It is a business model that is widely used in fraud, which depends on the constant recruitment of investors. It works like this: the initial scammer convinces other people to give them money to get into a “safe investment” he is managing. And he suggests that these people, in turn, convince others to also invest: they will receive a percentage of the money from each new member, and any new members that they bring. And so on.
With each layer, there are more and more “investors” at the bottom, which is why the scheme was named “pyramid“. But it does not hold: mathematically, it is necessary that each member manages to conquer at least two new participants. And if, for some reason, they all decide to “withdraw” the invested money at the same time, the pyramid collapses.
Pilantry was invented in 1920 in the USA by the Italian Carlo Ponzi. That is why it is called a “Ponzi scheme” there. Check out how the structure is (in the image above):
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PHARAOH
Responsible for convincing the first people to join the scheme. In modern versions, there can be several heads, each with its own guest network.
PRINCES
By joining early on, they usually do well, as they receive commission on the amount paid by people they invite to join the scheme.
SERVANTS
The more participants, the more difficult it is for new members to recover their investment, since even more people need to be indicated, with the structure already saturated.