No 1 Up and a 1-Up Gifting Programs Compared

We know that a no 1 up gifting program involves only direct person-to-person giving. But is a 1 up program an illegal pyramid? In order to answer this question one must first of all define what exactly is a pyramid scheme. According to Dictionary.com, (WordNet) http://dictionary.reference.com/browse/pyramid scheme , a pyramid scheme is “ a fraudulent scheme in which people are recruited to make payments to the person who recruited them while expecting to receive payments from the persons they recruit; when the number of new recruits fails to sustain the hierarchical payment structure, the scheme collapses with most of the participants losing the money they put in”. A according to the above definition, the operative phrase is “hierarchical payment structure”. Clearly, a no 1 up system is non-hierarchical. But can the same be said of a 1 up program? Consider, for example, a 1 up cash gifting program with a $100 joining free into which a prospect joins at the $500 level say. The 1-up structure requires that this prospect give up their 1st invitee up to their inviter.

Now in order to begin inviting others into the program, our prospect above would have spent a total of $600. Now he or she would need to invite at least 3 other people into the program before John makes a profit on his $600 investment. If his first and second invitees join at a level below the $500, then John must invite more than 3 into the program before he sees a profit. This is because the 1st sale John makes goes to his inviter (John is still $600 down), the second sale he keeps (he is $100 down), and the 3rd sale turns in a profit.

Thus, any new member is required to bring in at least 3 other people to make a profit. In turn, each of these 3 people would need to bring in another 3 people, and each of the latter then needs to recruit 3 new members and so on. Each level becomes much larger than the one it proceeds, hence the hierarchical structure. When recorded on a piece of paper, the 1 up program structure resembles a pyramid:

1

111

111111111

111111111111111111111111111,

The conclusion must therefore be that both no up and the 1up gifting system share a pyramidal structure with illegal pyramid scams associated with some mlm companies. But since all payments are direct member-to-member, in cash gifting the pyramid does not have a small group of fat cats at the top making all the money at the expense of the laboring majority. A no 1 up gifting system may have pyramidal membership structure but it is not necessarily a scam.
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