It’s possible that the combination of the increasing network size and reach of Amazon and the basic benefits of utility-based cryptocurrencies, could one day create a globally adopted cryptocurrency – the Amazon Coin.
Amazon’s Complete Economy
In the near future we could see Amazon continue extending its suite of offerings, which already includes online shopping, web services, grocery stores, video, music and digital media, artificial intelligence and the Internet of Things. In fact, healthcare and banking are already being planned as additions to the ever-growing Amazon network of consumer offerings.
While Wal-Mart and CVS are still larger overall retail companies, and Alibaba is the largest ecommerce company, Amazon is looking to dwarf them all in its scope of operations and offerings. Amazon is already shipping to more than 100 different countries of the world, and operates retail websites in 15 countries. It is especially strong in the U.S., where 55% of all online shoppers begin (and often end) their searches on Amazon, and estimates say that 51% (over 100 million) people in the U.S. are Prime subscribers.
With Amazon’s obsession with dominating every market it enters, while also providing the best service and cheapest prices, it could soon be selling everything to everyone in the most efficient and cheapest manner possible. This could theoretically create a global Amazon store rather than the current fragmented 15 individual country-specific stores. And what better way to keep all these customers within their own ecosystem than with a globally accepted single payment method.
Enter the Amazon Coin
Student loan refinancer LendEDU recently completed a survey of 1,000 customers and found that 52% would be willing to use an Amazon Coin cryptocurrency to make purchases.
In fact, Amazon has already released an Amazon Coin in 2013 as a digital currency designed for their U.S. customers to purchase items on the Amazon Appstore.
Each Amazon Coin has a fixed value of $0.01 and never expires. Users are incentivized to use Amazon Coins with a discount of up to 25% on purchases made using the Amazon Coin. If you’re an Amazon customer already you can buy Amazon Coins here.
So far, the Amazon Coin hasn’t been a success for several reasons:
- The Amazon Coin is only useful for purchases from the Amazon Appstore. Currently it isn’t possible to use it for other Amazon goods and services.
- Once purchased there is no secondary market for users to sell unused Amazon Coins.
- The Amazon Coin creates an unnecessary layer of friction for users. Many complain about the need to swap fiat currency to Amazon Coins to access discounts.
- The coin hasn’t been supported well, and there are numerous complaints of the coins not working properly in the Appstore or for in-game purchases.
- Recent legislation has created a situation where some users are subjected to double taxation on their Amazon Coins – first when purchasing the coins and then a second time when using them in the Appstore.
Amazon is not the only company to have created its own currency and then failed to generate adoption. Microsoft created Microsoft Points back in 2205 for use in the Xbox Marketplace, and Facebook has Facebook Credits which were created in 2009. Neither currency has faced widespread adoption, and both are rarely used.
The Cryptocurrency Amazon Coin
If Amazon were to focus its resources and create a cryptocurrency that could be used across its entire ecosystem it could be something that customers would flock to use. And that could mean that the Amazon Coin would be the very first trillion dollar market cap cryptocurrency. Let’s look deeper into how Amazon might make this a reality.
Implementing the Amazon Coin
Amazon has varying ways in which they could implement the use of a cryptocurrency on their platform, as well as varying degrees to which the coin could be utilized in the Amazon economy. Considering the company’s focus on being everything for everyone, it makes sense that eventually Amazon could require all purchases to be made using the Amazon coin. Perhaps far-fetched right now, but very realistic if you consider a world that is far more accepting of cryptocurrencies – as our world likely will be in just 10-15 years time.
Users may initially have some resistance to using the Amazon coin for everything Amazon related, but will eventually come around simply because Amazon has the cheapest and best products.
It’s also easy to imagine that Amazon will develop their own cryptocurrency wallet, and mobile application, which will not only allow users to store and spend Amazon coins easily, but will also serve as an exchange. This way Amazon users will be able to quickly and efficiently exchange any cryptocurrency into Amazon coins.
Which Type of Token
Depending on how regulatory issues work out, and Amazons own needs when issuing the cryptocurrency, there are a number of coin types that could be issued by Amazon. The most likely would be a hybrid token that both serves as a utility token (unlocking additional benefits not available with fiat) and a security token (that pays based on Amazon’s cash flows, similar to a dividend bearing stock).
While the hybrid token choice will expose Amazon to more risk, it isn’t an undue risk, and could potentially remove the need for third party financial resources in the future.
As a utility token the Amazon coin makes perfect sense, given Amazon’s business model. Add in the security token features, where the coin is backed by Amazon’s profits and free cash flow, and it begins to look more like a traditional dividend bearing stock. This opens up possibilities not just for consumers, but for investors as well.
Of course most coin holders would not be speculators, they would be Amazon’s core consumers. Most likely they would initially come from the Amazon Prime members, who already number nearly 100 million and at an annual average spend of $1,300 spend nearly twice as much as other Amazon customers. Even better for Amazon and their potential coin is the fact that 70% of upper-income American households—those earning more than $150K annually—are now Amazon Prime members, up from less than 50% a couple years ago.
One other benefit to coin holders, and users, is that the more they buy, the greater Amazon’s profits and free cash flow is, and the more valuable the coins become. It’s a virtuous circle that will incentivize customers to remain extremely loyal to Amazon. And think of this. Amazon employs 560,000 people worldwide. What if it decided to pay them in Amazon coins?
Future Life With the Amazon Coin
Let’s look into the future and consider the case of Roberto, a 28-year old resident of Las Vegas who represents the average first-world citizen in the coming decades.
Naturally Roberto shops at Amazon.com, but he also gets his groceries delivered from Whole Foods. He doesn’t Netflix and chill, rather he gets his daily video fix, including network news, from Amazon Video and the Amazon Network. All his online data is stored in the cloud on Amazon Web Services, and Amazon Alexa helps him manage his home, both when he’s there and when he’s away. Additionally, he banks with Amazon Bank N.A. and has his health insurance through Amazon Global Health Services. Are you starting to get the picture?
Last month Roberto took a long dreamed of European vacation, stopping in London, Paris, Madrid, Rome and Berlin. All the tickets and hotel reservations were booked through Amazon Travel and paid for with Amazon coins. While in Europe he had no worries about troublesome fiat exchange rates. Everywhere he went they were happy to accept Amazon coins…except that one small mom and pop shop. But for the most part all the shops, restaurants, museums, national parks, hotels, taxis and everywhere accepted Amazon coins.
Because Amazon coins are so widely accepted Roberto almost never deals with U.S. dollars any longer. Even his paycheck is automatically converted to Amazon coins when it’s direct deposited to his Amazon Bank checking account. He’s also earning 1.8% dividends on the coins in his account, and he’s been able to participate in special Amazon projects that earn him an even better return when he “stakes” his coins. For example, he allocated 10,000 coins last year to a project in rural Venezuela to build an Amazon warehouse and shipping depot. His “stake in that project earned him 3% over 6 months, or a 6% annualized return. Plus it helped the poor Venezuelans who had suffered so badly under their despotic leaders and devalued currency for decades. He was glad that they were finally getting access to Amazon services and products.
Roberto is more than happy to have all the services Amazon offers. Last month he refinanced his auto loan through Amazon Auto Finance and when he buys a house in the coming years he’ll almost certainly use Amazon Mortgage Service. He thinks Amazon is great because they always deliver the best service and products at prices that can’t be beat anywhere else. In fact, he’d feel lost without his host of Amazon services.
The idealized Amazon coin world sounds great, but Amazon would need to handle a lot of questions and issues if they want the Amazon coin to become a universally accepted medium of exchange. For example, how many coins will they issue, and how will they handle inflation rates for the coins? How can they ensure that Amazon coins are used rather than hoarded if the price begins to appreciate on the open market? How will they approach the issue of global pricing in Amazon coins? What will happen if increasing Amazon coin usage sparks inflation in traditional fiat currencies? How would the world governments respond to such a situation?
Amazon has been a pioneer in e-commerce for more than 2 decades, and more recently they have become a dominant force in web services, digital content and artificial intelligence as well. With their entrance into the health care and banking fields can we expect anything less? With each entry into a new space Amazon increases its value as a network. Thanks to the invention of the blockchain Amazon may have an opportunity that is unique in all history to create a globally accepted currency and dominate not just e-commerce, but all of commerce and global economics.