Blockchain never ceases to surprise us with its effectiveness. Regardless of sector, capital or geography, it has proven its worth across the line and MLM isn’t untouched. In fact, Blockchain and MLM share an interesting similarity – they both involve peer-to-peer engagements. Moreover, both are propelling into billion dollar industries. Now, imagine the prowess of a platform that brings together the two.

Ever since MLM over Blockchain has arrived, there’s been an exponential rise in the acceptance of peer-2-peer products in the consumer markets and the reasons are well justified. Besides Ethereum, the Tron Smart Contract MLM software has gained widespread acceptance recently.

Here are the top 3 issues in traditional MLM addressed by smart contracts. 

 
Problem #1:
Centralized Network and Ownership

A traditional MLM Network is controlled by a single entity and is operated on centralized network architecture. This setup creates a single point of failure in terms of MLM operations and technology and thus, is a major risk that most service providers face today. 

• Operational Risk

MLM practices are considered to be legal if the organization sells its products to the consumers those who have participated to build the network. However, many MLM operators do not adhere to this legal model and get involved in pyramid frauds and stock manipulations. There have been multiple lawsuits against leading MLMs accusing them of misrepresenting sales data. As a result, the entire network suffers. 

• Technology Risk

An MLM business is transaction-intensive. Thus, when a single server controls the operations, the organization is exposed to unforeseen risk. If the server goes down, the network users’ requests, transactions, and pay-outs fail to process. As the system availability is completely compromised, the network participants suffer. 

Apart from this, the centralized networks offer limited scalability. As an MLM business generally experiences exponential participation growth, scaling a centralized network may not prove to be a cost-effective solution. 

Solution 

An MLM Platform driven by a blockchain smart-Contract is inherently decentralized. For example, a Tron smart contract MLM software is capable of automating all the operational transactions. As these transactions cannot be altered, the network’s exposure to centralized manipulation is minimized. 

From a technical standpoint, a smart-contract MLM basically thrives on a decentralized network of computers. Thus, even if a server crashes somewhere, it will not affect the system availability for the MLM organization. As a result, the MLM business growth is stabilized and revenue from business increases. 

Problem #2:
Transaction delays 

In a traditional MLM organization, transactions are recorded in databases that can be easily manipulated or corrupted. In such an event, the commission earned by the network participants might not be calculated correctly or there might be payment delays. 

Apart from this, the centralized systems used could fall victim to hacks or become slow due to transactional overload. All this could lead to compensation pay-out delays which are not generally taken well by MLM network participants. 

Solution 

When a network participant joins an MLM organization, a smart-contract is created that stores the terms of the contract between the two parties. As these contracts cannot be changed until both parties agree, the network participants will always receive the correct amount of compensation in a timely manner. 

Problem #3:
Zero transparency 

According to research conducted by Stacie Bosley, an associate professor of economics at Hamline University, many MLM firms are less transparent about their compensation structure. As a result, the network participants are usually unaware of the products, costs, earnings and compensation plans when they decide to participate in the model. 

Solution 

The smart contract platform like Tron smart contract MLM software brings traceability to the MLM business. Apart from this the participants can trace and identify the transactions on the platform anytime. This comes across as a major advantage as the participants can take an educated decision as all the details and transactions can be viewed over blockchain. 

Another major advantage of a smart contract based MLM software is that there is no third-party involvement. It is a completely peer-to-peer platform and is immune to scams in traditional MLM businesses. 

Problem #4:
Operational efficiency 

On a traditional MLM platform, the operators are responsible for managing the transactions like the network joining fees, position allocation, compensation plan management, and more. As most of these tasks require manual intervention, the speed, and efficiency of the overall MLM network suffers. 

Solution

On a smart-contract-driven MLM platform, the users are in complete control of their funds and data. Thus, the burden on the MLM operator to manage the funds, data, and transactions lowers significantly.  Using the immutable smart contracts, all the activities of the MLM platform are automated. As these contracts cannot be manipulated, the network participants’ trust in the network also increases. 

The scope of MLM 

In 2019, the MLM industry was valued at $ 167 billion which was expected to touch $200 billion by the end of 2020. The industry is experiencing phenomenal growth as it offers the following advantages: 

• MLM industry eliminates the need for any formal marketing infrastructure. As a result, the organizations can save massive marketing costs.

• MLM model makes it easy to penetrate new markets. 

However, the major challenges that are limiting the growth of the industry are trust issues, centralization and scams. This is where smart contracts play a crucial role:

• They bring 100% transparency to any kind of MLM model
• Help eliminate fraudulent activities
• Makes it easy to track and trace transactions
• Fosters a decentralized MLM set-up
• Eliminates the need for a third-party like a legal counsel
• Transparency brings trustability among network participants 

Conclusion 

To put your MLM business logics on Blockchain, you will need an expert to code the smart contract that not only preserves the ethos of your brand but also delivers in the best interest of the users that have actually built the network. 

Get in touch with us to explore more about our ready to deploy, white label MLM over Blockchain platform.