Multi-level Marketing (MLM) is a business model in which individuals earn income through direct sales of products or services and by recruiting others into the business. Participants are compensated not only for their own sales but also for the sales made by their recruits, creating a hierarchical or “multi-level” structure of earnings. In the context of cryptocurrency and blockchain, MLM schemes often involve promoting tokens, coins, or blockchain-based projects, sometimes raising concerns about legitimacy and sustainability.
What Is Multi-level Marketing?
Multi-level Marketing is a strategy used by companies to distribute products or services through a network of independent representatives. These representatives earn commissions based on their direct sales and the sales made by the people they recruit into the network. The model incentivizes participants to build large teams, as earnings increase with the growth of their downline (the recruits and their subsequent recruits).
In the blockchain and cryptocurrency space, MLM structures are sometimes used to promote new tokens, decentralized applications (dApps), or blockchain projects. While legitimate MLM programs exist, the model has also been exploited for fraudulent schemes, such as pyramid schemes disguised as MLM, which rely on recruitment rather than actual product or service sales.
Who Uses Multi-level Marketing?
MLM is utilized by companies across various industries, including health and wellness, cosmetics, and financial services. In the blockchain and cryptocurrency sector, MLM is often employed by startups and projects seeking rapid adoption of their tokens or platforms.
Participants in MLM programs typically include:
- Entrepreneurs looking for flexible income opportunities.
- Individuals with strong sales and networking skills.
- Early adopters of blockchain or crypto projects aiming to capitalize on growth potential.
However, MLM schemes in the crypto space often attract inexperienced investors who may not fully understand the risks involved.
When Did Multi-level Marketing Begin?
The concept of MLM dates back to the early 20th century, with companies like Avon and Amway popularizing the model in the mid-1900s. In the cryptocurrency and blockchain industry, MLM structures began to emerge in the 2010s, coinciding with the rise of Bitcoin and other digital assets.
The integration of MLM with blockchain technology gained traction as projects sought innovative ways to incentivize user adoption. However, this overlap also led to the proliferation of scams, particularly during the Initial Coin Offering (ICO) boom of 2017-2018.
Where Is Multi-level Marketing Used?
MLM is a global phenomenon, with companies and participants operating in virtually every country. In the crypto and blockchain sector, MLM schemes are often promoted online through social media platforms, forums, and webinars.
Regions with high levels of crypto adoption, such as Southeast Asia, Africa, and parts of South America, have seen significant activity in blockchain-based MLM programs. These regions often have large populations of unbanked individuals, making them attractive markets for crypto-related opportunities.
Why Is Multi-level Marketing Important?
MLM is important because it provides companies with a cost-effective way to reach new customers and expand their market presence. For participants, it offers an opportunity to earn income without the need for significant upfront investment or traditional employment.
In the blockchain and crypto space, MLM can accelerate the adoption of new technologies by leveraging the power of networks and word-of-mouth marketing. However, its importance is double-edged, as poorly designed or fraudulent MLM schemes can damage the reputation of legitimate blockchain projects and harm investors.
How Does Multi-level Marketing Work?
MLM operates through a tiered compensation structure. Here’s how it typically works:
- Participants join the program by purchasing a starter kit or paying a membership fee.
- They earn commissions by selling products or services directly to customers.
- Participants recruit others into the program, forming a downline.
- Commissions are earned not only on personal sales but also on the sales made by the downline.
- The more recruits and sales generated within the network, the higher the earnings potential.
In the crypto space, MLM programs may involve purchasing tokens or staking funds to gain access to the program. Participants are then incentivized to recruit others to buy or stake tokens, often with promises of high returns. While some programs are legitimate, others may lack transparency or sustainability, leading to financial losses for participants.
