Thread by @smdiehl

Let's talk about how cryptocurrencies are for all intents and purposes multilevel marketing schemes for tech dudes. 🧵 (1/)

Normal MLM businesses are a type of legal pyramid scheme in which non-salaried workers purchase products (cosmetics, health food, vitamins) out of pocket from a company at a discount to do direct sales to friends and family. They make a small commission on these sales. (2/)

The second revenue stream is by fractional commissions from any other people that one has recruited into the same scheme, called one's "downline distributors". The person who recruits people into the scheme gets a percentage of their sales. (3/)

This pyramid structure incentivizes recruiting more than sales. If you recruit four people into the scheme to recoup your losses, then those four people have to do the same, do this 16 times and you have recruited every person on earth to sell skincare. Just a math problem. (4/)

These schemes prey on vulnerable people (and mostly young women) by recruiting them into the scheme under the premise "being your own boss" or promises of "financial security". And these claims seem tenuously true until you look at the actual economics of the organization. (5/)

The FTC released a report on economic problems of MLM schemes, and the findings was not surprisingly that 99% of people involved lose money. They're a fairly predatory wealth transfer from people recruited into the scheme directly to the company. (6/)
ftc.gov/sites/default/…

Crypto investments are a slight variation on this theme, they're investment schemes that promise wealth based on the Greater Fool theory, in which to make a profit you have to convince the next person to come along that your asset is worth more than what you paid for it. (7/)

When a product or investment opportunity can't justify its existence based on value alone, it requires people to go and preach its merits to bring more customers in.

And word of mouth from someone you know or trust is the best marketing a product can receive. (8/)

All crypto tokens are investment schemes with an inherently pyramidal structure, where cashflows are obscured by technology and opaque market making, and where the payout structure is inherently from new investors to early investors. (9/)

This is vastly different then normal investments in stocks, which impart ownership in a company and are valued in terms of the company's future revenue; or bonds which pay coupons over time. Companies actually build and sell real products.

Crypto doesn't do anything. (10/)

Crypto investments have no external cashflow, all payouts are tied to recruiting more people into it. We run into the same problem as MLMs, there isn't a infinite pool of fools to pay out everyone and this game of musical chairs collapses leaving most people at a loss. (11/)

Cryptocurrencies have a "marketing department" of those with a vested stake in bringing more fools into the scheme. Instead of word of mouth they're now "investment influencers" who spin creating value out of nothing by just holding on long enough and spreading the gospel. (12/)

Their many cliché mantras of "have fun staying poor" and "not gonna make it" is exactly the same kind of psychological games that MLM schemes use to recruit other people. They're exploiting people's guilt, fear, and insecurity to draw them in. (13/)

Important thing to realise is that people involved are themselves victims. One can be in an MLM and not be a scammer, even though they're perpetuating a scam.

Hordes of MLM people actually believe it's a real business out of ignorance of the underlying economic structure.(14/)

Cryptocurrency is for all intents and purposes a multilevel marketing scheme wrapped in techno-babble, distrust of institutions and libertarian politics that preys on young vulnerable men to sell and promote "life-changing" token investments to their friends and family. (15/)

And it's on all us to pull our friends out before they get lost in these scams. All these schemes legitimately hurt vulnerable people and "investing" in crypto tokens is a game of financial musical chairs that always ends badly for people who have the most to lose.

/fin