
Introducing Amazon Coins: A New Virtual Currency for Kindle Fire - tokenadult
http://www.amazonappstoredev.com/2013/02/introducing-amazon-coins.html
======
cs702
A new form of "money" that you can only spend at, or via, Amazon. It's a great
idea... for Amazon!

\--

PS. In response to comments below, this is not at all like gift cards (which
Amazon has offered for many years), but truly a digital currency similar to
those used in online multi-player games (e.g., Linden Dollars) -- the key
difference being that Amazon Coins will be accepted by the world's largest
online merchant from day one.

rm999: Gift cards are not fungible (each gift card has its own unique ID that
can be used only once) and cannot be subdivided into smaller units (e.g., one
can't split a gift card in two and send half of it to someone else), so they
cannot be used as a medium of exchange.

~~~
libria
Since it's a currency conversion instead of a purchase, does this then
circumvent sales tax laws when exchanging them for goods? Today it's just
apps, but it could feasibly be tangible goods in the future.

~~~
Dylan16807
I think you got something mixed up. Buying coins can be looked at as a
currency conversation, sure, but exchanging coins for goods most certainly is
not, and will be taxed as per usual.

------
ChuckMcM
So this is pretty interesting to me. When I left Sun in '95 to do a startup
(GolfWeb) one of the things we were planning on doing was a custom currency so
that you could "subscribe" to the online magazine, and we'd deduct currency
out of your subscription for each article you read, and tag it so that you
could go back an re-read it whenever you wanted. Then when you currency got
low you could 're-subscribe'. We felt it would be cool because you could make
it the Golf Magazine you wanted to read rather than what an Editor-in-Chief
decided to put in the issue that month. And by looking what articles were
driving traffic we could get a feel for our subscriber base.

I ran smack into a giant wall of patents from Digicash and others. I remember
saying "Wow, 20 years from now this is going to be something cool."

And here we are. In 2011 a number of David Chaum's patents expired. Of course
there are interesting new patents that Amazon just got like this one:
[http://patft.uspto.gov/netacgi/nph-
Parser?Sect1=PTO2&Sec...](http://patft.uspto.gov/netacgi/nph-
Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-
bool.html&r=2&f=G&l=50&co1=AND&d=PTXT&s1=digicash&OS=digicash&RS=digicash)

But Amazon has been aggressive in their patent defense for years.

Creating their system to be one coin == one cent is also interesting as it
effectively kills off the remainder grab [1]. Especially true since the
balance apparently combines in your account. Basically you 'top up' with coins
when ever you want. So really it has utility of shifting the payment
processing charges around. It also touches a grey area of taxation, which is
when you buy something for "points" how much tax to do you pay and to whom?

[1] Pre paid phone cards that can't be re-filled would not make a call if you
had $1.00 or less on the card so they became worthless with up to a $1 of un-
spent value on them. In the large, across all cards, this was hundreds of
millions of dollars which accrued to the benefit of the card issuers.

------
rwanghacker
Putting an intermediary currency in between purchaser and product is always
worse for the consumers.

1\. There is the leftover phenomenon where you have currency leftover and you
can't spend it anywhere else

2\. Or everytime you need to make a purchase, you switch the exact amount out
for your purchase which adds additional step of useless process

~~~
niggler
There's one added benefit, but its not clear who this accreted to: reduced
credit card fees. Having one large charge is generally more efficient than
many small charges, and if the savings are used to reduce fees or increase
developer percentage then this is a good thing.

~~~
picklefish
I would prefer the "wallet" method that steam uses. You require people put at
least $5 in the wallet tied to their account. It's easy to remove the leftover
balance because the first time you buy something over $5 it takes money from
the wallet and charges you the rest leaving $0 in wallet.

------
josephagoss
Hey "visualcsharp", for some reason your post is appearing dead. This is not a
real virtual currency, and nothing like Bitcoin. Think of this as store
credits, similar to Xbox credits or whatever they use. Its not really a layer
of inefficiency because customers will always have a little more Amazon coin
than they spend, so this makes Amazon a little more money in the short term
and also conditions its customers to use the coins and thus use Amazons
services more.

(What I mean about not spending all the coins: you buy $20 worth of coin, and
something you buy is worth $18.75, that leftover $1.25 is useless until you
top up more. And if your not allowed to combine Amazon coin and USD then it
encourages you to purchase more coins)

------
niggler
I'm not familiar with the Amazon Kindle ecosystem. Are credit card fees taken
out of the 30% Amazon cut or out of the 70% that the developers receive?

~~~
fharper1961
credit card fees come out of Amazon's 30%.

~~~
lleims
Is it the same situation in the Apple App Store and Google Play?

Thanks

------
charonn0
I don't see the advantage for the customer. Surely Amazon coins will be less
useful than actual money, being less liquid and not acceptable anywhere else,
and not even valid for all digital transactions made via Amazon (e.g.
subscriptions.)

There may be some utility along the lines of a parent issuing a tablet-
wielding offspring an "allowance" of Amazon coins, but not having any
offspring this doesn't help me.

------
viraptor
Can they be changed back to real currency? If not, is Amazon interested in
gambling?

------
nivla
This really rewards Amazon more than anyone else in the ecosystem. Let's see:

1) You have to buy these "Virtual Currencies" and since they can only be used
within the ecosystem and cannot be reversed, you will be psychologically
attuned to, spend it or lose it all.

2) Amazon now doesn't have to hiccup 50c or so for every small credit card
transaction.

3) Amazon could now theoretically avoid paying sales tax because the real
currency was only used to buy something intangible which can be bartered for
something else.

~~~
Zarathust
Point 3 is extremely interesting. There is a lot of controversy going on about
their sales tax collection[0]. I say that it is interesting because it gives
an incentive to the customer to use their virtual money instead of traditional
payment methods. Other advantages I see (or that you saw) only benefit Amazon,
which only gets mild sympathies from most users. I am not sure this will have
such a great impact however, because unless they find a loophole to sell those
coins, the first sale would still be subject to any applicable tax.

[0]<http://en.wikipedia.org/wiki/Amazon_tax>

------
mcantelon
If history repeats itself, Amazon will offer virtual currency brokering as a
service. A crapload of money to be made if it can pull that off.

------
sauravc
The MiKandi App Store has been doing this for years. It makes
microtransactions a viable source of revenue for developers.

~~~
Osiris
So is the point of the coins to reduce the cost of credit card fees per
transaction? If I can buy $20 worth of coins with a $0.30 + 3% fee, I can then
pay a merchant as much or as little as I want with no additional fee.

The core problem seems to be that credit card fees aren't structured in a way
to support small payments (<$5).

~~~
sauravc
Micro-transactions are one of the advantages. (Micro-transactions in adult
were basically unfeasible before MiKandi, since no adult payment processor
would allow a charge below a certain threshold (usually $5-10).)

But virtual currency has other advantages. For example: points can be acquired
via offer walls (no credit card at all); it can be bought as prepaid bundles
anonymously (via third party stations); they avoid charge back issues (refund
points instead of dollars to the credit card); they can be given out easily
(had a crap experience? have some extra points); and can be traded for other
virtual currencies (just like real currencies and third party exchanges).

------
pavel_lishin
Next, AmazonVille! Play with your friends!

This is basically just another version of gift cards - a way to lock money
into the system.

------
mcintyre1994
It's obvious why these can't be used at Amazon's website from launch, but
it'll be interesting to see whether they allow that if/when people are
actually buying them. Could solve the issue of leftover credit.

------
alimoeeny
What?! Is Amazon giving away money to people to spend on apps, to encourage
developers? or it is just to kick start people buying the coins for actual
money? or I missed the point?

~~~
niggler
The second: promote the coins so that people will continue and pay to use
them.

------
idunno246
I hope they don't do what facebook did with their free credits and actually
pay developers instead of forcing them to accept promo credits free

------
Macsenour
Reading the comments here, I think it's easy to spot the gamers from the non-
gamers. Gamers know this type of economy well.

------
crumb
In other news: Microsoft Points returns to the Xbox Marketplace!

------
p6rny
indirectly customer is not required to pay sales tax on purchases made

