What is Ponzi Scheme?
Ponzi Scheme explained
People often mistake Ponzi Scheme for Pyramid Scheme or a more localized name of Multi-Level Marketing (MLM). Although they are both very similar in nature which funds are primarily based on utilizing the fresh investments to pay the earlier ones. Ponzi Scheme is more uniform in nature as it consolidate all funds collected from the investors and distributes them based on stipulated terms. The person at the top is able to have absolute control over the full amount of funds and usually is able to dictate how much are to be distributed.
Difference between Ponzi and Pyramid
Pyramid Scheme or MLM on the other hand required the members to market or promote the products or investments and at the same time recruiting them to be members, but as their 'downlines' or in online context 'referrals'. Being part of the term that the products are being sold to these new 'downlines', incentives goes proportionally to the 'uplines'. Thereafter, this 'downlines' went on to recuit more members and money are continously being earned and passed upwards. But the ultimate 'upline' will not be able to control the amount of money as the amount that went upwards are stipulated and generally, the one who recruited the new members or investors got the bulk of the products.
In the perspective of investing, both schemes do not work. At least not for long. Both will collapse eventually when money slows and fresh investments stopped.
Tags: What Is Ponzi Scheme , NOP , What Happened To NOP , MLM , Amway , Multi Level Marketing , Pyramid Scheme , Pyramid Sales , Direct Marketing , Scams
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