This is part 1 of a 2 part series about cryptocurrencies and MLM.
I caught the Bitcoin bug two years ago, back in mid-2013. I was speaking with a client and he mentioned this Bitcoin thing, talking about how it was a new way to send “funds” overseas without any intermediaries (banks). I was hearing this at a time when I was aware of another client experiencing trouble getting money out of India due to banking restrictions. In a fast and fluid economy, time is precious. And if banks’ outdated systems were adding undue burdens on international business, innovation in that sphere was inevitable. While I did not fully understand it, the concept made sense.
I was hooked. I read as much as I could and even bought a few coins to test it out. I even started the website Bitcoin Lawyer on the hunch that there was an opportunity for legal services when it came to crypto-currencies. Politically, the concept of Bitcoin was appealing. The current banking system with a centralized Federal Reserve has always made me nervous. Practically, I had no idea if I had any real need for Bitcoin.
As time has gone by, I’ve become less interested. While Bitcoin might have a strong future, it solves no immediate problems for me today. I experience zero difficulties transferring funds to merchants, friends or anybody else. Long term, I think the Bitcoin technology might inspire banks to streamline their processes, adopting some of the blockchain technology to eliminate some of the costs associated with money remittance. Will Bitcoin trump the banks? Nope. Currently, Bitcoin related companies are trying to fit their square pegs into round holes by trying to comply with existing banking regulations. It’s not going so well with several of the early pioneers facing jail time. Cryptocurrency was born out of a need for privacy. Banking regulations exist to eliminate privacy, making it easier for the government to root out fraud. Thus, the serious conflict between the two.
Within the span of a couple of years, Bitcoin has literally exploded onto the scene and become a household word. Silicon Valley has literally dumped over $2,000,000,000 into Bitcoin related technologies. The technology is improving, the base of Bitcoin users is growing, the exchanges are becoming more stable. All in all, Bitcoin is developing into a solid service for users. It’s in a virtuous cycle where more good news begets more good news. It’s a topic I like and it’s a topic I understand.
Does Bitcoin work with MLM?
It’s a tough question. I’m often reminded of Seth Godin’s analogy of a Meatball Sundae. Just because I like ice cream and I like meatballs doesn’t mean that I should put the two together. The same applies to cryptocurrency MLMs. While the two can coincide in theory, it’s hard surgery to do right.
The purpose of this article is to serve as a warning
I feel as though there’s a cryptocurrency ponzi scheme bubble brewing in the network marketing industry. It reminds me of the environment during Zeek Rewards. I’m afraid this cancer has already grown into a mass larger than what we saw with Zeek. Ponzi scheme promoters, domestic and foreign (primarily in China), are taking advantage of Bitcoin’s complexity and its veneer of legitimacy to convince investors that “now’s the time to invest in XYZ alt-coin, which is destined to be the next Bitcoin.” Consumers, completely uneducated about the technology behind cryptocurrency and unable to decipher good from bad, are making serious mistakes. Plus, there’s the added excitement of investing in a coin cheaply with the hopes of it rising in value 1000% similar to Bitcoin’s climb. After seeing the Zeek Rewards hysteria, there’s one lesson I’ve learned: People under the influence of easy money make stupid mistakes. Be warned: There’s a chance the cryptocurrency program is a cleverly disguised ponzi scheme. In most scenarios, the coins are not OPEN; thus, there’s no way to confirm the coin’s legitimacy. When the coin is developed in a CLOSED environment, the value of the coin is driven purely by new enrollments into the scheme i.e. ponzi.
The ponzi promoters that push these programs look like you and I. The difference is that they spend most of their time building their “businesses” in the dark corners of the world, seemingly beyond the eye of the U.S. government. They’re hanging out in places like Thailand, Hong Kong and China. They know they’re doing wrong, which is why they’re building away from their homes, amassing as much money as possible before the market wises up to the industry. In Zeek Rewards, there was about a two year run where the ponzi promoters made their money before the market figured out the game. The victims are uneducated and faceless, which makes their work that much easier.
The SEC has provided some tips on how to sort out the ponzi schemes from the legitimate cryptocurrencies. In part 2 of this series, I’ll pass along the SEC’s tips as well as provide some tips of my own.
I’m hopeful this article educates people and starts a discussion.
To read Part 2, click here. In Part 2, we dive more into the specific law and I provide some tips for consumers.