GlossaryBeginner
Pyramid Scheme
A fraud where profit mainly comes from recruiting new participants, not a genuine product or service.
A pyramid scheme generates profit primarily through recruiting new participants who each pay to join, rather than through selling a genuine product or service, with revenue flowing upward toward earlier participants.
Like a Ponzi scheme, a pyramid scheme is mathematically unsustainable, since it requires an ever-growing base of new recruits to keep paying out earlier participants.
Examples
- A crypto "opportunity" emphasizing recruiting new members over any actual product is a pyramid scheme warning sign.
- Pyramid schemes are structurally unsustainable because they depend on continuous new recruitment.