Why isn't Pi Network "burning coins"? The Future of Cryptocurrencies: Lessons from the History of Mt. Gox and FTX

Introduction: The pros and cons of cryptocurrencies and the recurring question of "trust"

The world of crypto-assets (virtual currencies) has sometimes offered dreamlike possibilities and other times brought deep despair. Behind the hope of a “new form of finance” represented by blockchain technology lies a history of the collapse of major exchanges such as Mt. Gox and FTX, which seriously shook people’s confidence. Why do such tragedies keep happening? What can we learn from this history and what kind of future should we build?

In this article, we look back at two major cryptocurrency bankruptcies, one from the early days and one from the modern era, and delve into their root causes and lessons learned.

We will also explain Pi Network's unique approach and philosophy and why it does not use the "coin burning" method of supply adjustment that many projects use..

Through this article, we will objectively understand the past and present of cryptocurrencies and lay the foundation for deeper insight into their future.

Article content

• Introduction: The pros and cons of cryptocurrencies and the recurring question of "trust"
• Audio and video overview [Czech]
• Audio and video overview [English]
• Lessons from the early days of cryptocurrencies: The biggest stock market crash in history, the Mt. Gox incident
  • Mt. Gox: The Giant That Supported the Early Days
  • How it all fell apart so easily: Security vulnerabilities and mismanagement
  • Lesson: The importance of "governance" as the foundation of trust
• Modern Tragedy: The FTX Crash That Shaken Confidence in Cryptocurrencies
  • What is FTX? The darling of the new generation and its ideals
  • What went wrong: Hidden financial negligence and lack of ethics
  • Lesson learned: Transparency and accountability build healthy markets
• Lessons from repeated failures: The fundamental challenges facing the cryptocurrency market
• Pi Network proposes a new path: A community-driven ecosystem
  • The basic philosophy of the Pi network: Practicality and fairness, not speculation
  • Why doesn't Pi Network burn coins? Revealing the philosophy
    • What is coin burning?
    • Pi Network Philosophy "No Coin Burning": An Economy for 8 Billion People
    • The real value comes from community activities: Pi Network Challenge
• Summary: The potential of the Pi network to apply historical knowledge to the future
  • Next steps: Deeper dive into Pi networking
• Related articles …
• PiNetwork

Estimated reading time: 10 minut

Audio and video overview [Czech]

Audio and video overview [English]

Lessons from the early days of cryptocurrencies : The largest stock market collapse in history, the Mt. Gox incident

Mt. Gox : The giant who supported the early days

Founded in Tokyo in 2010, Mt. Gox is an iconic figure in the history of cryptocurrency. At one point, it controlled over 70% of global Bitcoin transactions and was a giant driving the growth of the cryptocurrency market. For many, Mt. Gox was the “gateway” to a new financial future, and great expectations were placed on its development.

How it all fell apart so easily : Security vulnerabilities and mismanagement

However, behind its spectacular success, Mt. Gox was hiding one fatal problem.

• Weak security systems: Company inadequately responded to repeated cyberattacks
• Sloppy transaction records: The internal transaction system was in chaos, making it difficult to accurately track assets
• Mismanagement: The organizational structure and management were not good enough to keep up with the rapid growth

These internal weaknesses accumulated and led to the largest collapse in history in February 2014. Approximately 850,000 bitcoins were lost, resulting in a loss of customer assets worth approximately $460 million at the time, equivalent to several billion dollars in today’s value. It wasn’t just a number; it was a moment when the dreams and trust of many users were stolen.

Lesson learned : Importance "public administration"as a basis for trust"

The collapse of Mt. Gox clearly demonstrated that cryptocurrency exchanges are not just technology platforms, but also require strict security measures, highly transparent financial management, and sound corporate governance. No matter how innovative the technology may be, if the organizational foundation that runs it is weak, even great trust can crumble in an instant. This harsh lesson is deeply etched throughout the cryptocurrency industry.

Modern tragedy : The FTX crash that shook confidence in cryptocurrencies

What is FTX? ? The darling of the new generation and its ideals

Having learned the lessons of Mt. Gox, the cryptocurrency market seemed to have matured. FTX became a symbol of this. Led by founder Sam Bankman-Fried, who was hailed as a young genius, and with strong support from the media and prominent investors, it quickly grew into one of the world's leading exchanges. FTX was expected to surpass past failures such as Mt. Gox and become "darling of the new era"which will shape the future of cryptocurrencies."

What went wrong? : Hidden financial negligence and lack of ethics

But behind the scenes, FTX had similar problems to Mt. Gox.

• Misappropriation of client funds: Unauthorized loans to Alameda Research affiliate revealed
• Unclear financial structure: Due to sloppy accounting practices and poor internal controls, the true situation was not understood
• Lack of ethics: The founder's personal decisions had a fundamental influence on the fate of the company

In November 2022, hidden problems suddenly emerged and FTX suddenly collapsed. Approximately $8 billion worth of customer assets were damaged and users around the world were confused. This was not just an ordinary business failure; it was a major incident that shook the depths of the "trust", which the cryptocurrency industry has been building for many years.

Lesson learned : Transparency and accountability build healthy markets

The FTX crash highlighted the fact that the cryptocurrency market also faces universal problems of human greed and ethics that cannot be solved by technological advances alone. It confronted us with the harsh reality that no matter how innovative a technology may be, it can easily be distorted by the people who run it.

This event teaches us that transparent governance, rigorous audits, and accountability to users are important for building a healthy market.

Learning from repeated failures : The fundamental challenges facing the cryptocurrency market

Mt. Gox and FTX are two different bankruptcies that occurred at two different times, but they reveal fundamental problems that they share.

• The fragility of trust: If a centralized organization lacks governance and ethics, even the largest platforms can easily collapse.
• Speculative aspects: In the pursuit of high returns, risk management and sustainability are usually overlooked
• Information asymmetry: Information gaps arise between users and operators, making it easier to hide unfair practices

Although cryptocurrencies have the potential to revolutionize the financial system, these challenges pose significant obstacles to their development. How can we solve the fundamental problem of “trust” and build a sustainable and fair economic sphere? This is the most important question that the cryptocurrency market must overcome to move forward into the future.

Pi Network proposes a new path : Community-driven ecosystem

The basic philosophy of the Pi network : Practicality and fairness, not speculation

Given these historical lessons from the cryptocurrency market, Pi Network seeks to take a fundamentally different approach. While many cryptocurrency projects focus on early speculative growth in value, Pi Network's philosophy is to be "a practical digital currency that can be used by anyone in the world, not a speculative currency".

The Pi Network aims to create " community-driven ecosystem ", where all participants can contribute to building the network by providing a system that allows users to easily profit from their smartphones. This is based on the idea that value is created and distributed through the contributions of individual users, known as "pioneers", around the world, rather than being managed by a centralized authority.

Why Pi Network doesn't burn coins ? Revealing philosophy

The question many people ask is, “Why doesn’t Pi Network do a coin burn?” The answer to this question reveals the core philosophy of Pi Network.

First, a brief explanation of coinburn. General purpose and effects.

What is coin burning?

This is an intentional reduction (burning) of the supply of virtual currency. Coins sent to a specific wallet address can never be withdrawn and become permanently unusable.

Many cryptocurrency projects expect the following effects from coin burning:

• Increased rarity: A decrease in supply makes the coin rarer, which creates deflationary pressure.
• Expectations of rising prices: Increased shortages generally lead to expectations of rising prices in the market.
• Project credibility: It is seen as a way to prevent excessive inflation and demonstrate the reliability of the economic model.

In other words, coin burning is often used primarily as strategies to increase speculative value.

Pi Network's "No Coin Burning" Philosophy : An economy for 8 billion people

However, Pi Network takes a different approach to this common strategy. The main reason why Pi Network does not use coin burning lies in its fundamental goal.

• Emphasis on wide "use" and "circulation", not speculation: The Pi Network aims to be a universal currency that can be used in the daily lives of billions of people around the world, rather than a tool for a few investors to make speculative profits. By capping the total supply at 10 billion Pi and neutralizing it, sufficient liquidity is ensured. If the supply were to be intentionally reduced, the market would shrink and only a few players would benefit. The Pi Network aims to ensure sufficient supply to build a large economic sphere that is accessible to all.
• The idea that value comes from “use”: We believe that the true value does not come from the rarity of a coin, but is determined by how many people actually use it and how it circulates within economic activity. We believe that a sustainable ecosystem will be built when coins are actively traded and function as a medium of exchange for goods and services.
• Striving for a fair distribution of wealth: Too much control over supply can lead to the concentration of wealth in the hands of a few. Rather than intentionally manipulating supply, Pi Network seeks to create value through community growth and increased usage so that more people can benefit from the wealth fairly.

Pi Network does not focus solely on the “price” of cryptocurrency, but emphasizes the “meaning” and “use value” that the currency provides to society. Instead of relying on “artificial scarcity” through coin burning, we have chosen to support the activities of the entire community and the "life" that is born from the circulation of coins.

The real value comes from community activities : Pi Network Challenge

Pi Network has learned from the failures of centralized companies like Mt. Gox and FTX and is striving for true reliability and sustainability through a decentralized, community-driven model.

For example, the “Pi Bank” and “Pi Exchange” planned after the mainnet transition will be a place for pioneers to exchange Pi in real life and create value, rather than serving as speculative short-term buys and sells. This is a manifestation of the Pi Network’s strong will to build the foundations of a new economy that benefits all pioneers, rather than wealth being monopolized by a select elite. The Pi Network is not just a new cryptocurrency; it is taking on the grand challenge of deeply delving into the lessons of the past and building a digital economy of the future based on a different philosophy.

Summary : The potential of the Pi network to apply historical knowledge to the future

The history of cryptocurrencies has taught us bitter lessons about innovation and a crisis of confidence. The collapses of the Mt. Gox and FTX exchanges clearly demonstrate how costly a lack of governance, security vulnerabilities, and lack of ethics can be.

Pi Network is deeply aware of these past mistakes and has made the unique decision not to “burn coins.”

This decision is based on her unwavering philosophy of prioritizing "practical values" and "fairness" generated by billions of people around the world using the network and circulating the economy, rather than speculative value creation that seeks to achieve scarcity.

The Pi Network's challenge goes beyond simply creating a new digital currency; asks important questions: we can truly embody "decentralized"the philosophy inherent in cryptoassets and build a stronger, fairer, and more sustainable economic sphere of the future?

The potential of Pi Network, learning from history and breaking new ground, will continue to attract attention.

Next steps : A deeper dive into the Pi network

If this article has intrigued you about the Pi Network philosophy and the future of cryptocurrencies, please visit the official website and Pi Network white paper to learn more about its detailed concept and vision. You might even become one of the pioneers who will help build the digital economy of the future.

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