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by fmvab 1560 days ago
‘A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of "investors." The initial promoters recruit investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.’

Come on, many crypto projects don’t seem like this in any sense?
1 comments
Dylan16807 1560 days ago
That's a bad definition.

The key characteristic of a pyramid scheme is that each person gets paid by the people they recruit.

If there is a global FIFO, that's a Ponzi scheme.

A pump and dump is something else entirely. It doesn't depend on an infinite series of investors, just one wave.

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cuteboy19 1560 days ago
The general term should be "greater fools schemes". Ponzi and Pyramid are just subtypes of this. There is also MLM and PnD which have their own characteristics. All of these involve finding more and more people to invest so that early investors can exit.

The reason why every greater fools scheme fails is that there is no net revenue (or too small to sustain the scheme). No matter the scheme, you will always run out of greater fools, and so it must collapse eventually.

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Dylan16807 1560 days ago
> All of these involve finding more and more people to invest so that early investors can exit.

> No matter the scheme, you will always run out of greater fools, and so it must collapse eventually.

That depends on how you define "collapse". After a pump and dump, a stock might crash to zero, or settle back to where it was, or even settle back to a higher number than it was originally at. It doesn't require a particularly large supply of fools, and it only requires them for a small amount of time. And it doesn't have to move the stock price by a huge percentage either.

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fmvab 1560 days ago
It comes from the office of the NYS attorney general. https://ag.ny.gov/consumer-frauds/pyramid-schemes

Please send them an email elucidating the finer points of what scheme is what.

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Dylan16807 1560 days ago
I'm aware of what page it comes from.

I'm also aware that not all communications use exact definitions at all times! Your smugness is not called for.

If you just want to link some government pages in the google results for 'pyramid scheme', here's one following the precise definition: https://www.fbi.gov/scams-and-safety/common-scams-and-crimes...

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fmvab 1560 days ago
My point is, it doesn't matter whether you or I consider it a "bad definition". To say that these things are not pyramid schemes "in any way" is unnecessarily pedantic and not useful considering the context (the implications of their terms of service).
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Dylan16807 1560 days ago
As far as the terms of service go, I could see conflating a pyramid and a ponzi, but a pump and dump is pretty distantly related.

And saying they need to remove that part of the ToS to honestly accept any crypto business is silly.

You could make an argument against allowing entirely new coins, I guess, but that's more about the other ToS terms than 'pyramid scheme'.

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