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# Pyramis, a pyramide scheme

South Tyrol, ItalyMember Posts: 26 ✭✭
1. Root node is the address of the Ethereum foundation.
2. Every node has two legs where you can attach
3. The first two donors sends a fixed amount of x Ether to the contract
4. The contract adds their address to the pyramid bottom
5. Repeat (2)-(4) for each new transaction
....a) as soon as a donor sends a transaction, it is money is split between all his parents
....b) were the first parent gets 1/2, the second 1/4, 3th 1/8, 1/16 following the series of 2^(-n-1)
.........(better formula???)
....c) the money is send to the addresses in the pyramid according to (a)

The ROI for each node should converge to 3x ETHER
http://www.wolframalpha.com/input/?i=sum+(n^2+*+2^(-n-1)+*+x)

Q&A:
Is there enough contract store to hold all pyramid addresses?
Certainly not, maybe I need to create a selfcopying federation of contracts representing each a single node. Exciting challenge!

What happens at saturation point when nobody invests with more?
Nothing the wealth is redistributed and 2/3 of the players lost to a 1/3 of the players

What happens if something goes wrong?
Principle of do no evil, funds are returned to the player

• Member Posts: 46
This concept seems like a perfect fit for ethereum. I am curious as well as to the ability of ethereum to store thousands of addresses and process payments for them on a continuing basis.

Nice work!
• Member Posts: 2
I really don't like it, there are far more progressive things you can build for ethereum than a pyramide scheme.
• Member Posts: 29
@Roland, would you like to team up with others working on new currencies that are in development for now.
• South Tyrol, ItalyMember Posts: 26 ✭✭
edited March 2014
@SatCa I'm interested to know more about your plans, contact me on Skype (handle: malefizer) or roland.kofler on gmail...
• London, EnglandMember, Moderator Posts: 1,282 mod
Fans of pyramid schemes should check out this Ethereum contract: https://github.com/dougbtv/lifegiving-bazooka
• Member Posts: 4
I am a little confused, why exactly are you all trying to scam people, and scamming people is a good idea why?
• Member Posts: 9
Most of world commerce, and finance in particular, is built on the pyramid scheme model. It's just not called a scheme because it continues to work and it is legal. For example, the FED is the buyer of last resort to keep the entire banking system afloat. The FED had to step in to support the base of the pyramid when there weren't enough new participants with real money willing to buy US Treasury Bonds. This is convenient for the FED since it is also at the top of the pyramid, and it costs nothing to support the base of the pyramid with new money, so long as all of the intermediary participants continue to flow value (interest payments) back up to the top.

Then you look at something like Facebook - it is also a pyramid scheme of a different order. All of the new participants in the scheme receive absolutely nothing but a virtual abstract of their social life, in exchange for their time and attention. The FB execs at the top captured most of this value, with some value trickling down to the shareholders in the form of dividends, and the scheme perpetuates as long as there are willing participants. When corporations go bankrupt, you can think of it in terms of their pyramid scheme having failed, when not enough new participants (consumers) entered from the bottom of the pyramid to sustain the participants farther up the chain (employees, managers, execs). When the real estate bubble burst in the US in 2007 it was a clear example of a pyramid scheme going bust.

Decentralization attempts to flatten the pyramid structure throughout the value chain and distribute risk more broadly across the system, which is the greatest characteristic of crypto currency in my opinion. Ideally though, a pyramid scheme could be used to effectuate good (wealth redistribution), particularly if most of the early participants are of the 99% and the last participants belong to the 1%. Ethereum would certainly provide the kind of automated transaction backbone to implement such a scheme to a very large scale.

The risk to any pyramid scheme is always shouldered by the last group of people to buy in - but these are risks we face every day in the real world - just ask the last guy to buy an 8 track player, or the last buyer of shares of any corp that went bankrupt.

So the question is not if pyramid schemes are right or wrong, the question is how to do one that improves the world for the largest number of people - one in which the rewards overshadow the risks. Decentralized finance seems to offer that hope, and I think that's the biggest reason why most of us are here on this forum.
• Member Posts: 9
Just an added note - the reason multi-level marketing is legal and "pyramid schemes" illegal is that the illegal pyramid schemes offer no product to justify the money invested by participants. If we can create a valuable product or service that people are willing to purchase, and they receive a share from every friend they also introduce to the network, and a percentage of that value flows upward to the early participants, we have an affiliate network (legal), not a pyramid scheme (illegal).
• London, EnglandMember, Moderator Posts: 1,282 mod
@Fior_Sirtheoir, Roland is a well respected member of our community, and he had actually asked me before posting if this was appropriate. I see it as completely appropriate as it's not written with the purpose to defraud (remember the contracts are always inspectable via the merkle tree). It's also a bit of fun, and a good challenge in terms of learning how to write contracts. Harmless IMHO.
• Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
Can come quite close to 'pure' pyramid schemes, for a donation/payment scheme where later donations also pay out to earlier donations.(encountered here) The purpose is to give fans incentive to promote whatever they donated to.
• Member Posts: 11
@Roland the contract storage is theoretically unlimited if you can afford the storage fees. @Jasper and I were discussing an similar idea where one donation to an address triggers a whole bunch of related transactions.

The problem is that the bigger the pyramid or federation of contracts grows, the more expensive it becomes to pay the fees. Or maybe I'm wrong - if you find any solution or explanations , please share there's more of us thinking about the same stuff
• Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
I thought ethereum didnt have the 'inputs and outputs' stuff bitcoin has, the blockchain creates consensus about balances on addresses directly.(the question why bitcoin doesnt do this lead me to ethereum) As such, transactions are always just the transaction fee. (+potential script fees) So transaction cost as fraction is plainly depending on size.

Still, we might want to try avoid transactions regarding values <10*fee, in the donation scheme we talked about that could be done with payouts working in a particular way, always jumping up from zero. 'Lotery ticket' -bits of signed data that can be fed to a contract- payment is an idea, losing tickets never have to touch the blockchain. But random values are not entirely as easy as you'd want, it itself might cause a bit of overhead. (though probably not nearly enough to defeat the concept)
• Member Posts: 4
Apologies, I mad presumptions based upon the general bad stigma of "pyramid scheme".
• South Tyrol, ItalyMember Posts: 26 ✭✭
@Fior_Sirtheoir , no actually thank you! The philosophical problems that arise when you confront yourself with the borderlines of Ethereum contracts actually brought me there, and your question is valid. As @Captain_Picard? elaborated by doing Pyramis I discovered how thin the line is beween something banned (for good reasons) and current workings of capitalsm (I never take ideological positions, I just use the word). What is a bubble, what is a Ponzi and what is innovative disruption? With Pyramis already I learned that a pyramid scheme can only be harmfull if people can't see the big picture. Normaly you would say it works if they think that their victims thinks that they got victims, avalance! If my formula in the original post is right, the trickle up effect is quiet limited. Herbalife, Amway, Just & Co. need to raise the contribution of their disciples substantially to become wealthy. And they do it!

Man I wish I had more time for Ethereum in these days, hope at least to see you at Bitcoin 2014 in Amsterdam, @Stephan_Tual? and everybody!

• London, EnglandMember, Moderator Posts: 1,282 mod
I'm likely not going to be present in Amsterdam, but others from the team might
• Member Posts: 6
I've developed a financial protocol that seems to generate an 'inverted pyramid' in terms of money flow. It still operates as a pyramid, and thus has 'capital' attraction. It is also a pure p2p system.