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Introducing Amazon Coins: A New Virtual Currency for Kindle Fire (amazonappstoredev.com)
49 points by tokenadult on Feb 5, 2013 | hide | past | favorite | 35 comments

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.

>this is not at all like gift cards

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?

rm999: sorry for replying to your comment above instead of below it. I was about to reply to it below, but then thought that adding the clarification at the top would be more helpful for everyone else. Thanks for pointing this out.

The Amazon press release calls Amazon Coins a "virtual currency," which by definition means they're fungible and subdividable.

That's a pretty circular argument. You know the term fits because it has the attributes of the term, which you know because they used the term.

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.

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.

Amazon is too tasty piece for IRS. Where smaller merchants could get away with, AMZN is always under microscope.

The most important way in which Amazon Coins resemble a gift card is when you buy one, Amazon can use/bank/invest that money right away, instead of waiting for you to make a purchase. They definitely make enough off the interest/investment to pay for the whole Coins service.

You can too spend part of a gift card, give a gift card to someone else, or combine gift cards for a large purchase, unless the company making them has terrible customer service. The only thing you can't do is split them arbitrarily.

Similar to the iTunes Gift Cards that have proven popular.

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...

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.

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

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.

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.

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)

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?

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

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


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.

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

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.

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.


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.

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

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).

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).

Next, AmazonVille! Play with your friends!

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

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.

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?

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

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

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

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

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

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