Amazon is now printing virtual currency for its Kindle users The Introducing Amazon Coins: A New Virtual Currency for Kindle Fire) called Amazon Coins (Fig. 1) Right now the exchange rate is one U.S. cent to one Amazon coin so a $2.99 app will cost 299 Amazon coins. For now, Amazon Coins target Kindle Fire (see Will Apple Take On The Kindle Fire And Nexus 7 Tablets?) users but Amazon has a massive customer base that use more than just the Fire.
So why do a one-for-one currency? Control.
Amazon's partners still pay Amazon 30% on sales. They must still pay taxes on the converted transactions so you will be paying for that too. "There is no such thing as a free lunch" even in the virtual world.
Amazon will be giving some free Coins to customers in May (It says so in their press release) essentially printing their own cash. They are talking "tens of millions of dollars". That's a lot of coin.
At this point it grows the Amazon Coin realm but it is an asset that stays within Amazon. Real cash only flows out through Amazon's partners.
Paul Ryder, Amazon's vice president of apps and games, highlights why partners might be interested when he said, "Developers continue to report higher conversion rates on Amazon compared to other platforms." That is good for Amazon and developers. Will it be good for Amazon's customers?
Amazon Coins are expected to move into apps that run on the Kindle Fire. These are likely to be games to by in-game currency but there is no restriction. There are restrictions on what Coins can be used for (see Amazon Coins FAQ). They cannot be used for subscriptions.
The big question is where will this go. It could disappear next year or other large vendors with many customers like Verizon or Comcast could do the same. Will the exchange rate remain or will there be discounts? Will there be currency exchanges cropping up?
Remember. All this is set up using an implied and actual contract between Amazon and their customer. It will take a lawyer to address all the details. For example, what happens with if a person dies or goes bankrupt in the real world? Are Amazon Coins asset to be converted?
Amazon Coin is much different that technologies like Bitcoin. Amazon is also not the first company to take this approach. It is just one of the biggest to do so.
App developers will be the first to take advantage of Amazon Coin. That includes some of our readers but if Amazon Coin moves into other areas then that group will grow. It tends to be a software and service management issue but it is also a security issue among other aspects that Amazon Coin will impact. For that reason, even embedded developers will need to understand its operation and impact.
The announcement is important because Amazon's economy exceeds that of many countries. It would love to convert its entire operation to Amazon Coin because it would have a locked in customer base.
Regardless of where it goes, Amazon Coin is a major undertaking from Amazon. It will have impact that rumbles through Wall Street, Main Street and the virtual world. It impacts technology products right now, mostly in the virtual world. For now.