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.
On a superficial level they seem almost identical, but I don't understand the idea behind Amazon coins well yet. What makes them so different? I've always considered gift cards a sort of currency, like the coins are.
s702: it's virtually impossible to have a discussion if you reply to comments like this, the reply button and comment threading are made just for this purpose.
I don't see anything in the FAQ or press releases that indicates amazon coins will be fungible or splittable. Do you have a source that you can gift some of your coins to other users?
The Amazon press release calls Amazon Coins a "virtual currency," which by definition means they're fungible and subdividable.
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...
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 . 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?
 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.
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
(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)
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.
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.
The core problem seems to be that credit card fees aren't structured in a way to support small payments (<$5).
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).
This is basically just another version of gift cards - a way to lock money into the system.