Multi-level marketing (MLM) is often compared to pyramid or Ponzi schemes. MLM schemes work on a referral system. If I join the business and get friends and family to sign up, I can claim a referral bonus. If my friends and family sign people up, then not only do they get a referral bonus, but so do I as well. Often, the schemes run for a couple of years before collapse. Those who got in early have already made their profit whilst those who join late are left to pick up the pieces.
For now, I am not going to name names of current pyramid schemes running in cryptocurrencies – I’ll save that for a later date. However, previous ones that have since failed include OneCoin and, probably the most famous, Bitconnect. Bitconnect was spectacular in that it achieved so much success despite many people citing that it was a scam. They even managed to advertise on CoinMarketCap. This time last year, it even had a market cap of over $2 billion. It was absolute madness to put it mildly.
MLM schemes are not just endemic within cryptocurrencies. They are a virus that is everywhere in society. The reason this virus exists is simply that they do generally work at creating streams of income for their participants. Those involved at early stages are usually career pyramid schemers. They hop from one scheme to another. They are usually very good at hiding their previous failed schemes as well by removing the evidence from the internet. However, they are not as good as they think they are.
There are honest, hard-working people who spend their time researching MLM schemes. They call out their faults and aspects of illegality, and attempt to serve the general public by warning them. Credit must go to such people for using their spare time to try and help people.
Within cryptocurrency, it is rare for coins to work on an MLM basis. The majority of coins do not. My advice is to avoid any of these MLM coins like the plague – they are not going to bring you any rewards no matter what they tell you. In the new year, we will look at one such scheme that is currently taking place and analyse how they reel in their marks – from promises that have not been kept since the beginning to the tactics they use to convince people they have a Bitcoin killer.