2026-05-04

PiRC1 Liquidity Pool Mechanism Explained: Where Does Your Pi Go?

When participating in token launches on Pi Launchpad, the Pi you commit does not go into the project team's pockets. Many have heard this, but few truly understand "where Pi goes and how it works." This article aims to clarify just that. --- ## Let's Start with a Question: What's Wrong with Traditional Token Launches? Before explaining PiRC1's liquidity pool mechanism, let's discuss the problem it aims to solve. In the cryptocurrency world, there's a scam called a rug pull, which typically follows these steps: 1. Project team issues tokens, users buy them with money 2. Project team takes the users' money (usually ETH or other mainstream coins) 3. Project team completely removes the token's liquidity 4. Token price instantly drops to zero, users lose everything This has happened countless times in the crypto space, with losses ranging from hundreds of thousands to hundreds of millions of dollars. The root of the problem lies in **the project team having control over the funds**, rather than the funds being managed by an unmanipulable mechanism. PiRC1's liquidity pool design fundamentally changes this structure. --- ## What is a Liquidity Pool? In Simple Terms The term 'liquidity pool' sounds technical, but the concept is actually not difficult. You can think of it as a **public fund reservoir**. This reservoir belongs to no one and is automatically managed by a smart contract, with rules hardcoded on-chain—no one, including the project team, can unilaterally withdraw funds. When Pioneers participate in a token launch on Pi Launchpad, their committed Pi is not transferred to the project team but flows directly into this reservoir, paired with the newly issued tokens to form a 'Pi / New Token' trading pair. The effect of this is that everyone's Pi—whether developers, participants, or project teams—cannot privately access funds within the liquidity pool. This incentivizes developers to continuously optimize their projects, and Pioneers' investments cannot be easily absconded with by developers. In contrast, if funds go into a developer's personal wallet, they have complete discretion, and the risk is entirely different. --- ## PiRC1's Four Stages: Stake → Escrow → Liquidity → Market Activation PiRC1 divides token launches into four sequential stages, each with corresponding fund protection mechanisms. ### Stage One: Stake Project teams must first stake a certain amount of Pi as collateral. This action serves two purposes: - To prove the project team has a genuine financial commitment, not just an empty promise - If the project team violates rules, the staked Pi can serve as a penalty mechanism This at least makes project teams think twice before making any decisions and safeguards the basic rights of all participating Pioneers. ### Stage Two: Escrow The Pi committed by Pioneers will be locked in an escrow wallet before the official token launch and cannot be accessed by anyone until predetermined conditions are met. The significance of this design is that every Pioneer's contributed Pi will be converted into liquidity supporting the new token, ensuring that project teams cannot misuse these funds before the token officially goes live. In simple terms, it's like paying a deposit when buying a house or car—it confirms genuine intent to purchase, and if something goes wrong, there's at least a deposit to cover breach of contract fees, preventing a situation where there's no recourse. ### Stage Three: Liquidity Establishment When Pioneers commit Pi to participate in a project on Pi Launchpad, this Pi does not flow to the project team but enters a permanent liquidity pool, anchoring all ecosystem tokens to Pi Coin and ensuring the underlying liquidity remains intact and secure. The word 'permanent' is crucial. This is not a lock for a period followed by an unlock—Pi Network, through its mechanism of automatically locking liquidity, ensures that developers cannot remove liquidity, providing a level of security rarely seen on other platforms. However, to be honest, we cannot currently confirm if 'permanent' has any prerequisites or exceptions. In reality, the probability of startup failure is high. If a project team realizes they're on the wrong track, how do they cut their losses? How are acquisitions handled? How does the project team itself earn a reasonable profit? The official team currently has no clear answers to these questions, making them gray areas of PiRC1 that warrant continuous monitoring. ### Stage Four: Market Activation Only when both technical and liquidity conditions are met does the token enter the market activation stage, beginning trading on Pi DEX. This four-stage design actually combines the advantages of several traditional token launch methods: the strict regulation of ICOs, the trust and vetting mechanisms of IEOs, and the 'liquidity pool established upon launch' characteristic of IDOs—while simultaneously attempting to circumvent their respective drawbacks. --- ## Why is Pi Used as the Base Currency for Liquidity? The core of Pi Network's strategy is that 'Pi is the center of liquidity.' Every token launched on Pi Launchpad uses Pi Coin as its liquidity base, ensuring that all tokens within the ecosystem have Pi as their intrinsic value support. This design has an interesting effect: every new token launch increases the demand for Pi and its use cases. Theoretically, the more active the ecosystem, the greater the actual usage of Pi. Pi Network's goal is mass participation, and using Pi as the base currency for liquidity means the barrier to entry is extremely low. Success depends on whether the convenience and vetting mechanisms can convince everyone. If the infrastructure is robust enough, more projects will naturally want to participate, various ecosystems will flourish, which in turn will drive Pi Network's liquidity and value, ultimately forming a positive feedback loop. --- ## What Can Ordinary Pioneers Do Now? Pi Launchpad is currently in the testnet phase, and mainnet token launch functionality will only be available after the V23 smart contract goes live. Therefore, 'participating in the Pi Launchpad launch process' is not yet possible for ordinary Pioneers. But what you can do now is: - **Understand the mechanism and prepare for the mainnet.** When Pi Launchpad officially opens on the mainnet, you'll need to know how PiPower and the Engage-to-Earn mechanism work to determine your eligibility to participate and which projects are worth paying attention to. - **Continue using Pi ecosystem Apps.** Engage-to-Earn allocation priority is related to your activity within the ecosystem; current participation records will affect future allocation eligibility. - **Await the first batch of projects approved by PiRC1.** These are the truly worthwhile projects to research, not just empty promises from anyone. --- ## OrbitWatch's On-Chain Observations PiRC1 officially went live on-chain on April 30th, but according to OrbitWatch's Horizon API monitoring data, there is currently no mainnet on-chain activity related to Pi Launchpad or PiRC1 token launches. This is expected. Pi Launchpad's mainnet functionality requires V23 smart contract support, and relevant on-chain data will not appear before V23 goes live (targeted for May 11th). OrbitWatch expects to begin tracking the following metrics after V23 goes live: - Deployment timestamp of the first PiRC1 compliant tokens on the mainnet - Initial size of the liquidity pools - User participation data for the first batch of Pi Launchpad projects These are the first-hand data that will truly indicate whether PiRC1 is functioning as intended. --- ## Potential Issues with This Mechanism Every design involves trade-offs, and PiRC1's liquidity pool mechanism is no exception. There are several issues that deserve an honest look: - **Is 'permanent lock' too extreme?** For project teams, if no funds can be retrieved from the liquidity pool, how can a long-term business model be sustained? The official team has not yet provided a clear answer. - **What happens to Pioneers' Pi if a project fails?** If a project passes PiRC1 review but ultimately fails, can the Pi locked in the liquidity pool be retrieved? There is currently no clear mechanism explaining this. - **Lack of transparency in review standards.** PiRC1 requires projects to have 'operational applications,' but what is the minimum standard for 'operational,' how long does the review take, and who conducts it—these details have not yet been fully disclosed by the official team. These uncertainties do not mean PiRC1 is a bad design, but they are issues worth continuously monitoring. OrbitWatch will update this article as soon as official clarifications are provided. --- **Further Reading** - [PiRC1 Full Analysis](/zh-TW/protocol/pirc1) - [PiRC1 vs ERC-20: How Does Pi's Token Standard Compare to Ethereum's?](/zh-TW/updates/2026-05-01) --- *Data sources: Pi Network Official Blog, Horizon API, crypto.news. All analyses do not constitute investment advice.* *OrbitWatch is an independent Pi Network ecosystem observatory and is not affiliated with Pi Network official.*

• •PiRC1's liquidity pool mechanism aims to prevent 'rug pulls' by ensuring committed Pi goes into a smart contract-managed pool, not directly to project teams.
• •Token launches under PiRC1 follow four stages (Stake, Escrow, Liquidity, Market Activation), with Pi serving as the base currency for all ecosystem tokens, theoretically increasing its demand and utility.