conventions, Pi will also use its mobile application as a platform for allowing Pi’s member to
participate in the process remotely. Whether in-person or online, Pi’s community members
will have the ability to participate in the crafting Pi’s long-term governance structure.
Roadmap / Deployment plan
Phase 1 - Design, Distribution, Trust Graph Bootstrap.
The Pi server is operating as a faucet emulating the behavior of the decentralized system as
it will function once its live. During this phase improvements in the user experience and
behavior are possible and relatively easy to make compared to the stable phase of the main
net. All minting of coins to users will be migrated to the live net once it launches. In other
words, the livenet will pre-mint in its genesis block all account holder balances generated
during Phase 1, and continue operating just like the current system but fully decentralized. Pi
is not listed on exchanges during this phase and it is impossible to “buy” Pi with any other
currency.

Phase 2 - Testnet
Before we launch the main net, the Node software will be deployed on a test net. The test
net will use the same exact trust graph as the main net but on a testing Pi coin. Pi core team
will host several nodes on the test net, but will encourage more Pioneers to start their own
nodes on the testnet. In fact, in order for any node to join the main net, they are advised to
begin on the testnet. The test net will be run in parallel to the Pi emulator in phase one, and
periodically, e.g. daily, the results from both systems will be compared to catch the gaps and
misses of the test net, which will allow Pi developers to propose and implement fixes. After
a thorough concurrent run of both systems, testnet will reach a state where its results
consistently match the emulator’s. At that time when the community feels its ready, Pi will
migrate to the next phase.

Phase 3 - Mainnet
When the community feels the software is ready for production, and it has been thoroughly
tested on the testnet, the official mainnet of the Pi network will be launched. An important
detail is that, in the transition into the mainnet, only accounts validated to belong to distinct
real individuals will be honored. After this point, the faucet and Pi network emulator of Phase
1 will be shut down and the system will continue on its own forever. Future updates to the
protocol will be contributed by the Pi developer community and Pi’s core team, and will be
proposed by the committee. Their implementation and deployment will depend on nodes
updating the mining software just like any other blockchains. No central authority will be
controlling the currency and it will be fully decentralized. Balances of fake users or duplicate
users will be discarded. This is the phase when Pi can be connected to exchanges and be
exchanged for other currencies.