How to Identify MLM in Cryptocurrency

Chapter 0 Introduction

A few months ago, a classmate called me to consult about "Onecoin". He had a friend who had invested in Onecoin and wanted to follow suit. I repeatedly stressed that Onecoin was a pyramid scheme and told him not to invest. A month later, he called me again and asked me, "Is this really a pyramid scheme? My friend really made money, I saw it with my own eyes." I tried to persuade him again, told him a lot of reasons, and gave him a few articles to read. After hanging up the phone, I called a few of our mutual friends, those who were close to him, and I told them one by one not to touch Onecoin.

I decided to write an article to analyze how to identify these pyramid schemes using digital currency. But I looked up a lot of similar cases, and here are a few names of pyramid schemes:

维卡币; V宝,石油币;克拉币; U币; mmm国际盘;乌斯坦罗莱特币基金项目...

I spent a full 6 hours reading these materials, and I still felt that how could these things deceive people! It was really! Too! Stupid!!

I don't know where to start. All the propaganda is obviously a scam. These things are just like the small advertisements with pictures of beautiful women posted everywhere on the street, "Miss Bao", "Seeking help, borrowing sperm to have a child", "XXX folk remedy for aphrodisiac"... Only idiots will be fooled.

I just gave up because I couldn't write.

But during the National Day holiday, a former colleague sent me a WeChat message asking me about "Morgan Coin", and I was immediately stunned. This person is not an idiot! He is a middle-level manager in the previous company.

In addition, I think about the many highly educated friends in my circle of friends who are selling facial masks, one of whom is my relative. (Yes, I am saying that the Huizhou merchants who sell facial masks are pyramid schemes. To be precise, most of them are pyramid schemes.)

As a liberal, I never felt that I should bear any "social responsibility", but MLM has begun to enter my circle of friends and blood relations whom I meet in my daily life. What's even more damn hateful is that there are so many MLMs using the Bitcoin that I promote every day as the background, claiming that "Bitcoin is outdated, now is the era of XXX coin...", "If you missed Bitcoin, you can't miss XXX coin..."

I can't stand it anymore, I have to write something.

This article will not quote the definition from the textbook, I will just repeat what I have said to my friends and relatives.

Chapter 1 What All MLMs Have in Common

One of the necessary conditions for pyramid schemes拉人头. All pyramid schemes must be reflected in recruiting people.

However, there are too many business models in the world that require people to be valuable. Especially for products on the Internet, recruiting people in the early stage has almost become an inevitable requirement for Internet products. With so many such cases, ordinary people have become accustomed to recruiting people and will not think more deeply about it.

Not thinking is a necessary condition for becoming an idiot, and it is also a necessary condition for being cheated.

Ask the following question about the business model of recruiting people you encounter: "Does this business model encourage cooperation from these recruited people?"

This is the second characteristic of MLM. The profit model of MLM is从下线收取钱，上线获利. The business model of MLM must be hierarchical, and people who enter this model are not allowed to cooperate with each other, or such cooperation has no commercial value at all. Only by spreading MLM outside can contributions be made.

But the problem is that it is difficult to identify whether this business model is a one-way hierarchical structure, especially in the Internet model, where people communicate with each other on QQ, which is all P2P. It is indeed difficult to identify. Moreover, the profits promised to us by the pyramid schemers were too large, and they threatened us that the opportunity would be fleeting.

In order not to be an idiot, please ask another question about this business model: " If I participate, will the price of this product I get be higher than that of my superior ?"

This leads to the third characteristic of MLM. The increase in the level of MLM, or the increase in the number of agents, does not increase the cost! The price of the product sold to you by your superior is the same as the price your superior bought from his superior. This is impossible in a normal business model. The normal business model is committed to eliminating middlemen and selling directly to manufacturers. Because the final profit of conventional product sales is obtained from consumers, the price paid by consumers will be divided up from manufacturers to all agents. But MLM is not like that. The profit of MLM is obtained from the lower level. As long as you develop one level, you will directly obtain the profit. In other words, the business model of MLM does not actually have agents. Every agent is essentially a consumer.

People who are involved in MLM usually don’t focus on how good their products are, but rather on bragging about their own performance. Look at MLM conferences, they always give big prizes to people with good performance, such as BMWs and travel, but never give prizes to R&D personnel.

I believe most of you have seen the following advertising slogan for facial masks.

"I just sent out 100 boxes. I haven't even taken a breath yet and someone has made another payment. 58 transactions, but no one is specified. Please give me the address and phone number. The courier is about to go off work. Haha..."

Finally, there is another way to identify pyramid scheme scams: "Ask about the income distribution in this organizational structure." The income distribution of pyramid schemes is pyramid-layered and fixed. The top earns the highest income, and the higher you go, the higher the income. And it cannot be changed. No matter how hard you work, this organizational structure will not allow you to upgrade .

In order to crack down on pyramid schemes, the United States requires suspected companies to disclose the income distribution of their employees, such as the median and average, so that those involved can have a clear understanding of their income.

Remember these three characteristics to help you stay away from pyramid schemes:

1. Pulling people;

2. There is no cooperation among the heads;

3. Add layers without increasing costs.

4. Income is stratified.

Chapter 2 Beware of Ponzi Schemes

The Ponzi scheme is led by one person or an organization, who promises high returns on investment. The rest are downline members, who are investors. Investors can receive regular profit returns, which are the money of later investors given to earlier investors, until the leader runs away.

Ponzi schemes usually make investment plans very complicated, so that ordinary people can't understand them at all, and have no intention to read them. The key layout of the scam is to let ordinary people "see is believing" evidence: the first batch of "investors" did get the promised returns within the specified time. Then, some people will follow up and be deceived. If the operation is done properly, the follow-up can also get the initial returns, which will make more people see the benefits, and more people will take the initiative to be deceived. Until the leader gets enough money and runs away.

There is no room for simple Ponzi schemes anymore. But!!!

The modern financial system, especially the non-100% margin system, has given Ponzi schemes a lot of room to survive. Coupled with the development of Internet finance, a large number of Ponzi schemes exist objectively. Moreover, these scams are not simply a pile of greed and stupidity. On the contrary, many of them are logical and have strict reasoning. Many of them are considered scams after the project fails. That is, many investment projects are only realized and determined to be scams when they are unsustainable and bankrupt.

For example, the current state-led social security system is very likely to develop into a Ponzi scheme in a society where the aging population continues to worsen.

It is not easy to identify and avoid Ponzi schemes. Here are two suggestions:

1. Don’t invest in investment projects that you don’t understand. Don’t invest in investment projects that you don’t understand. Don’t invest in investment projects that you don’t understand. I have to say this three times.

2. If you want to invest in a project that you understand, you can invest there yourself, but don’t invest on behalf of others.

Pyramid schemes can be seen as an advanced derivative of the Ponzi scheme. Compared with the Ponzi scheme packaged in modern finance, pyramid schemes are easier to identify.

Chapter 3 Direct Selling

Direct selling is direct selling by manufacturers. It means selling products directly to end consumers face to face, bypassing traditional wholesalers or retail channels, without a fixed business location.

Direct selling is a legal business model and it is reasonable.

But direct selling also has agents and a hierarchical structure, which is very confusing. How to distinguish between direct selling and pyramid schemes?

Three key points to distinguish between MLM and direct selling:

1. When developing new sub-agents, do you require them to consume and purchase products themselves? Direct selling agents do not need to consume and purchase products, otherwise it will be either a traditional business model or a pyramid scheme.

2. If you develop new sub-agents, you will get commissions and rewards immediately, regardless of whether the terminal sales are completed. MLM can get commissions and rewards immediately, while direct sales must wait until the terminal products are sold before profits can be obtained.

3. When developing new sub-agents, do you require them to bring in funds? Direct selling will not require this, but MLM will (this is similar to 1). MLM can be seen as direct selling plus a capital pool. If the capital pool is removed, MLM is the same as direct selling.

Chapter 4: Digital Currency MLM

Digital currency is particularly suitable for pyramid schemes. Digital currency itself can be understood as a commodity or an investment product. Participating in a pyramid scheme of digital currency is more like a fund-raising stock speculation.

The typical model of digital currency pyramid selling is as follows:

1. Choose a ready-made one, or simply write your own program and invent a digital currency.

2. Package a few "experts", "elites" and "government officials".

3. Through online and offline promotion of various cases of getting rich overnight, the false impression of digital currency appreciation is created.

4. The victims directly invest in the digital currency.

5. The victim will be rewarded with compound interest after the investment cycle ends, or directly rebated. The reward is also the digital currency itself.

6. Give the deceived people digital currency rewards for developing downlines.

7. The organizers will sell a large amount of digital currency to cash in, and the currency price will fall sharply.

8. Refusing to return money and rewards, refusing to pay. Claiming to be hacked, claiming to be controlled by the banker, causing the price of the currency to fall.

9. Run away.

The MLM of digital currency is a combination of general MLM, Ponzi scheme, and direct sales.

Compared with general MLM, digital currency MLM has three additional characteristics:

1. There is a real product - digital currency. And it is packaged very high-end.

2. Participants can get rewards for recruiting people, and the prize is the digital currency itself.

3. The value of digital currency will tend to increase as more people participate in the scam. Participants can gain both an increase in the amount of digital currency itself and an increase in the amount of fiat currency converted from the book value, including the lowest-level participants.

Digital currency pyramid scheme was a pyramid scheme in the early stage, but it immediately turned into a Ponzi scheme in the later stage.

In general, the victims of pyramid schemes are at the bottom. Even if the pyramid scheme collapses, the middle level will suffer less losses and may even make a profit.

However, in the case of digital currency pyramid schemes, the bottom and middle levels can make profits on paper during the digital currency appreciation cycle. But when it enters the depreciation cycle, except for the organizers, all the lower levels will have no chance of escaping, and it will immediately become a Ponzi scheme, causing all those who did not cash out in advance to lose all their principal and interest.

During the digital currency pyramid scheme, it is extremely similar to direct sales.

Because after each middle agent recruits someone, the person will buy digital currency directly from the organizer, not from the middle agent. The middle agent will not sell digital currency to the lower-level agent. This is the direct sales model. But the difference is that this kind of recruiting can get additional digital currency rewards. The rewards come from the Ponzi scheme model.

Therefore, digital currency pyramid schemes are often like this: they start with pyramid schemes, operate with direct sales, and end with Ponzi schemes.

In the end, except for the organizers and those participants who had foresight and withdrew early, the investments of all other participants depreciated to zero.

What’s even more tragic is that digital currency pyramid schemes are relatively new, and there are almost no successful cases of crime being solved, so if you are deceived, you have nowhere to seek redress. You just have to be more careful.

Here I have two suggestions:

1. Read Chapter 1 of this article and ask the following four questions of a cryptocurrency investment project.

2. Digital currency is too complicated. If you don’t understand it, don’t invest in it.

Chapter 5 Bitcoin is not a pyramid scheme or a Ponzi scheme

There are too many articles on this topic. I am too lazy to talk about it. A friend once called me and asked, "Bitcoin is a pyramid scheme. The country has banned it. Why are you still playing with it? Sell it now." Facing such a kind-hearted person, I really don't want to scold him, but it's too against my will. So I will waste a few more words here.

It is true that Bitcoin needs to attract people to appreciate in value. Bitcoin itself is a protocol and a data structure. I guess most people don't understand it. Let's put it this way. Bitcoin is very similar to a fax machine, if a fax machine can fax money. If you put 100 yuan into a fax machine and send it to another person, your fax machine will eat up the 100 yuan. In this way, you have successfully transferred the money to that person. Bitcoin does this, allowing you to spread value freely on the Internet. We all know that the more fax machines there are, the greater the value of each fax machine. The same is true for Bitcoin. The more people use Bitcoin, the greater its value. This is why Bitcoin needs to attract people to appreciate in value.

Bitcoin needs people to join, but there is no upper or lower buyer. You can buy or sell your coins at any time, and you can become an upper or lower buyer at any time. There is no pyramid structure. Satoshi Nakamoto is not the top of a pyramid. Even if Satoshi Nakamoto dies now, or sells all his coins, it is impossible to destroy Bitcoin.

Bitcoin attracts people, but it also requires cooperation between people to form a network effect and then increase the value of the currency. Bitcoin itself is designed to make it easier for everyone to cooperate. The national attributes of legal currency restrict cross-border cooperation, but Bitcoin can break this restriction.

Early participants can more easily obtain more Bitcoins, that is, the earlier they enter, the lower the cost, while the cost for those who follow up is higher. This is a fact, but it is the real world. The original stock of any successful company is lower than the stock price in the secondary market. In the world of pyramid schemes and Ponzi schemes, the cost of entry for all participants is often the same (the difference is also the scarcity designed by the organizer), but the rewards and rebates obtained are different.

Bitcoin is open source, all codes are public and transparent, all doubts can be raised openly, and no one can be mysterious.

The Chinese government has publicly acknowledged the commodity attributes of Bitcoin. The U.S. federal government has publicly stated that Bitcoin is a commodity. The U.S. Federal Marshals and the FBI have publicly auctioned Bitcoin three times, and will sell it again in November. Some U.S. state governments have signed laws defining Bitcoin as a currency. Most European governments recognize Bitcoin's commodity status or currency attributes.

Li Ka-shing has invested in a Bitcoin company, Bill Gates has publicly discussed the advantages of Bitcoin, Baidu and Tesla investor Tim has publicly held a large amount of Bitcoin, and the Australian Prime Minister has publicly admitted to buying shares in a Bitcoin company...

So please stop asking me if Bitcoin is a pyramid scheme.

Finally, I have three suggestions for Bitcoin:

1. If you are interested, learn the basics of Bitcoin. The pleasure of a leap in IQ is waiting for you.

2. If you don’t understand the principles of Bitcoin, don’t invest in it. Stay away from it.

3. Don't curse Bitcoin, otherwise you will be embarrassed when you realize that you are an idiot.