Of Multi Level Marketing

Multi-Level Marketing (MLM) is a business model where participants earn commissions not only from direct sales of products or services but also from recruiting others and earning a percentage of their sales. This structure has found applications in the cryptocurrency industry, particularly in token distribution and promotion strategies. The implementation of MLM in blockchain projects often attempts to leverage network effects to rapidly expand the user base, though it simultaneously introduces a series of controversies and risks.

MLM in the cryptocurrency space exhibits several distinctive characteristics. Primarily, incentive mechanisms form its core, with participants typically receiving rewards according to hierarchical levels—the higher the level, the greater the profit potential. Additionally, this model heavily relies on interpersonal networks and word-of-mouth promotion, expanding through the social connections of existing participants. MLM projects usually feature complex reward algorithms and meticulously designed token economics to sustain operations. Notably, while some MLM models focus on actual products or services, many projects in the crypto domain emphasize promises of token price appreciation rather than creating substantive value—an important indicator for assessing project legitimacy.

The impact of MLM on the crypto market is significant. On one hand, such projects can generate remarkable market heat and liquidity in the short term, driving dramatic increases in related token trading volumes. On the other hand, MLM structures may result in extremely uneven token distribution, with early participants and top-tier nodes often controlling substantial assets, increasing the risk of market manipulation. From an industry ecosystem perspective, an abundance of projects adopting MLM strategies could damage the credibility of the cryptocurrency industry, causing potential investors and regulatory bodies to view the entire sector with skepticism. In fact, financial regulatory authorities in many countries have begun intensifying scrutiny of such models, especially when combined with crypto assets.

MLM in the crypto domain faces severe risks and challenges. Most notably, regulatory risk exists where MLM projects deemed illegal pyramid schemes may subject participants to legal liabilities. Technically, these projects often lack genuine blockchain innovation, and their tokens struggle to maintain long-term value support. Sustainability issues are equally prominent, as such projects typically depend on continuous recruitment of new members to keep operating, easily collapsing once growth slows. Moreover, participants face investment risks, with late joiners often unable to recover investments, while top-tier beneficiaries may exit at any time, causing market crashes. Community trust crisis also presents a major challenge, as many MLM projects ultimately proven to be scams lead to investor distrust toward the entire crypto industry.

Multi-level marketing models play a complex role in the cryptocurrency ecosystem. While they provide avenues for rapid promotion of blockchain projects, their potential sustainability issues and legal risks cannot be ignored. For investors, distinguishing between legitimate incentive marketing and predatory pyramid structures is crucial. As the crypto market matures, more regulatory measures will emerge, and projects based purely on MLM strategies without substantial innovation may face greater challenges. True blockchain value should ultimately be built on technological innovation, practical applications, and transparent governance, rather than relying on unsustainable marketing structures.