pyramid scheme

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A scam in which users of the Internet are drawn into a process of recruiting other users, who in turn recruit others, and so on. Such schemes have been part of the conventional commercial world for some time: however, the Internet, with its ability to put hundreds of thousands of users in touch with each other easily, has provided a fillip to a practice that was declining in the 1990s. A typical pyramid scheme involves users recruiting other users to sell a product and keeping a commission based on their sales. The second layer of users then recruit others and keep some part of their commission. Each participant in a pyramid operation pays an initial registration fee to the initiators of the scheme. After a short time the laws of economics kick in and the schemes collapse under their own weight, with the creators of the scheme usually disappearing.

Subjects: Computing.

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