Why a rising issue price is not a pyramid
It is a fair suspicion and it deserves a direct answer rather than an offended one. A pyramid has features that can be listed and checked. Here they are, one at a time.
What actually defines a pyramid
Not the shape of a chart. A pyramid is defined by where the money to pay participants comes from: earlier participants are paid out of the deposits of later ones, and the arrangement survives only while new deposits arrive. Five features follow from that, and each can be checked against a design rather than argued about.
The five: money is paid out of new entrants’ deposits; a return is promised; recruitment is rewarded; leaving depends on new money arriving; and where the money sits cannot be inspected. A design that fails any one of them is not a pyramid, whatever its chart looks like.
One: who pays whom
Here nothing is paid out of anybody’s deposit. Collateral deposited to mint stays inside the position that was minted — not in a common pot, not lent out, not paid to anyone. Redeeming that position returns it, in the currency it arrived in, at any time. There is no arrangement in which your deposit becomes somebody else’s payout.
The founders are paid, and it is worth stating exactly how, because an unstated fee is the usual place this test fails. A protocol fee is charged once, when a position is created, as a share of the deposit with ceilings fixed in the code — 1 per cent at the start of Phase 1, 2.8 at its end, 0.56 in Phase 2. It is taken in tokens whose own collateral goes into the common pool, and the prevailing rate is readable from the contract at any moment.
Two: what is promised
Nothing about return. The contract sets the price at which it will create a new token and does not lower it. That is a cost of entry — a statement about what joining costs, not about what anything will be worth. The market price is not set by the protocol, cannot be, and may fall towards backing.
This distinction is the whole difference between a bounded design and a promise. A rising cost of entry is a ceiling on what a token can reasonably trade for. It is not a floor under anything, and a ceiling that rises is not a prediction that the room fills.
Three: recruitment
There is no referral scheme, no bonus for bringing anyone, no tier, no structure that depends on who introduced whom. The contract does not know and cannot know who told you about it. A design that pays for recruitment has to record the relationship somewhere; look for that record in any protocol you are assessing, and if it is there, ask what it is for.
Four: whether leaving depends on new money
This is the test that matters most, and it is the one a pyramid always fails. Here there are two exits and neither waits for anybody. Redeeming a position returns its own collateral, which is sitting in the position — no queue, no pot, nothing to run out of. Redeeming tokens returns a proportional share of the reserve: a division, not a payout. If everyone left at once, each would take exactly their share and the backing of anyone who stayed would not move.
One limit exists and applies to closing, not to leaving: turning a cheap position into tokens is rationed, because that particular operation lowers backing for everyone else. Even then the position itself can always be redeemed in full. The gate restricts a conversion; it never restricts the exit.
Five: what you can inspect
The contract is immutable once deployed, with no upgrade path — so what is checked is what runs. The code is published after deployment and verification. The documents carry checksums and Bitcoin-anchored timestamps, so a version cannot be quietly replaced by a different one later. None of this asks you to trust a claim; all of it is something you can run yourself.
The transfer that does exist
Honesty requires naming the one real transfer in the design, because pretending it is absent would be the thing worth distrusting. Closing a cheap position — one whose entry price is below current backing — issues tokens against collateral that does not cover them, and that lowers backing per token for everybody else. Someone gains and others give up a little. That is real.
What makes it something other than a pyramid is that it is bounded, priced and disclosed. Bounded: backing may not fall below a threshold set from its own record, and one closing may use at most 38.2 per cent of the room above it. Priced: such a close pays a dilution fee, proportional to what it dilutes, which returns part of the damage to the pool. Disclosed: the whole mechanism is in the white paper, on this site, and in the code. A pyramid conceals the transfer and depends on it. This design limits it, charges for it, and works without it.